The Effect of Mergers on Innovations

Das, Kaustav; Mayskaya, Tatiana; Nikandrova, Arina

doi:10.2139/ssrn.4343673

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The Effect of Mergers on Innovations

106 Pages Posted: 31 Jan 2023

See all articles by Kaustav Das

Tatiana Mayskaya

National Research University Higher School of Economics - International College of Economics and Finance; National Research University Higher School of Economics - Faculty of Economics

Arina Nikandrova

City, University of London

Date Written: January 31, 2023

Abstract

We study the effect of a two-to-one merger on R&D activity in a dynamic model in which there is uncertainty about the feasibility of innovation. Once an innovation has already taken place, the merger may block future innovations (cannibalization effect). The merger may increase the probability of the first innovation (appropriability effect). The merger may bring the first innovation forward in time (informational effect). The merger may increase innovation diversity (diversity effect).

Keywords: R&D, Mergers, Poisson Process, Strategic Experimentation, Learning

JEL Classification: D82, D83

Suggested Citation: Suggested Citation

Das, Kaustav and Mayskaya, Tatiana and Nikandrova, Arina, The Effect of Mergers on Innovations (January 31, 2023). Available at SSRN: https://ssrn.com/abstract=4343673 or http://dx.doi.org/10.2139/ssrn.4343673