A simple model of mergers and innovation
G Federico, G Langus, T Valletti - Economics Letters, 2017 - Elsevier
We analyze the impact of a merger on firms' incentives to innovate. We show that the
merging parties always decrease their innovation efforts post-merger while the outsiders to
the merger respond by increasing their effort. A merger tends to reduce overall innovation.
Consumers are always worse off after a merger. Our model calls into question the
applicability of the “inverted-U” relationship between innovation and competition to a merger
setting.
merging parties always decrease their innovation efforts post-merger while the outsiders to
the merger respond by increasing their effort. A merger tends to reduce overall innovation.
Consumers are always worse off after a merger. Our model calls into question the
applicability of the “inverted-U” relationship between innovation and competition to a merger
setting.
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