The Effect of Mergers on Innovation

47 Pages Posted: 31 Jan 2023 Last revised: 8 Feb 2024

See all articles by Kaustav Das

Kaustav Das

University of Leicester

Tatiana Mayskaya

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

Arina Nikandrova

City, University of London

Date Written: February 5, 2024

Abstract

We study the effect of a merger on R&D activity in a dynamic model in which there is uncertainty about the feasibility of innovation. The merger has three effects on innovation. Once an innovation has already taken place, the merger may reduce the number of follow-up innovations (cannibalization effect). At the same time, the merger may increase the probability of the first game-changer innovation (appropriability effect) and bring this innovation forward in time - informational effect. A surprising policy implication of our model is that the benefit of the merger may be higher if the first and subsequent innovations are closer substitutes.

Keywords: R&D, mergers, Poisson process, strategic experimentation, learning

JEL Classification: C73, D83

Suggested Citation

Das, Kaustav and Mayskaya, Tatiana and Nikandrova, Arina, The Effect of Mergers on Innovation (February 5, 2024). Available at SSRN: https://ssrn.com/abstract=4343673 or http://dx.doi.org/10.2139/ssrn.4343673

Kaustav Das

University of Leicester ( email )

University Road
Leicester, LE1 7RH
United Kingdom

Tatiana Mayskaya (Contact Author)

National Research University Higher School of Economics (Moscow) - International College of Economics and Finance ( email )

Pokrovski Bulvar 11, Korpus Zh, Office 715
Moscow, 109028
Russia

National Research University Higher School of Economics (Moscow) - Faculty of Economics ( email )

Shabolovka 26
Moscow, 119049
Russia

Arina Nikandrova

City, University of London ( email )

London
United Kingdom
EC1V 0HB (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
213
Abstract Views
709
Rank
259,350
PlumX Metrics