How mergers affect innovation: Theory and evidence

I have been looking at the acquisition model of Apple over the past few years and it transpires that it takes an average of around 3 years before it is “released as a feature” in iOS. I mention this here because Apple is concentrating on healthcare in front of our eyes and despite the claims of market share, it represents an absolute monopoly with an iron grip on services.

Technology is being defined by relatively few companies (which isn’t good for us).  The paper below is behind the paywall but as usual, you can download it here.

This article analyses how horizontal mergers affect innovation of the merged entity and its non-merging competitors. Using data on horizontal mergers among pharmaceutical firms in Europe and applying propensity score matching estimators, we find that average patenting and R&D of the merged entity and its rivals declines substantially in post-merger periods.

We show that this result is consistent with the predictions from an oligopoly model with heterogeneous firms, as well as a patent race model, when pre-merger R&D intensity is sufficiently high.

Consistent with our theoretical model, we find that negative effects of mergers on innovation are concentrated in markets with high R&D intensity and in technology classes with overlap in pre-merger innovation activities of merging and rival firms.

via How mergers affect innovation: Theory and evidence – ScienceDirect

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.