The Effect of Mergers on Innovations

Market Structure and Investments: A Progress Report

“…Initially, the firms are unaware of the avenue type, but they learn about it over time through observable research activities and innovation successes of both themselves and their rivals. Das et al (2024) show that, in this setting, a merger has three effects on innovation. Firstly, due to the substitutability of innovations, a cannibalization effect arises as the second innovation displaces a portion of the gains from the initial innovation.…”

“…effect of mergers increases as synergies now arise. Das et al (2024) consider a dynamic setting in which two competitors have the opportunity to develop innovations by undertaking investments along a research avenue. The research avenue can be either good or bad; a good research avenue rewards R&D effort with a product innovation at exponentially distributed times, while a bad research avenue never generates an innovation.…”