Affordable Access

Access to the full text

Competition, Mergers, and R&D Diversity

Authors
  • Gilbert, Richard J.1
  • 1 University of California, Berkeley, Department of Economics, 593 Evans Hall, Berkeley, CA, 94720-3880, USA , Berkeley (United States)
Type
Published Article
Journal
Review of Industrial Organization
Publisher
Springer US
Publication Date
Jan 31, 2019
Volume
54
Issue
3
Pages
465–484
Identifiers
DOI: 10.1007/s11151-019-09679-5
Source
Springer Nature
Keywords
License
Yellow

Abstract

This paper describes a model of research and development (R&D) investment in which firms can choose any number of R&D projects that have independent and identical probabilities of success. The measure of R&D diversity is the number of projects that are undertaken by the industry. Absent spillovers or profits at risk from innovation, mergers often—but not always—decrease R&D diversity; however, the incremental effects decline rapidly with the number of industry rivals. Mergers can have significant adverse effects if the merging firms have large profits that are at risk from an innovation. A merger can promote investment in R&D and increase expected consumer surplus if discoveries have sufficiently large information spillovers.

Report this publication

Statistics

Seen <100 times