Discussion Paper Details

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Title: Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies

Author(s): Igor Letina, Armin Schmutzler and Regina Seibel

Publication Date: August 2020

Keyword(s): Innovation, killer acquisitions, Merger Policy, Potential competition and start-ups

Programme Area(s): Industrial Organization

Abstract: This paper provides a theory of strategic innovation project choice by incumbents and start-ups. We show that prohibiting killer acquisitions strictly reduces the variety of innovation projects. By contrast, we find that prohibiting other acquisitions only has a weakly negative innovation effect, and we provide conditions under which the effect is zero. Furthermore, for both killer and other acquisitions, we identify market conditions under which the innovation effect is small, so that prohibiting acquisitions to enhance competition would be justified.

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Bibliographic Reference

Letina, I, Schmutzler, A and Seibel, R. 2020. 'Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies'. London, Centre for Economic Policy Research.