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Arijit Mukherjee and Prabal Roy chowdhury
''Innovation and social desirability of merger''
( 2013, Vol. 33 No.1 )
Although regulatory authorities are putting more emphasis to the long-run effects of mergers and acquisitions due to their effects on innovation, several merger proposals have been challenged due to their adverse innovation effects. In a simple model with endogenous R&D investment, we show that the effects of merger on the R&D investment, consumer surplus and social welfare depend on the degree of knowledge spillover and the slope of the marginal cost of doing R&D. Hence, the social desirability of merger may depend on the effectiveness of the patent system and the cost of innovation.
Keywords: Innovation; Merger; Welfare
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
O3 - Technological Change; Research and Development: General
Manuscript Received : Jun 27 2012 Manuscript Accepted : Feb 15 2013

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