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Do mergers of potentially dominant firms foster innovation? An empirical analysis for the manufacturing sector

By E. Cefis, A. Sabidussi and E.J.J Schenk

Abstract

We investigate the effects of M&A on innovation in the specific context of potential or realized market dominance. Authorities are challenged by balancing both detrimental and beneficial effects of mergers on innovation, especially when a merger threatens to result in market dominance, while firms would wish to uncover all the potential benefits arising from M&A. The effects of M&As on innovation have been tested on a panel dataset, constructed from the Dutch Community Innovation Survey and the Dutch Business Register, including around 1000 manufacturing companies. We have adopted a comprehensive approach, taking into consideration three dimensions of innovation: innovation inputs, innovation outputs and efficiency. The results show that M&As performed in the previous 3-5 years have a positive and significant effect on innovation except R&D expenses and innovation efficiencies. The results also suggest that technological regimes are critical to understanding the patterns of innovation

Topics: Mergers and Acquisitions, Innovation, Market Dominance
Year: 2007
OAI identifier: oai:dspace.library.uu.nl:1874/309952
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