Mergers, innovation, and merger policy

In this paper, we summarise the economic literature on the effects of mergers and acquisitions (M&As) on innovation. We primarily focus on empirical studies, but also discuss mechanisms predicted by the theoretical literature. Although the effects of mergers on innovation can be theoretically ambiguous, the vast majority of ex-post evaluations of horizontal M&As find large negative effects on innovation inputs and outputs. In contrast, vertical and other non-horizonal mergers are less likely to generate detrimental effects. We discuss a number of selected merger cases in which the European Commission raised concerns about innovation and derive some ideas and options for merger policy.