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Horizontal Mergers and Incremental Innovation

Marc Bourreau et al.

RAND Journal of Economics2026https://doi.org/10.1111/1756-2171.70045preprint
AJG 4ABDC A*
Weight
0.37

Abstract

We study the impact of horizontal mergers on the incentives of merging firms to invest in incremental innovation. We provide a decomposition of this impact that clarifies the various forces at work and the differences between demand‐enhancing and cost‐reducing innovation. Moreover, we derive sufficient conditions for a merger to either reduce or raise the merging firms' incentives to innovate, and show that the comparison of the price diversion ratio and the innovation diversion ratio can help screen mergers. We also uncover a useful connection between the level of production synergies induced by a merger and its impact on innovation.

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https://doi.org/https://doi.org/10.1111/1756-2171.70045

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@article{marc2026,
  title        = {{Horizontal Mergers and Incremental Innovation}},
  author       = {Marc Bourreau et al.},
  journal      = {RAND Journal of Economics},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/1756-2171.70045},
}

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Horizontal Mergers and Incremental Innovation

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.