Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/275661 
Year of Publication: 
2023
Series/Report no.: 
Working Paper No. 358
Version Description: 
This version: July 2023
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
This paper provides a theory of strategic innovation project choice by incumbents and start-ups which serves as a foundation for the analysis of acquisition policy. We show that, in spite of countervailing incentives on incumbents and entrants, prohibiting acquisitions has a weakly negative overall innovation effect. We provide conditions determining the size of the effect and, in particular, conditions under which it is zero. We further analyze the effects of less restrictive policies, including merger remedies and the tax treatment of acquisitions and initial public offerings. Such interventions tend to prevent acquisitions only if the entrant has sufficiently high stand-alone profits.
Subjects: 
innovation
killer acquisitions
merger policy
potential competition
start-ups
JEL: 
O31
L41
G34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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