Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95891
Authors: 
Kern, Benjamin R.
Ackermann, Malte
Year of Publication: 
2014
Series/Report no.: 
Joint Discussion Paper Series in Economics 05-2014
Abstract: 
A merger between two innovation competitors is often suspected to reduce the variety of heterogeneous entities which are currently undertaking R&D or which are well situated to undertake R&D in a certain field. The consequential reduction of diversity can be detrimental to innovation because it reduces the number of independent sources for possible future innovations and might furthermore lead to an alignment of formerly different R&D programs. However, if diversity indeed benefits innovative performance, even merged firms should have an incentive to maintain it in-house. Therefore, this article aims to bring to light whether firms can indeed be expected to create or maintain diversity post-merger. By focusing on the strategic management and organizational science literature we will demonstrate that the creation/maintenance of independent entities is indeed considered as an important determinant for the innovativeness and general performance of firms. Nevertheless, we will also show that this strategy has several grave implementation problems and might be hampered by certain trade-offs. As a consequence, competition authorities cannot presume that a reduced inter-firm diversity will get substituted by an increased intra-firm diversity without fail.
JEL: 
B52
K21
L4
M1
O31
O32
Document Type: 
Working Paper

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