Organisations, Innovation and Complexity: New Perspectives on the Knowledge Economy

University of Manchester
9-10th September 2004

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Mergers, Innovation and Market Structure: Insights from Evolutionary Economics

Francesco Crespi & Natalia Zinovyeva

University of Rome III and IoIR.
Sant’Anna School of Advanced Studies

Abstract

The paper uses evolutionary economics and computer simulation techniques to gain additional insights for the analysis of the impact of mergers and acquisitions on the economy. These results will be also used to provide new foundations for the implementation of dynamic considerations in merger scrutiny.

In the paper it will be shown that by adopting a dynamic perspective it is possible to shed new light on the complex nature of the effects of mergers on industrial structure. It will be argued that on the one hand market concentration increases instantaneously because of the merger and this effect can be reinforced if the merged entity gains competitive advantages on rivals. On the other hand, if a merger has the potential to produce synergies capable of increasing the richness of technological knowledge, then it is possible that it affects the dynamic of concentration in that market with contrary sign. In this way we can claim that the relevance of the potential effects of firms’ integration on the production of new knowledge cannot be confined to the realization of cost reductions and product quality improvements. On the contrary, our results show that the realization of synergies in innovative activities can be important also for their effects on the evolution of market concentration and, consequently, on competition.

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