CLIP of the month: A simple model of mergers and innovation


Our current CLIP of the month is ‘A Simple Model of Mergers and Innovation’ by Giulio Federico, Gregor Langus, and outgoing Commission Chief Economist Tommaso Valletti, a 2017 article which suggested that mergers tend to reduce overall innovation.

Innovation is becoming an increasingly important part of merger assessment in Europe. The trend began with the Commission’s 2017 analysis of ‘innovation spaces’ in lines of research and early pipeline products in pesticides and herbicides in the Dow/DuPont merger. The Commission also assessed areas of innovation and active R&D projects in the Bayer/Monsanto merger the following year (see here).

This year, innovation is again in the spotlight in the merger context following the UK Competition and Markets Authority focusing on the concept of ‘killer acquisitions’ when assessing incumbent PayPal’s acquisition of start-up and possible future rival iZettle (see here and here).