Institutional Affiliation: European Commission
NBER Working Papers and Publications
|April 2019||Antitrust and Innovation: Welcoming and Protecting Disruption|
with Fiona Scott Morton, Carl Shapiro
in Innovation Policy and the Economy, Volume 20, Josh Lerner and Scott Stern, editors
The goal of antitrust policy is to protect and promote a vigorous competitive process. Effective rivalry spurs firms to introduce new and innovative products, as they seek to capture profitable sales from their competitors and to protect their existing sales from future challengers. In this fundamental way, competition promotes innovation. We apply this basic insight to the antitrust treatment of horizontal mergers and of exclusionary conduct by dominant firms. A merger between rivals internalizes business-stealing effects arising from their parallel innovation efforts and thus tends to depress innovation incentives. Merger-specific synergies, such as the internalization of involuntary spillovers or an increase in the productivity of R&D, may offset the adverse effect of a merger on innova...