Can mergers lead firms to more rapidly adopt new technologies?

January 3 - 5, 2014
Philadelphia, PA, USA

Yes, according to research by PURC director Dr. Mark Jamison and his co-author, Dr. Janice Hauge. Speaking at the 2014 Annual Meeting of the American Economic Association, Drs. Jamison and Hauge explained that while a merger often means a decrease in competitive pressures, which can lead to higher prices for customers, the decreased pressure also means that the merging firms can profit more from new technologies than they could before the merger. These results have implications for two mergers that were rejected by antitrust regulators. In the case of AT&T's proposed acquisition of T-Mobile, the U.S. Department of Justice had opposed the merger on grounds that it would lessen competition. But the firms argued that they could deploy advanced wireless services more rapidly if they were allowed to merge. Drs. Jamison and Hauge's research, "Effects of Mergers on Incentives for New Technology Adoption", implies that the companies might have been correct and that the value of the technology could have trumped any concerns with market power. In another case, the EU had rejected the proposed merger of GE and Honeywell, concluding that the merged companies could have produced superior products and harmed rivals. The "Effects of Mergers" analysis finds that rivals in such situations are actually more likely to adopt the advanced technology than they were before the merger. The AEA meetings were held in Philadelphia on January 3-5, 2014.

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