Mergers, Innovation, and Entry-Exit Dynamics: The Consolidation of the Hard Disk Drive Industry (1976-2014)

Posted by Social Science Research Network

Mergers, Innovation, and Entry-Exit Dynamics: The Consolidation of the Hard Disk Drive Industry (1976-2014)–  Mitsuru Igami (Yale University) & Kosuke Uetake (Yale School of Management)

Abstract: We measure the impact of mergers on competition, innovation, and welfare. We develop a dynamic oligopoly model of mergers, R&D, and entry/exit, and estimate it using data from the hard disk drive industry. We find mergers became a dominant mode of exit in the later phase of industry consolidation and often generated productivity improvement (i.e., synergies). Our counterfactual simulation suggests a more restrictive antitrust policy may not necessarily increase welfare because a higher exit rate partially o¤sets its pro-competitive effect, and R&D does not fully make up for the forgone synergies.