An Innovation Market Approach to Analyzing Impacts of Mergers and Acquisitions in the Plant Biotechnology Industry

Abstract

This paper provides some insights into the impacts of firm concentration on research output by analyzing data on research output in the form of United States patents and field trials by private firms and merger activity over the last fourteen years (1987-2001). In recent antitrust cases and rulings, the US Federal Trade Commission (FTC) is more frequently assessing the impacts of mergers on the basis of innovation competition as well as product market competition. Results of Herfindahl-Hirshfield Index and Four-Firm Concentration Ratio analyses show that there is evidence of firm concentration in innovation markets. Analysis of new firm entry and mobility in innovation market share confirm this diagnosis. Given what appears to be the beginning of a trend towards negative impacts on innovation and competition, the FTC should monitor field trials, patents, and deregulations, as well as other measures of research activity and output and prices, for signs that industry concentration is having an adverse effect on research and development activities.