Thesis Title:
Acquisitions, Venture Capital, and the Direction of Innovation
Thesis Abstract:
This PhD project studies a crucial question for innovation policy and competition regulation: how do changes in market competition affect innovative effort? While a rich literature in Economics documents several patterns between competition and innovation, there remains limited consensus on the mechanisms that generate these results. From a methodological perspective, we also need to develop models that help us distinguish which changes in innovation are driven by shifts in underlying economic conditions, and which are driven by strategic expectations and coordination among firms and investors.
My project develops a research agenda around untangling these mechanisms. At the core of my research is the notion that innovation is a forward-looking object: firms innovate today because they expect investors and rival companies to respond accordingly in the future. This has an interesting implication: the same observed change in innovation can be explained by both changes in the underlying foundations of the market (e.g., demand has weakened or technological opportunities have declined) and changes in how rivals behave (e.g., investors change their expectations or companies coordinate around a less aggressive competitive environment).
To study these mechanisms, I combine econometric modelling with firm-level data on market structure, investment, and innovation decisions. The goal is to separate changes in innovation driven by real economic conditions from changes driven by expectations, strategic behaviour, and coordination motives among firms and investors.
My PhD thesis will produce evidence on when competition encourages innovation, when it redirects it, and when it discourages it. It will also provide policy tools to evaluate questions such as whether a merger is likely to reduce innovative effort, whether market concentration changes the direction of technological progress, and how regulators should think about innovation effects over time.
Primary Supervisor:
Prof Tommaso Valletti