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Working Paper 18-4 v2 (updated October 2018)
Mergers and Innovation: Evidence from the Hard Disk Drive Market
AUTHORS: Anna Rita Bennato, Stephen Davies, Franco Mariuzzo & Peter Ormosi
ABSTRACT: This case study is a relatively rare ex-post evaluation of the impact on innovation of two mergers in the world-wide hard disk drive (HDD) industry. We take a holistic view of innovation, employing four different measures: R&D expenditure and patent activity as indicators of innovative inputs, and the number of new products marketed, and their unit costs for end users as indicators of innovative output. This allows us to distinguish the impact of the mergers on the magnitudes of the parties' innovative efforts from the productivity of those efforts. We employ a differences-in-differences methodology, placing considerable emphasis on the robustness of results to alternative control groups. Our main finding is that the mergers had a beneficial effect. They were associated with significantly increased R&D and patent activity by the two acquiring firms (Seagate and Western Digital), and increased innovative productivity for Seagate and less robustly for the Western Digital. These results appear to vindicate the European Commission's decision to allow both mergers.
CITATION: Bennato AR, Davies S, Mariuzzo F & Ormosi P (2018) "The effect of market consolidation on innovation in the HDD industry", CCP Working Paper 18-4
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