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R&D investment as a signal in corporate takeovers Author info | Abstract | Publisher info | Download info | Related research | Statistics M. Pilar Socorro (Departamento de Análisis Económico Aplicado, Universidad de Las Palmas de Gran Canaria, Las Palmas de Gran Canaria, Spain)
The purpose of this paper is to analyze the effects that takeover threats have on firms' preacquisition R&D intensity. Critics of takeovers usually argue that takeover threats may reduce target firms' R&D investments. However, I find that target firms may increase R&D investment in order to signal their compatibility with the acquiring firm. The identity of the acquired firm depends on the market size and target firms' efficiency and compatibility. Through R&D investments, target firms may affect this result, signaling potential outsiders the kind of competition they may face, and forcing them to accept lower takeover offers. Copyright © 2009 John Wiley & Sons, Ltd.
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics .
Volume (Year): 30 (2009)
Issue (Month): 5 ()
Pages: 335-350
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Handle: RePEc:wly:mgtdec:v:30:y:2009:i:5:p:335-350Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976
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