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Effects of Acquisitions on Product and Process Innovation and R&D Performance

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Author Info
Cefis, Elena
Rosenkranz, Stephanie
Weitzel, Utz

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Abstract

Using a game theoretical model on firms' simultaneous investments in product and process innovation, we deduct and empirically test hypotheses on the optimal R&D portfolio, investment, performance, and dynamic efficiency of R&D for acquisitions and in independently competing firms. We use Community Innovation Survey data on Italian manufacturing firms. Theoretical and empirical results show that firms involved in acquisitions invest in different R&D portfolios and invest at least as much in aggregate R&D as independent firms. The empirical results do not support our hypothesis on dynamic efficiency since acquisitions lead to inferior R&D performance.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5275.

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Date of creation: Oct 2005
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Handle: RePEc:cpr:ceprdp:5275

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Related research
Keywords: cost reduction dynamic efficiency innovation mergers and acquisitions product differentiation

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  2. Jacques Mairesse & Pierre Mohnen, 2002. "Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application," American Economic Review, American Economic Association, vol. 92(2), pages 226-230, May. [Downloadable!] (restricted)
  3. Rosenkranz, Stephanie, 2003. "Simultaneous choice of process and product innovation when consumers have a preference for product variety," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 183-201, February. [Downloadable!] (restricted)
  4. Agarwal, Rajshree & Audretsch, David B, 2001. "Does Entry Size Matter? The Impact of the Life Cycle and Technology on Firm Survival," Journal of Industrial Economics, Blackwell Publishing, vol. 49(1), pages 21-43, March. [Downloadable!] (restricted)
  5. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July. [Downloadable!] (restricted)
  6. De Bondt, Raymond & Veugelers, Reinhilde, 1991. "Strategic investment with spillovers," European Journal of Political Economy, Elsevier, vol. 7(3), pages 345-366, October. [Downloadable!] (restricted)
  7. Bruno Cassiman & Reinhilde Veugelers, 2002. "R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium," American Economic Review, American Economic Association, vol. 92(4), pages 1169-1184, September. [Downloadable!] (restricted)
  8. Mukesh Eswaran & Nancy Gallini, 1996. "Patent Policy and the Direction of Technological Change," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 722-746, Winter. [Downloadable!] (restricted)
  9. James D. Adams & Mircea Marcu, 2004. "R&D Sourcing, Joint Ventures and Innovation: A Multiple Indicators Approach," NBER Working Papers 10474, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Scherer, F M, 1992. "Schumpeter and Plausible Capitalism," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1416-33, September. [Downloadable!] (restricted)
  11. Duranton, Gilles, 2000. "Cumulative Investment and Spillovers in the Formation of Technological Landscapes," Journal of Industrial Economics, Blackwell Publishing, vol. 48(2), pages 205-13, June. [Downloadable!] (restricted)
  12. Steven Klepper & Elizabeth Graddy, 1990. "The Evolution of New Industries and the Determinants of Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 27-44, Spring. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Elena Cefis & Anna Sabidussi & Hans Schenk, 2007. "Do Mergers of Potentially Dominant Firms foster Innovation? An Empirical Analysis for the Manufacturing Sector," Working Papers 07-20, Utrecht School of Economics. [Downloadable!]
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