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

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  • Cefis, Elena
  • Rosenkranz, Stephanie
  • Weitzel, Utz

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

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Cited by:
  1. E. Cefis & A. Sabidussi & E.J.J. 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.

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