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M&A and R&D: Asymmetric Effects on Acquirers and Targets?

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  • Florian Szücs
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    Abstract

    We evaluate the impact of M&A activity on the growth of R&D spending and R&D intensity of 265 acquiring firms and 133 merger targets between 1990 and 2009. We use different matching techniques to construct separate control groups for acquirers and targets and use appropriate difference-in-difference estimation methods to single out the causal effect of mergers on R&D growth and intensity. We find that target firms substantially decrease their R&D efforts after a merger, while the R&D intensity of acquirers drops due to a sharp increase in sales.

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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.429740.de/dp1331.pdf
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    Bibliographic Info

    Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1331.

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    Length: 23 p.
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:diw:diwwpp:dp1331

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    Keywords: Mergers; R&D growth; R&D intensity; propensity-score matching; difference in difference estimation;

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    1. Blonigen, Bruce A & Taylor, Christopher T, 2000. "R&D Intensity and Acquisitions in High-Technology Industries: Evidence from the US Electronic and Electrical Equipment Industries," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 48(1), pages 47-70, March.
    2. Hagedoorn, John & Cloodt, Myriam, 2003. "Measuring innovative performance: is there an advantage in using multiple indicators?," Research Policy, Elsevier, Elsevier, vol. 32(8), pages 1365-1379, September.
    3. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "The Effects of Mergers: An International Comparison," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 01-21, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    4. Ornaghi, Carmine, 2009. "Mergers and innovation in big pharma," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(1), pages 70-79, January.
    5. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity score matching methods for non-experimental causal studies," Discussion Papers, Columbia University, Department of Economics 0102-14, Columbia University, Department of Economics.
    6. Richard Blundell & Monica Costa Dias, 2000. "Evaluation methods for non-experimental data," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 427-468, January.
    7. Elena Cefis & Stephanie Rosenkranz & Utz Weitzel, 2009. "Effects of coordinated strategies on product and process R&D," Journal of Economics, Springer, Springer, vol. 96(3), pages 193-222, April.
    8. Wagner, Marcus, 2011. "To explore or to exploit? An empirical investigation of acquisitions by large incumbents," Research Policy, Elsevier, Elsevier, vol. 40(9), pages 1217-1225.
    9. Stiebale, Joel & Reize, Frank, 2011. "The impact of FDI through mergers and acquisitions on innovation in target firms," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 29(2), pages 155-167, March.
    10. Eleanor Morgan, 2001. "Innovation and Merger Decisions in the Pharmaceutical Industry," Review of Industrial Organization, Springer, Springer, vol. 19(2), pages 181-197, September.
    11. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
    12. Cassiman, Bruno & Colombo, Massimo G. & Garrone, Paola & Veugelers, Reinhilde, 2005. "The impact of M&A on the R&D process: An empirical analysis of the role of technological- and market-relatedness," Research Policy, Elsevier, Elsevier, vol. 34(2), pages 195-220, March.
    13. Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," Discussion Papers of DIW Berlin 485, DIW Berlin, German Institute for Economic Research.
    14. Desyllas, Panos & Hughes, Alan, 2010. "Do high technology acquirers become more innovative?," Research Policy, Elsevier, Elsevier, vol. 39(8), pages 1105-1121, October.
    15. Alex Coad & Rekha Rao, 2010. "Firm growth and R&D expenditure," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 19(2), pages 127-145.
    16. Kleinknecht, Alfred, 1987. "Measuring R&D in Small Firms: How Much Are We Missing?," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 36(2), pages 253-56, December.
    17. Bertrand, Olivier, 2009. "Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France," Research Policy, Elsevier, Elsevier, vol. 38(6), pages 1021-1031, July.
    18. Stiebale, Joel, 2013. "The impact of cross-border mergers and acquisitions on the acquirers' R&D — Firm-level evidence," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 31(4), pages 307-321.
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