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M&As and innovation: Evidence from acquiring private firms

Author

Listed:
  • Farida, Siti
  • Fidrmuc, Jana P.
  • Zhang, Chendi

Abstract

We show that acquisitions of private targets increase the quantity, quality, and value of the acquiring firms’ patents more than acquisitions of public targets. Private-target acquisitions also foster significantly greater innovation synergies, increase the total number of inventors, and promote new collaborations among inventors. These outcomes are associated with the acquirers’ expertise in identifying innovative private targets, are more pronounced in industries with breakthrough technologies, and are not driven by targets with existing patent portfolios. We also find that the patenting increases explain away the higher announcement returns for private versus public-target acquisitions. Overall, our results underscore the role of complementary innovation capabilities in driving value creation through the integration of private targets with publicly listed acquirers.

Suggested Citation

  • Farida, Siti & Fidrmuc, Jana P. & Zhang, Chendi, 2026. "M&As and innovation: Evidence from acquiring private firms," Journal of Corporate Finance, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:corfin:v:96:y:2026:i:c:s0929119925001737
    DOI: 10.1016/j.jcorpfin.2025.102905
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    Keywords

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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