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Cross-border acquisitions and R&D: Unpacking the impact on acquirers and targets

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  • Chen, Victor Zitian
  • Shapiro, Daniel M.
  • Li, Jing

Abstract

We study the post acquisition R&D of both targets and acquirers involved in cross-border acquisitions by developing and estimating a two equation model that explicitly accounts for cross-border knowledge flows. We employ a sample of 3,243 firm-year observations, representing 299 cross-border deals between 28 home and 34 host markets over 15 years. Results suggest that while the acquisition disrupts the R&D trajectory of both acquirers and targets, R&D complementarities result in more R&D in both acquirers and targets. However, these effects are asymmetrical: post-acquisition R&D increases are higher in the acquirer than in the target. The overall outcome of acquisitions appears to favor R&D in the acquirer.

Suggested Citation

  • Chen, Victor Zitian & Shapiro, Daniel M. & Li, Jing, 2022. "Cross-border acquisitions and R&D: Unpacking the impact on acquirers and targets," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000204
    DOI: 10.1016/j.frl.2022.102691
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    More about this item

    Keywords

    Cross-border acquisitions; Post-acquisition performance; R&D; R&D location;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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