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The impact of FDI through mergers and acquisitions on innovation in target firms

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  • Stiebale, Joel
  • Reize, Frank

Abstract

This paper analyzes the effects of cross-border mergers and acquisitions on innovation activities in target firms. The empirical analysis is based on survey and ownership data for a large sample of small- and medium-sized German firms. After controlling for endogeneity and selection bias, we find that foreign acquisitions have a large negative impact on the propensity to perform innovation activities and a negative impact on average R&D expenditures in innovative firms. Furthermore, innovation output, measured as product and process innovations, and the share of sales from product innovations, is not significantly affected by a foreign acquisition for a given amount of innovation efforts. Hence, the estimation results do not provide any evidence of significant technology transfer through foreign acquisitions in form of a higher innovation success.

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  • Stiebale, Joel & Reize, Frank, 2011. "The impact of FDI through mergers and acquisitions on innovation in target firms," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 155-167, March.
  • Handle: RePEc:eee:indorg:v:29:y:2011:i:2:p:155-167
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    Cited by:

    1. Walter Park & Ralph Sonenshine, 2012. "Impact of Horizontal Mergers on Research & Development and Patenting: Evidence from Merger Challenges in the U.S," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 143-167, March.
    2. Stiebale, Joel, 2012. "Cross-Border M&A and Innovative Activity: Firm-Level Evidence," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62027, Verein für Socialpolitik / German Economic Association.
    3. Agbloyor, Elikplimi Komla & Abor, Joshua & Adjasi, Charles Komla Delali & Yawson, Alfred, 2013. "Exploring the causality links between financial markets and foreign direct investment in Africa," Research in International Business and Finance, Elsevier, vol. 28(C), pages 118-134.
    4. Florian Szücs, 2014. "Innovationsverhalten nach Fusionen," DIW Roundup: Politik im Fokus 13, DIW Berlin, German Institute for Economic Research.
    5. Weitzel, Utz & Kling, Gerhard & Gerritsen, Dirk, 2014. "Testing the fire-sale FDI hypothesis for the European financial crisis," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 211-234.
    6. Stiebale, Joel, 2016. "Cross-border M&As and innovative activity of acquiring and target firms," Journal of International Economics, Elsevier, vol. 99(C), pages 1-15.
    7. Stiebale, Joel, 2013. "The impact of cross-border mergers and acquisitions on the acquirers' R & D Firm-level evidence," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 307-321.
    8. Stiebale, Joel & Haucap, Justus, 2013. "How Mergers A ffect Innovation: Theory and Evidence," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79831, Verein für Socialpolitik / German Economic Association.
    9. Liu, Qing & Lu, Ruosi & Zhang, Chao, 2015. "The labor market effect of foreign acquisitions: Evidence from Chinese manufacturing firms," China Economic Review, Elsevier, vol. 32(C), pages 110-120.
    10. Frank, Alejandro Germán & Cortimiglia, Marcelo Nogueira & Ribeiro, José Luis Duarte & Oliveira, Lindomar Subtil de, 2016. "The effect of innovation activities on innovation outputs in the Brazilian industry: Market-orientation vs. technology-acquisition strategies," Research Policy, Elsevier, vol. 45(3), pages 577-592.
    11. Luis Alberiko Gil-Alaña & Fernando Pérez de Gracia & Robert Mudida, 2013. "Persistence, long memory and seasonality in Kenyan tourism series," NCID Working Papers 05/2013, Navarra Center for International Development, University of Navarra.
    12. Bertrand, Olivier & Betschinger, Marie-Ann, 2012. "Performance of domestic and cross-border acquisitions: Empirical evidence from Russian acquirers," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 413-437.
    13. María García-Vega & Patricia Hofmann & Richard Kneller, "undated". "The Internationalisation of R&D and the Knowledge Production Function," Discussion Papers 12/02, University of Nottingham, GEP.
    14. María García-Vega & Patricia Hofmann & Richard Kneller, 2015. "Multinationals and the Globalization of R&D," Discussion Papers 2015-18, University of Nottingham, GEP.
    15. Dachs, Bernhard, 2017. "Internationalisation of R&D: A Review of Drivers, Impacts, and new Lines of Research," MPRA Paper 83367, University Library of Munich, Germany.
    16. Szücs, Florian, 2014. "M&A and R&D: Asymmetric Effects on acquirers and targets?," Research Policy, Elsevier, vol. 43(7), pages 1264-1273.
    17. Florian Szücs, 2013. "M&A and R&D: Asymmetric Effects on Acquirers and Targets?," Discussion Papers of DIW Berlin 1331, DIW Berlin, German Institute for Economic Research.
    18. Danakol, Seçil Hülya & Estrin, Saul & Reynolds, Paul & Weitzel, Utz, 2017. "Foreign direct investment via M&A and domestic entrepreneurship: blessing or curse?," LSE Research Online Documents on Economics 68118, London School of Economics and Political Science, LSE Library.
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    20. Nazeem Mustapha & Pedro Mendi, 2013. "Multinational corporations as channels for international technology transfer: evidence from the South African innovation survey," NCID Working Papers 04/2013, Navarra Center for International Development, University of Navarra.

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