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

  • Stiebale, Joel
  • Reize, Frank

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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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 29 (2011)
Issue (Month): 2 (March)
Pages: 155-167

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Handle: RePEc:eee:indorg:v:29:y:2011:i:2:p:155-167
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