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Acquisition for innovations? M&A intensity and intra-firm innovation reallocations

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  • Wang, Shuxun
  • Wu, Kai
  • Lai, Seiwai

Abstract

We investigate how M&A activities are used to allocate innovation resources within firm boundaries. We find that Chinese listed firms exhibit strong intra-firm innovation reallocation behaviors following M&A activities from 2007 to 2017. Specifically, they shift innovation activities to subsidiary firms. The intra-firm innovation reallocation concentrates on major restructuring and related-party deals. In addition, firms in the decline stage of life cycles are more likely to use innovation reallocation behaviors after M&A. Further analysis shows that the innovation reallocation behaviors are more visible in firms with low financial constraints, high product market competition, and low productivity. Besides, the innovation reallocation is value-enhancing for listed firms in general. Our findings highlight the intra-firm innovation reallocation as an effective innovation strategy.

Suggested Citation

  • Wang, Shuxun & Wu, Kai & Lai, Seiwai, 2022. "Acquisition for innovations? M&A intensity and intra-firm innovation reallocations," Research in International Business and Finance, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:riibaf:v:62:y:2022:i:c:s027553192200109x
    DOI: 10.1016/j.ribaf.2022.101721
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    More about this item

    Keywords

    M&A intensity; Firm innovation; R&D reallocation;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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