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Innovation Activities and Integration through Vertical Acquisitions

Author

Listed:
  • Laurent Frésard

    (Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute)

  • Gerard Hoberg

    (University of Southern California - Marshall School of Business - Finance and Business Economics Department)

  • Gordon M. Phillips

    (Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER))

Abstract

We examine the determinants of vertical acquisitions using product text linked to product vocabulary from the input-output tables. We find that the stage of innovation is important in understanding vertical integration. R\&D-intensive firms are less likely to become targets in vertical acquisitions. In contrast, firms with patented innovation are more likely to sell to vertically-related buyers. Firms' R&D intensity is a more important deterrent to their vertical acquisitions when the provision of innovation incentives by potential acquirers is more difficult. The role of patents in fostering vertical acquisitions is more prevalent when potential buyers face a higher risk of hold-up.

Suggested Citation

  • Laurent Frésard & Gerard Hoberg & Gordon M. Phillips, 2019. "Innovation Activities and Integration through Vertical Acquisitions," Swiss Finance Institute Research Paper Series 19-36, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1936
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    Keywords

    Mergers and Acquisitions; Vertical Mergers; Vertical Integration;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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