How Mergers & Acquisitions (M&As) Shape the Dynamics of Exports and R&D Activities: Evidence from Tunisian Manufacturing Firms

Foreign Direct Investment (FDI) can inject technology and knowledge into host- country economies, potentially influencing their firms' R&D investments and export capacities; as a result, these firms may engage in R&D (exports), potentially shaping the interaction between the two strategies. This paper investigates whether and when these strategies are complementary and reinforce each other, or whether they are substitutes, and should not be jointly pursued, as well as how combining the two strategies may lead to synergies positively affecting growth. The analysis was conducted on four clusters of firms using panel data of Tunisian manufacturing firms over the period 2016-2018. The first and second clusters include any exporting firms (differentiating exporters from non-exporters) without and with foreign participation, respectively. The third and fourth clusters are made up of fully exporting firms without and with foreign involvement, respectively. The findings suggest that R&D and exports positively reinforce each other in a dynamic virtuous circle to boost exports for firms with no foreign participation, whereas substitutability effects emerge for R&D activity, primarily for firms with foreign participation. The findings are also consistent with complementarities between the two activities in boosting the growth of fully exporting firms with foreign ownership.Length: 55