Becoming an Acquirer and Becoming Acquired

This paper considers mergers and acquisitions in Finland. More specifically, we focus on the reasons behind acquisitions and mergers. We take a closer look at a firm’s orientation toward R&D and the use of high technology. We empirically test how R&D affects the likelihood of acquisitions. Both the probability that a firm acquires another firm and that a firm is acquired by another firm is then analysed. According to the central finding of this study, the high level of R&D, given the firm size, increases both the probability of becoming both the subject and the object of an acquisition. This result shows that, contrary to some earlier findings (concerning the USA)2, firms do not seem to specialize in their strategies either to invest in their own R&D, or alternatively, to buy innovations from the market. Our results indicate that for established firms it is also important to invest in one’s own R&D in order to sustain the capacity to utilize the other firms’ R&D and to confirm bargaining power when the terms of acquisition are negotiated. The result also shows that R&D investments increase a firm’s attraction as a target for an acquisition. This result also shows that there often exist such positive externalities, which arise with knowledge capital and which can be internalized by combining both the acquirer’s and the target firm’s assets.