The Impact of Foreign Acquisitions on the Investors‘ R&D Activities – Firm-level Evidence
This paper provides empirical evidence on the relationship between cross-border acquisitions and innovation activities at the fi rm level. In contrast to previous studies that analyze the eff ects on innovation in target fi rms, this paper investigates the eff ects on the investing fi rms. For the empirical analysis a unique fi rm-level data set is constructed that combines survey data for German fi rms with a merger and acquisition database. After a cross-border acquisition, investing fi rms display a higher rate of domestic expenditures for research and development. After controlling for endogeneity of foreign acquisitions by estimating a two-equation system with limited dependent variables and applying instrument variable techniques it is found that part of this correlation stems from a causal eff ect. The estimated eff ects are robust towards alternative identifi cation strategies and are higher in industries with high knowledge intensity. The analysis is complemented by an investigation of the eff ects on tangible investment spending and by a comparison of the eff ects of cross-border acquisitions to those of Greenfi eld foreign direct investments and domestic M&As.
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