Abstract

http://ssrn.com/abstract=2242425
 
 

References (39)



 
 

Citations (2)



 


 



Innovation Activities and the Incentives for Vertical Acquisitions and Integration


Laurent Frésard


University of Maryland - Robert H. Smith School of Business

Gerard Hoberg


University of Southern California - Marshall School of Business

Gordon M. Phillips


University of Southern California; National Bureau of Economic Research (NBER)

March 31, 2015


Abstract:     
We examine the incentives for firms to vertically integrate through acquisitions and production. We develop a new firm-specific measure of vertical relatedness and integration using 10-K product text. We find that firms in high R&D industries are less likely to become targets in vertical acquisitions or to vertically integrate. These findings are consistent with the idea that firms with unrealized innovation avoid integration to maintain ex ante incentives to invest in intangible assets and to keep residual rights of control as in Grossman and Hart (1986). In contrast, firms in high patenting industries with mature product markets are more likely to vertically integrate, consistent with control rights being obtained by firms to facilitate commercialization of already realized innovation.

Number of Pages in PDF File: 59

Keywords: Mergers and Acquisitions, Vertical Mergers, Vertical Integration

JEL Classification: G34


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Date posted: March 31, 2013 ; Last revised: April 1, 2015

Suggested Citation

Frésard, Laurent and Hoberg, Gerard and Phillips, Gordon M., Innovation Activities and the Incentives for Vertical Acquisitions and Integration (March 31, 2015). Available at SSRN: http://ssrn.com/abstract=2242425 or http://dx.doi.org/10.2139/ssrn.2242425

Contact Information

Laurent Frésard (Contact Author)
University of Maryland - Robert H. Smith School of Business ( email )
College Park
College Park, MD 20742
United States
Gerard Hoberg
University of Southern California - Marshall School of Business ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~hoberg/
Gordon M. Phillips
University of Southern California ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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