Abstract

http://ssrn.com/abstract=2242425
 
 

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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


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

February 15, 2016


Abstract:     
We examine firm vertical integration through acquisitions and organic changes in 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 vertically integrate. These findings are consistent with firms with unrealized innovation avoiding integration to maintain ex ante incentives to invest in intangible assets and keep residual rights of control. In contrast, firms in high patenting and more mature industries are more likely to vertically integrate, consistent with ownership facilitating commercialization and reducing ex post holdup.

Number of Pages in PDF File: 60

Keywords: Mergers and Acquisitions, Vertical Mergers, Vertical Integration

JEL Classification: G34


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Date posted: March 31, 2013 ; Last revised: February 15, 2016

Suggested Citation

Frésard, Laurent and Hoberg, Gerard and Phillips, Gordon M., Innovation Activities and the Incentives for Vertical Acquisitions and Integration (February 15, 2016). 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
Tuck School of Business at Dartmouth ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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