Acquisition for Innovations? R&D Outsourcing Through M&A Activities

57 Pages Posted: 30 Oct 2019

See all articles by Kai Wu

Kai Wu

Central University of Finance and Economics (CUFE) - School of Finance

Shuxun Wang

Capital University of Economics and Business

Seiwai Lai

Central University of Finance and Economics (CUFE) - School of Finance

Date Written: October 20, 2019

Abstract

We evaluate the effects of M&A activities on firms' innovation strategies. We find R&D outsourcing from parent firms to subsidiary firms following M&A activities in China from 2007 to 2017. In particular, M&A activities have a negative (positive) effect on parent (subsidiary) firms' innovations. R&D expenditures are identified as the underlying channel through which the firm innovations are affected. Only firms in the declining life-cycle stage engage in R&D outsourcing. The shift of R&D activities increase firm performance. In addition, the R&D outsourcing behaviors are more pronounced in firms that face great financial constraints, pay aggressive bidding premiums, and operate in competitive markets. Our findings provide evidence that R&D outsourcing through M&A activities is an effective strategy to promote firm innovations.

Keywords: M&A Intensity, Firm Innovations, R&D Outsourcing

JEL Classification: D22, L13, L4

Suggested Citation

Wu, Kai and Wang, Shuxun and Lai, Seiwai, Acquisition for Innovations? R&D Outsourcing Through M&A Activities (October 20, 2019). Available at SSRN: https://ssrn.com/abstract=3472772

Kai Wu

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

Shuxun Wang (Contact Author)

Capital University of Economics and Business ( email )

Beijing
China

Seiwai Lai

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

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