Effects of Acquisitions on Product and Process Innovation and R&D Performance
34 Pages Posted: 18 Nov 2005
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Effects of Acquisitions on Product and Process Innovation and R&D Performance
Date Written: October 2005
Abstract
Using a game theoretical model on firms' simultaneous investments in product and process innovation, we deduct and empirically test hypotheses on the optimal R&D portfolio, investment, performance, and dynamic efficiency of R&D for acquisitions and in independently competing firms. We use Community Innovation Survey data on Italian manufacturing firms. Theoretical and empirical results show that firms involved in acquisitions invest in different R&D portfolios and invest at least as much in aggregate R&D as independent firms. The empirical results do not support our hypothesis on dynamic efficiency since acquisitions lead to inferior R&D performance.
Keywords: Mergers and acquisitions, innovation, dynamic efficiency, cost reduction, product differentiation
JEL Classification: C72, L1, L13, O32
Suggested Citation: Suggested Citation
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