Effects of Acquisitions on Product and Process Innovation and R&D Performance

Elena Cefis

University of Bergamo – Department of Economics; Utrecht University – Tjalling C. Koopmans Research Institute

Stephanie Rosenkranz

Utrecht University – Utrecht University School of Economics; Centre for Economic Policy Research (CEPR)

Utz Weitzel

Utrecht University – Utrecht University School of Economics; Radboud University – Economics Department, IMR

June 1, 2005

published version available: E. Cefis, S. Rosenkranz, & U. Weitzel (2009): “Effects of acquisitions on product and process innovation and R&D performance”, Journal of Economics, 96(3), 193-222

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.

Effects of Acquisitions on Product and Process Innovation and R&D Performance

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