DP5275 Effects of Acquisitions on Product and Process Innovation and R&D Performance
|Author(s):||Elena Cefis, Stephanie Rosenkranz, Utz Weitzel|
|Publication Date:||October 2005|
|Keyword(s):||cost reduction, dynamic efficiency, innovation, mergers and acquisitions, product differentiation|
|JEL(s):||C72, L1, L13, O32|
|Programme Areas:||Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5275|
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.