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Discussion Paper Details

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

Author(s): Elena Cefis, Stephanie Rosenkranz and Utz Weitzel

Publication Date: October 2005

Keyword(s): cost reduction, dynamic efficiency, innovation, mergers and acquisitions and product differentiation

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Cefis, E, Rosenkranz, S and Weitzel, U. 2005. 'Effects of Acquisitions on Product and Process Innovation and R&D Performance'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5275