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: | 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.