Working Paper: CEPR ID: DP5275
Authors: Elena Cefis; Stephanie Rosenkranz; Utz Weitzel
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: Cost Reduction; Dynamic Efficiency; Innovation; Mergers and Acquisitions; Product Differentiation
JEL Codes: C72; L1; L13; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Acquisitions (G34) | R&D investment in new products (O32) |
| Acquisitions (G34) | Aggregate R&D investment (O32) |
| Acquisitions (G34) | R&D efficiency (O32) |
| Acquisitions (G34) | Dynamic efficiency (C69) |