Mergers & acquisitions and innovation performance in the telecommunications equipment industry

Tseveen Gantumur and Andreas Stephan

No 2007-051, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: In response to global market forces such as deregulation and globalization, technological change and digital convergence, the telecommunications in the 1990s witnessed an enormous worldwide round of Mergers & Acquisitions (M&A). Given both M&A and Innovation a major means of today's competitive strategy development, this paper examines the innovation determinants of M&A activity and the consequences of M&A transactions on the technological potential and the innovation performance. We examine the telecommunications equipment industry over the period 1988-2002 using a newly constructed data set with firm-level data on M&A and innovation activity as well as financial characteristics. By implementing a counterfactual technique based on a matching propensity score procedure, the analysis not only controls for merger endogeneity and ex-ante observable firms characteristics but also takes account of unobserved heterogeneity. The study provides evidence that M&A realize significantly positive changes to the firm's post-merger innovation performance. The effects of M&A on innovation performance are in turn driven by both the success in Research and Development (R&D) activity and the deterioration in internal technological capabilities at acquiring firms prior to a merger.

Keywords: Mergers & Acquisitions; Innovation Performance; Telecommunications Equipment Industry (search for similar items in EconPapers)
JEL-codes: L10 L63 O30 (search for similar items in EconPapers)
Date: 2007
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Related works:
Journal Article: Mergers & acquisitions and innovation performance in the telecommunications equipment industry (2012)
Working Paper: Mergers & Acquisitions and Innovation Performance in the Telecommunications Equipment Industry (2011)
Working Paper: Mergers & Acquisitions and Innovation Performance in the Telecommunications Equipment Industry (2007)
Working Paper: MERGERS & ACQUISITIONS AND INNOVATION PERFORMANCE IN THE TELECOMMUNICATIONS EQUIPMENT INDUSTRY (2007)
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