Impact of Acquistions by Foreign Companies on Innovation Activities

Jyrki Ali-Yrkkö and Antti Kauhanen

No 122, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Abstract This study examines the impact of foreign acquisitions on innovation activities in Finnish target firms using comprehensive linked employer-employee data from 2010–2021. Unlike previous research that found negative effects on R&D expenditures and patenting, we measure innovation through the share of R&D personnel in total employment. Our main finding is that foreign acquisitions have a statistically insignificant and economically small impact on the share of R&D employees in target firms. Three years post-acquisition, the point estimate shows a 0.9 percentage point increase in R&D employee share, and we can rule out increases over 2 percentage points and decreases below 0.09 percentage points. This null effect persists across different firm sizes and industries. Our results suggest that con-cerns about foreign acquisitions substantially reducing domestic R&D activity may be overstated, at least when measured by R&D employment.

Keywords: Acquisition; M&A; Research; Development; R&D; Innovation; Impact (search for similar items in EconPapers)
JEL-codes: L6 L64 O3 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2024-11-27
New Economics Papers: this item is included in nep-com, nep-cse, nep-ent, nep-ino, nep-int and nep-sbm
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