Should countries block foreign takeovers of R&D champions and promote greenfield entry?

Olivier Bertrand, Katariina Nilsson Hakkala, Pehr-Johan Norbäck and Lars Persson

Canadian Journal of Economics, 2012, vol. 45, issue 3, 1083-1124

Abstract: In R&D intensive industries, governments promote greenfield foreign investments, while being sceptical towards foreign acquisitions of domestic high-quality firms. We develop a theoretical model that shows that foreign acquisitions are conducive to high-quality targets because of strategic effects on the sales price. However, foreign firms `cherry pick' high-quality targets to expand R&D rather than to downsize. Otherwise, rivals expand R&D, making the acquisition unprofitable. Thus, our model predicts that acquired affiliates invest more in R&D than greenfield affiliates. Using affiliate data, we find evidence that acquired affiliates have a higher level of sequential R&D intensity than greenfield affiliates.

JEL-codes: F23 L10 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://doi.org/10.1111/j.1540-5982.2012.01728.x (text/html)
access restricted to subscribers

Related works:
Journal Article: Should countries block foreign takeovers of R&D champions and promote greenfield entry? (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cje:issued:v:45:y:2012:i:3:p:1083-1124

Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php

Access Statistics for this article

Canadian Journal of Economics is currently edited by Zhiqi Chen

More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().