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Cross-border mergers and acquisitions for innovation

Po-Hsuan Hsu, Peng Huang, Mark Humphery-Jenner and Ronan Powell

Journal of International Money and Finance, 2021, vol. 112, issue C

Abstract: We propose and empirically examine cross-border mergers and acquisitions (M&As) as an important dimension of firms’ innovation strategies. Our empirical analyses, based on a sample of 85,591 M&A deals from 57 countries, show that innovative firms in low innovation countries are more likely to undertake cross-border deals, and select innovative targets when doing so, as compared with innovative firms in high innovation countries. We also find that these cross-border M&As earn higher announcement stock returns when compared to domestic deals. We show that innovative firms from low innovation countries produce more patents, and invest more in research and development (R&D) after they acquire targets in high innovation countries. This study provides new evidence to the absorptive capacity theory from an international perspective.

Keywords: Innovation; Mergers; Acquisitions; Cross-border (search for similar items in EconPapers)
JEL-codes: G34 O32 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jimonfin.2020.102320

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