Innovation spillover and merger decisions

Mahdiyeh Entezarkheir () and Saeed Moshiri

Empirical Economics, 2021, vol. 61, issue 5, No 4, 2419-2448

Abstract: Abstract The merger–innovation nexus has been well studied in the theoretical literature, but empirical evidence, particularly on the spillover impacts of innovation, is limited. Merger decisions are influenced by a series of macroeconomic and behavioural factors; however, internalizing innovation spillovers and keeping a competitive edge may also explain merger activities. In this paper, we investigate the impact of innovation spillovers on the likelihood of firms to merge, using a combined panel data set of mergers among publicly traded US manufacturing firms from 1980 to 2003. Innovation is measured using R&D investments and citation-weighted patents, and innovation spillover is proxied using the technological proximity of firms and rivals’ innovation. We include a series of control variables affecting merger decisions and address the potential endogeneity problem using previous R&D activities of firms. We find that innovative firms are on average more likely to merge. The results also show that within-industry inward spillovers increase the likelihood of mergers, but between-industry inward spillovers do not influence merger decisions significantly. Our main results are robust to alternative measures of innovation and spillovers as well as to different estimation methods such as propensity score matching.

Keywords: Merger; Innovation; R&D; Spillovers; Competition; Patent (search for similar items in EconPapers)
JEL-codes: L12 L13 L22 L40 L44 L60 O31 O32 O34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00181-020-01973-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:empeco:v:61:y:2021:i:5:d:10.1007_s00181-020-01973-6

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-020-01973-6

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().