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/Revue canadienne d'économique, 2012, vol. 45, issue 3, 1083-1124

Abstract: 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. Dans les industries à forte intensité de R&D, les gouvernements encouragent les investissements étrangers dans les jeunes pousses, tout en étant sceptiques quant aux acquisitions étrangères de firmes domestiques de haute qualité. On développe un modèle théorique qui montre que les acquisitions par l’étranger ciblent les firmes de haute qualitéà cause des effets stratégiques sur la valeur de l’entreprise. Les entreprises étrangères choisissent des cibles de haute qualité pour accroître leur R&D non pas pour le diminuer. Autrement leurs rivaux vont accroître leur R&D et rendre l’acquisition non‐profitable. Donc, le modèle prédit que les succursales acquises vont investir davantage dans le R&D que les jeunes pousses. A l’aide de données sur les succursales, on montre que les succursales acquises ont un plus haut niveau d’intensité en R&D dans l’après que les jeunes pousses acquises.

Date: 2012
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https://doi.org/10.1111/j.1540-5982.2012.01728.x

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Journal Article: Should countries block foreign takeovers of R&D champions and promote greenfield entry? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:canjec:v:45:y:2012:i:3:p:1083-1124

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