R&D investment as a signal in corporate takeovers
M. Pilar Socorro ()
Managerial and Decision Economics, 2009, vol. 30, issue 5, 335-350
The purpose of this paper is to analyze the effects that takeover threats have on firms' preacquisition R&D intensity. Critics of takeovers usually argue that takeover threats may reduce target firms' R&D investments. However, I find that target firms may increase R&D investment in order to signal their compatibility with the acquiring firm. The identity of the acquired firm depends on the market size and target firms' efficiency and compatibility. Through R&D investments, target firms may affect this result, signaling potential outsiders the kind of competition they may face, and forcing them to accept lower takeover offers. Copyright © 2009 John Wiley & Sons, Ltd.
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Working Paper: R&D investment as a signal in corporate takeovers (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:30:y:2009:i:5:p:335-350
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