The Effect of Takeover Activity on Corporate Research and Development / Bronwyn H. Hall.

Format:

Book

Author/Creator:

Hall, Bronwyn H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2191.

NBER working paper series no. w2191

Language:

English

Subjects (All):

Research, Industrial.

Experimental design.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1987.

Cambridge, Massachusetts : National Bureau of Economic Research, 1987.

Summary:

It is widely thought that increases in corporate mergers and acquisitions of the sort which the United States has experienced in the recent past lead to a reduction in such long term investment activities as R&D because of a shortened horizon on the part of managers. This paper uses a newly created dataset containing all acquisitions of publicly traded firms in the manufacturing sector in the last ten years to answer some basic questions which pertain to this issue. I find that the firms involved in acquisitions and mergers where both partners are in the manufacturing sector have roughly the same pattern of R&D spending as the sector as a whole and that the acquisition itself does not cause a reduction in R&D activity on the part of these firms. Moreover, the R&D capital thus acquired is valued more highly by the acquiring firm than by the stock market. On the other hand, I also find that the substantial increase in the number and size of acquisitions made by privately held firms in the eighties is concentrated primarily on firms with low R&D intensity which also are in non-R&D intensive industries. Because the pattern of low investment in R&D is longstanding, and because the firms taken over have less rather than more R&D capital than the industry as a whole, it seems unlikely that the recent increase in takeover activity has had a significantly negative effect on R&D spending in these industries.

Notes:

Print version record

March 1987.