R&D and the Incentives from Merger and Acquisition Activity / Gordon M. Phillips, Alexei Zhdanov.

Format:

Book

Author/Creator:

Phillips, Gordon M.

Contributor:

National Bureau of Economic Research.

Zhdanov, Alexei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18346.

NBER working paper series no. w18346

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

We provide a model and empirical tests showing how an active acquisition market affects firm incentives to innovate and conduct R&D. Our model shows that small firms optimally may decide to innovate more when they can sell out to larger firms. Large firms may find it disadvantageous to engage in an "R&D race" with small firms, as they can obtain access to innovation through acquisition. Our model and evidence show that the R&D responsiveness of firms increases with demand, competition and industry merger and acquisition activity. All of these effects are stronger for smaller firms than for larger firms.

Notes:

Print version record

August 2012.