Foreign Acquisitions, Domestic Multinationals, and R&D

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The aim of this paper is to evaluate the causal effect of foreign acquisition on R&D intensity in targeted domestic firms. We are able to distinguish domestic multinationals and non-multinationals, which allows us to investigate the fear that the change in ownership of domestic to foreign multinationals leads to a reduction in R&D activity in the country, as headquarter activities are relocated to the new owner's home country. We use unique and rich firm level data for the Swedish manufacturing sector and different micro-econometric estimation strategies in order to control for the potential endogeneity of the acquisition dummy. Overall, our results give no support to the fears that foreign acquisition of domestic firms lead to a brain drain of R&D activity in Swedish MNEs. Rather, this paper finds robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non-MNEs. Terms of use: Documents in EconStor may

Effects of foreign acquisitions on R&D and high-skill activities

“…To preview our results, we find, in contrast to Bertrand (2009) and Bandick et al (2014), no effect of foreign acquisitions on R&D in targeted firms, neither in MNEs nor in non-MNEs. In contrast, in small, non-MNEs, particularly in the service sector, the share of highly skilled labour increases in firms acquired by foreign enterprises.…”

“…Those studies often found negative impacts on post-acquisition R&D in the acquired firms; however, the results were not robust. 4 Two studies more in the vein of this paper are Bertrand (2009) and Bandick et al (2014); they both investigated the effects of foreign acquisitions on the R&D activities in domestic targeted firms. Bertrand (2009) covered international acquisitions of French innovative 5 manufacturing firms from 1995 to 2001, andBandick et al (2014) covered international acquisitions of Swedish manufacturing firms with at least 50 employees from 1994 to 1999.…”

“…In expanding on the work of Bandick et al (2014), we have extended our study to include the entire Swedish business sector. The foreign acquisitions in our study occurred between 2000 and 2006, a period with no spectacular increase in foreign ownership.…”

Investment liberalisation, technology take-off and export markets entry: Does foreign ownership structure matter?

“…2 For example, a number of papers employing propensity score matching show that foreign acquisitions lead to productivity increases (Arnold and Javorcik, 2009) where the implicit assumption is that technology improvements drive these increases in productivity, or foreign acquisition lead to more R&D activities in order to prevent the expansion of domestic rivals (Bandick, Görg and Karpaty, 2014). A number of studies also look at the relationship between acquisitions and exporting, see, for example, Du and Girma (2009) using firm level data from China.…”

Foreign Direct Investments Induced Innovation? A Case Study – Macedonia

“…There is a correlation between R&D, i.e. employees in R&D and R&D sales ratios (Howenstine and Zeile 1992); and thus foreign acquisitions lead to increasing R&D intensity in acquired domestic multinationals as well as non-multinationals (Bandick, Görg et al 2014). …”