TY  - JOUR
AU  - Hall,Bronwyn H.
TI  - The Effect of Takeover Activity on Corporate Research and Development
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2191
PY  - 1988
Y2  - December 1988
UR  - http://www.nber.org/papers/w2191
L1  - http://www.nber.org/papers/w2191.pdf
N1  - Author contact info:
Bronwyn H. Hall
Dept. of Economics
549 Evans Hall
UC Berkeley
Berkeley, CA 94720-3880
Tel: 510/642-3878
Fax: 510/548-5561
E-Mail: bhhall@nber.org
M1  - published as Bronwyn H. Hall. "The Effect of Takeover Activity on Corporate Research and Development," in Alan J. Auerbach, ed., "Corporate Takeovers: Causes and Consequences" University of Chicago Press (1988)

AB  - 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.
ER  -