Is innovation a factor in merger decisions? Evidence from a panel of US firms

Abstract

The impact of innovation on mergers has been a subject of debate in merger enforcements. Firms may decide to merge because of increasing market share and expanding capacity. However, mergers may also be motivated by innovation since they provide resources for commercialization of innovation and allow for capturing knowledge spillovers. There are myriad studies on the drivers of mergers, but empirical evidence on innovation-induced changes of merger likelihood is limited. In this paper, we construct a panel data set of mergers among publicly traded US manufacturing firms from 1980 to 2003 and investigate the impact of innovation on merger decisions controlling for business cycles and proxies of neoclassical, behavioural and Q-theories of mergers. Our measure of innovation is based on the citation-weighted patent stock. We find that innovations are positively and significantly correlated with firms' merger likelihood. Our results on the control variables, such as business cycles, Tobin's q, and market shares, are also consistent with those reported in the literature. We also find that the magnitude of the merger impact of innovation varies across industries. Our main result is robust to alternative measures of innovation and different estimation methods.

Analysis of Obstacles and Success Factors of Innovation Commercialization

“…The issue of commercialization of innovations in recent years has become particularly relevant. The work of such researchers focused on the study of the concept, procedures and factors influencing the process of creating innovation [1][2][3][4][5], including the stage of commercialization of innovation results and creative ideas [6][7][8][9][10]. Sharing of R&D results, technology transfer, corporate governance are the key factors that bring success in innovation activity of enterprises [10][11][12][13][14].…”

“…Commercialization of innovations in different areas has investigated and described in such articles: peculiarities of sales policy at innovation active enterprise [2]; distinguishing success from failure in the market of technological innovation [3]; analysis of the innovative development directions for industrial enterprises [14]. Cross-country analysis, cultural aspects and research on international market of innovative products have described in [1,5,6,11,15].…”