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Impact of Acquistions by Foreign Companies on Innovation Activities

Author

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  • Ali-Yrkkö, Jyrki
  • Kauhanen, Antti

Abstract

This study examines the impact of foreign acquisitions on innovation activities in Finnish target firms using comprehensive linked employer-employee data from 2010–2021. Unlike previous research that found negative effects on R&D expenditures and patenting, we measure innovation through the share of R&D personnel in total employment. Our main finding is that foreign acquisitions have a statistically insignificant and economically small impact on the share of R&D employees in target firms. Three years post-acquisition, the point estimate shows a 0.9 percentage point increase in R&D employee share, and we can rule out increases over 2 percentage points and decreases below 0.09 percentage points. This null effect persists across different firm sizes and industries. Our results suggest that con-cerns about foreign acquisitions substantially reducing domestic R&D activity may be overstated, at least when measured by R&D employment.

Suggested Citation

  • Ali-Yrkkö, Jyrki & Kauhanen, Antti, 2024. "Impact of Acquistions by Foreign Companies on Innovation Activities," ETLA Working Papers 122, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:wpaper:122
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    More about this item

    Keywords

    Acquisition; M&A; Research; Development; R&D; Innovation; Impact;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments

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