R&D and M&A: Are cross-border M&A different? An investigation on OECD countries

This paper investigates the incidence of national and cross-border mergers and acquisitions (M&A) on private research and development (R&D) investments in OECD countries over the period 1990-1999. We use generalized method of moments (GMM) estimation techniques for dynamic panel data and control for some market-related and technological determinants of R&D production. There are two main findings of particular importance. First, the last M&A wave did not have any significant effect on domestic R&D activities; M&A only contributed to increase R&D investment in some specific industries. This result emphasizes a weak influence of M&A on aggregated R&D investment. Second, our results provide evidence that domestic and cross-border M&A differed in their impact on R&D investment; only domestic operations seem to have stimulated R&D investment in low-technology intensive industries. However, it cannot be concluded that domestic M&A led to more R&D investment; domestic M&A diminished R&D investment across OECD nations in medium-technology intensive industries, while inward cross-border M&A tended to have the opposite effect. In these industries, host countries' target firms, and not home countries' buyer firms, seem to have benefited from M&A operations. This result casts some doubt on the usual fears regarding foreign takeovers and their impact on local R&D activity.