Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25223
Authors: 
Gantumur, Tseveen
Stephan, Andreas
Year of Publication: 
2007
Series/Report no.: 
SFB 649 discussion paper 2007,051
Abstract: 
In response to global market forces such as deregulation and globalization, technological change and digital convergence, the telecommunications in the 1990s witnessed an enormous worldwide round of Mergers & Acquisitions (M&A). Given both M&A and Innovation a major means of today's competitive strategy development, this paper examines the innovation determinants of M&A activity and the consequences of M&A transactions on the technological potential and the innovation performance. We examine the telecommunications equipment industry over the period 1988-2002 using a newly constructed data set with firm-level data on M&A and innovation activity as well as financial characteristics. By implementing a counterfactual technique based on a matching propensity score procedure, the analysis not only controls for merger endogeneity and ex-ante observable firms characteristics but also takes account of unobserved heterogeneity. The study provides evidence that M&A realize significantly positive changes to the firm's post-merger innovation performance. The effects of M&A on innovation performance are in turn driven by both the success in Research and Development (R&D) activity and the deterioration in internal technological capabilities at acquiring firms prior to a merger.
Subjects: 
Mergers & Acquisitions
Innovation Performance
Telecommunications Equipment Industry
JEL: 
L63
O30
L10
Document Type: 
Working Paper

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