The Impact of Mergers and Acquisitions on Innovation
Location
Biology Building, Room 101
Start Date
19-4-2018 6:00 PM
End Date
19-4-2018 7:00 PM
Description
While firms may choose to grow through internally innovating cost-cutting or quality improving processes, they may also find growth opportunities in merging with or acquiring other firms. This hypothesis predicts that merger and acquisition activity has a detrimental effect on technological growth. On the other hand, mergers may push the innovation process forward by combining the innovative capabilities of previously independent and competing entities, and foster novel technological advances. Since innovation is essential for national economic well-being and M&A activity is prevalent, there is a need to understand the impact of acquisition activity on innovation. Using fixed effects negative binomial modeling approach, this study examines the effects of M&As on innovation within one of the most important industries in the U.S. in terms of shipments and share of R&D – the medical devices industry. Consistent with the efficiency gains argument, merging firms generate more useful knowledge at a lower cost after the merger. Further, mergers involving a large and a small firm, compared to any other combination, produce the highest number, as well as the most widely cited set, of patents. Finally, among merging firms, complementarity of ex-ante innovative agendas fosters a higher level of innovation after the merger. Results are economically large and robust to numerous sensitivity checks.
The Impact of Mergers and Acquisitions on Innovation
Biology Building, Room 101
While firms may choose to grow through internally innovating cost-cutting or quality improving processes, they may also find growth opportunities in merging with or acquiring other firms. This hypothesis predicts that merger and acquisition activity has a detrimental effect on technological growth. On the other hand, mergers may push the innovation process forward by combining the innovative capabilities of previously independent and competing entities, and foster novel technological advances. Since innovation is essential for national economic well-being and M&A activity is prevalent, there is a need to understand the impact of acquisition activity on innovation. Using fixed effects negative binomial modeling approach, this study examines the effects of M&As on innovation within one of the most important industries in the U.S. in terms of shipments and share of R&D – the medical devices industry. Consistent with the efficiency gains argument, merging firms generate more useful knowledge at a lower cost after the merger. Further, mergers involving a large and a small firm, compared to any other combination, produce the highest number, as well as the most widely cited set, of patents. Finally, among merging firms, complementarity of ex-ante innovative agendas fosters a higher level of innovation after the merger. Results are economically large and robust to numerous sensitivity checks.
Speaker Bio
Dr. Eminli is an Assistant Professor of Finance at the Eberhardt School of Business at the University of the Pacific. He received his Ph.D. and M.S. degrees in Economics with concentrations in Finance and Industrial Organization from Purdue University, and his B.A. degree in Mathematics and Economics from Berea College. Dr. Eminli's primary research interests are in corporate finance, corporate governance, and industrial organization. Most of his work to date has focused on mergers and acquisitions, innovation, and t he medical devices industry. He currently teaches courses in Financial Management, and International Financial Management. Prior to joining the faculty of the University of the Pacific, Dr. Eminli taught courses at the Krannert School of Management at Purd ue University and he has been recognized for distinguished teaching at both institutions.