Mergers and Acquisitions

Mergers and Acquisitions

The Innovation Impact

Edited by Bruno Cassiman and Massimo G. Colombo

This book examines the issue of mergers and acquisitions (M & As) in the context of technological development, and in particular the impact of M & As on the innovation process. In so doing, the book integrates two bodies of literature, on M & As, and on innovation studies, a nexus which the editors contend represents an important step in the advancement of our understanding of both with clear implications for competitive advantage and growth of firms. Drawing on perspectives from both management and economics, the book offers a cohesive blend of theory, methodology, and a wealth of empirical material.

Chapter 4: Literature Review

Reinhilde Veugelers

Subjects: business and management, organisational innovation, economics and finance, economics of innovation, industrial economics, innovation and technology, economics of innovation, organisational innovation


Reinhilde Veugelers While Chapters 2 and 3 indicate that many Mergers and acquisitions (M&A) have an innovation related motivation, the link between M&A and research and development (R&D) is, despite its importance, less well examined, at least directly. The scarcity of ‘know-how’ on this issue is in contrast with the wide theoretical literature that exists on motives for M&A and the large number of empirical studies of M&A which focus on the link with shareholder value and economic performance. In section 4.1 we will very briefly review the mainstream theoretical and empirical M&A literature, using their main findings as a prelude to gaining a greater understanding on the innovation related issues, tackled in sections 4.2 and 4.3. 4.1 THEORIES AND EVIDENCE ON WHY M&A OCCUR The frequency with which M&A activities are observed suggest that there are strong reasons why it makes sense for two (or more) firms to consolidate into one or for one firm to purchase another. Typical motives identified in the theoretical Industrial Organization literature are the desire to achieve or strengthen market power and the search for efficiency gains by being able to exploit economies of scale and scope (Caves 1989, Röller et al. 2001). The Financial Economics (market for corporate control) literature suggests that M&A are used to correct internal inefficiencies, agency problems and capital market imperfections (Manne 1965, Jensen and Ruback 1983). Nevertheless, despite the many advantages M&A could...

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