The Relationship between M&A and Innovation

In: http://hdl.handle.net/11540/11173

Abstract

Innovation has attracted much attention among firms as well as researchers. First, firms allocate a huge amount of funds to R&D expenditure for their innovation in products and production processes because firms' long-run growth depends on innovation. Second, researchers have investigated diverse factors affecting firms' innovation in order to answer fundamental questions on sustainable innovation. As Schumpeter suggests in his seminal work, Capitalism, Socialism, and Democracy (1950), firm size plays an important role in firms' innovation. For example, large firms can easily realize innovation because they are more likely to possess many useful resources such as more skilled scientists and high-quality equipment than small firms. In this regard, mergers and acquisitions (M&As) have been used as one of the most preferable strategies for firm growth through innovation.