A new discussion on the relationship between M&A and innovation in an emerging market: the moderating effect of post-acquisition R&D investment

Abstract

ABSTRACTBased on the framework of ‘M&A size-integration process-innovation outputs’, we re-examine the relationship between M&A and post-acquisition innovation performance, and the moderating effect of post-acquisition R&D investment. Using zero-inflated negative binomial regression with data on mergers and acquisitions of 277 high-tech firms in China from 2005 to 2015, we found that M&A size has an inverted U-shaped effect on post-acquisition innovation performance. Post-acquisition R&D investment shows a significant moderating effect on this inverted U-shaped relationship, and puts the inflection point of the inverted U-shaped curve to the right from 23% to 39%. Thus, for the acquiring firm, increasing the post-acquisition R&D investment level can effectively improve its technology absorption capacity, thereby extending the positive effect interval of M&A size on its post-acquisition innovation performance.