Foreign acquisition and R&D activities: evidence from a small open economy

Abstract

ABSTRACT This paper examines the effect of the foreign acquisition on domestic firms’ R&D activities using a firm-level dataset. We exploit a rich dataset of South Korea, which is a representative small open economy. We find that foreign takeover leads to increased R&D expenditures, which are more outsourced. The effect stood out after the global financial crisis, for listed companies and companies that rely on trade.