How Does a Company Being Acquired Affect Rivals Innovation in Technology Industry?

Abstract

Previous research on mergers and acquisitions has predominantly focused on the companies involved in the acquisition process. This paper aims to extend the scope of study by including the response of rivals, specifically those of the companies being acquired. This paper studies how the rivals of companies being acquired change their innovation in technology industy. This study compares R&D expenses of rival firms before and after the acquisitions to analyze these changes. However, our analysis does not reveal a strong correlation between a company's level of innovation and the occurrence of its rivals being acquired. Other factors such as company size, industry competitiveness, and leverage held by the company appear to influence a company's innovation.To gain a more comprehensive understanding of the impact of rivals being acquired on a company's innovation, further research is required. Future studies should explore additional variables and factors that may mediate or moderate the relationship between M&A activities and innovation outcomes.In conclusion, while our study does not provide clear evidence of the effect of rivals being acquired on a company's innovation, it emphasizes the crucial role of considering multiple dimensions when examining the relationship between M&A and innovation. This study contributes to the ongoing discussion on understanding the complex dynamics of M&A and their influence on firms' innovation strategies.