Impact of M&A by foreign companies on innovation activities of acquired companies

In recent years, the number of acquisitions of Japanese companies by foreign companies has been increasing. In addition, M&As for technology acquisition are becoming more important, especially in industries such as automobiles and semiconductors, where radical technological changes such as electrification and autonomous driving are occurring. There is a possibility that R&D activities and technological resources are reorganized within the corporate group after the implementation of international M&As. In this study, we examine how the R&D activities of Japanese companies acquired by foreign companies change using a panel dataset at the firm level. The results show that R&D expenditures of an acquired company tend to decrease after the acquisition by a foreign company. However, R&D expenditures do not decrease after the acquisition in industries such as transportation machinery and electronic machinery. Furthermore, the effects of an acquisition on R&D expenditures of the acquired company vary depending on the nationality of the acquiring company.