Cross-Border Acquisitions and R&D : Unpacking the Impact on Acquirers and Targets

We study the post acquisition R&D of both targets and acquirers involved in cross-border acquisitions by developing and estimating a two equation model that explicitly accounts for cross-border knowledge flows. We employ a sample of 3,243 firm-year observations, representing 299 cross-border deals between 28 home and 34 host markets over 15 years. Results suggest that while the acquisition disrupts the R&D trajectory of both acquirers and targets, R&D complementarities result in more R&D in both acquirers and targets. However, these effects are asymmetrical: post-acquisition R&D increases are higher in the acquirer than in the target. The overall outcome of acquisitions appears to favor R&D in the acquirer