Effects of Firm R&D Investment and Environment on Acquisition Likelihood

What is it about?

R&D investments contribute to the development of firm technology resources, and the possession of such resources often increases a firm’s attractiveness as a potential acquisition target. However, the value ascribed to a firm’s technology resources by would-be acquirers may be moderated by its industry’s environmental characteristics. Using data from 2886 firms, we find that investments in R&D predict acquisition likelihood and that R&D investments are most strongly associated with acquisition of firms under conditions of high environmental munificence and dynamism.

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Why is it important?

Acquisitions are more likely in dynamic markets, and firms with more R&D investment are more likely to become acquisition targets.