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University of Richmond

1991

Corporate mergers

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Are Acquisitions A Poison Pill For Innovation?, Michael A. Hitt, Robert E. Hoskisson, R. Duane Ireland, Jeffrey S. Harrison Jan 1991

Are Acquisitions A Poison Pill For Innovation?, Michael A. Hitt, Robert E. Hoskisson, R. Duane Ireland, Jeffrey S. Harrison

Management Faculty Publications

The recent wave of acquisition activity may be damaging the innovative capabilities of American firms, thus making them less competitive in the global marketplace. In fact, acquisitions often serve as a substitute for innovation, which may cause further neglect of internal research and development (R&D) programs. Additionally, acquisitions often lead to increases in leverage, diversification, and absorb significant amounts of executive time, which may lead to reduced managerial commitment to innovation.

In this article, evidence is presented suggesting that acquisition activity may result in reductions in R&D inputs and outputs. On average, the 191 firms in the sample reduced their …


Effects Of Acquisitions On R&D Inputs And Outputs, Michael A. Hitt, Robert E. Hoskisson, R. Duane Ireland, Jeffrey S. Harrison Jan 1991

Effects Of Acquisitions On R&D Inputs And Outputs, Michael A. Hitt, Robert E. Hoskisson, R. Duane Ireland, Jeffrey S. Harrison

Management Faculty Publications

Making acquisitions, although a popular strategy, may not always lead to positive firm performance. Researchers have offered several explanations for this relationship. One is that acquisitions lead to lower investments in R&D and curtail the championing process whereby organization members internally promote new products and processes in firms. The current research found that acquisitions had negative effects on "R&D intensity" and "patent intensity."