Empirical Economics

, Volume 57, Issue 5, pp 1783–1809 | Cite as

Is innovation a factor in merger decisions? Evidence from a panel of US firms

  • Mahdiyeh EntezarkheirEmail author
  • Saeed Moshiri


The impact of innovation on mergers has been a subject of debate in merger enforcements. Firms may decide to merge because of increasing market share and expanding capacity. However, mergers may also be motivated by innovation since they provide resources for commercialization of innovation and allow for capturing knowledge spillovers. There are myriad studies on the drivers of mergers, but empirical evidence on innovation-induced changes of merger likelihood is limited. In this paper, we construct a panel data set of mergers among publicly traded US manufacturing firms from 1980 to 2003 and investigate the impact of innovation on merger decisions controlling for business cycles and proxies of neoclassical, behavioural and Q-theories of mergers. Our measure of innovation is based on the citation-weighted patent stock. We find that innovations are positively and significantly correlated with firms’ merger likelihood. Our results on the control variables, such as business cycles, Tobin’s q, and market shares, are also consistent with those reported in the literature. We also find that the magnitude of the merger impact of innovation varies across industries. Our main result is robust to alternative measures of innovation and different estimation methods.


Merger Innovation Business cycle Anti-trust Competition Patent 

JEL Classification

L12 L22 L40 L44 L60 O31 O34 

Supplementary material


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsHuron University College at University of Western OntarioLondonCanada
  2. 2.Department of Economics, STM CollegeUniversity of SaskatchewanSaskatoonCanada

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