Technology pp 89-109 | Cite as

Does M&A Matter for R&D? Evidence from the Pharmaceutical Sector in India

  • Vidhisha VyasEmail author
  • K. Narayanan
Part of the India Studies in Business and Economics book series (ISBE)


It is widely accepted that technological expertise, market know-how, tacit knowledge and quick innovation are crucial corporate assets for facing increased competition. Mergers and acquisitions [M&A] has become a means for firms to acquire, absorb and exploit the knowledge assets of target firm. The present study investigates the relationship between M&A and innovation activities of pharmaceutical firms (post-M&A R&D intensity) for three post acquisition years and for average of three years. To analyze the impact, appropriate acquirer’s characteristics have been drawn from learning and innovation theory and financial economics theory. The findings of the paper suggest that acquisitions per se have a mixed impact on R&D intensity of firms in immediate post-acquisition years. Financial factors captured by leverage also appear to influence adversely the R&D intensity of acquiring firms. While technology imports through embodied capital goods boost acquiring firms’ R&D intensity, imports of disembodied technology lowers the need for R&D expenditure. Relatedness of target and acquiring firms and cross-border M&A, however, enhances R&D intensity in post-M&A period. This could imply that mergers and acquisitions of firms, if carried out in similar line of business, could boost innovative efforts in this industry in India.


M&A R&D intensity Technology imports Leverage JEL classification: G34 C23 O32 



An earlier version of this paper was presented in the 9th Annual Conference of the Knowledge Forum held during October 2014. The authors are grateful to Professors Siddharthan and Goldar for their valuable feedback. The comment and suggestions received from other participants are also highly appreciated. The error(s) that remain are our own.


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Copyright information

© Springer Science+Business Media Singapore 2016

Authors and Affiliations

  1. 1.IILM Institute of Business and ManagementGurgaonIndia
  2. 2.Department of Humanities and Social SciencesIITBombayIndia

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