PhD seminar with Mustafa Bulut

Title: Do Acquisitions Stifle Local Innovation?

Abstract: Acquisition of a local firm by a distant acquirer raises considerable objections by the local communities due to concerns over layoffs and draining of economic activity. However, these concerns are not necessarily warranted given that acquiring firms might bring in key talent, managerial expertise, and achieve a better utilization of local resources. In this paper, using patent-based metrics, I analyze the spillovers of acquisitions on local innovation. As the selection of takeover targets is endogenous to local economic conditions, I compare successful M%A bids with failed ones as a quasi-experiment. The empirical results indicate that local innovation scale goes down after a firm is taken over in a county, compared to the case when an M%A bid fails. The innovation spillovers are stronger for firms that operate in similar technologies as the target firms; when the target establishments constitute a larger portion of the local economy; and in smaller geographies around the target establishments.