Should Countries Block Foreign Takeovers of R&D Champions and Promote Greenfield Entry?

Reprint No. 2012:34

Author(s): Oliver Bertrand, Katariina Nilsson Hakkala, Pehr-Johan Norbäck and Lars PerssonYear: 2012 Title: Canadian Journal of Economics Volume (No.): 45 (3) Pages: 1083–1124
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Preliminary version

In R&D intensive industries, governments promote greenfield foreign investments, while being sceptical towards foreign acquisitions of domestic high-quality firms. We develop a theoretical model that shows that foreign acquisitions are conducive to high-quality targets because of strategic effects on the sales price. However, foreign firms ‘cherry pick’ high-quality targets to expand R&D rather than to downsize. Otherwise, rivals expand R&D, making the acquisition unprofitable. Thus, our model predicts that acquired affiliates invest more in R&D than greenfield affiliates. Using affiliate data, we find evidence that acquired affiliates have a higher level of sequential R&D intensity than greenfield affiliates.

Bertrand, Oliver, Katariina Nilsson Hakkala, Pehr-Johan Norbäck and Lars Persson (2012), "Should Countries Block Foreign Takeovers of R&D Champions and Promote Greenfield Entry?". Canadian Journal of Economics 45(3), 1083–1124.

Pehr-Johan Norbäck


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Lars Persson


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Interdisciplinary European Studies

The European Union and the Return of the Nation State


This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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