The Bright Side of Diversification: The Case of R&D Productivity

Topic:

The Bright Side of Diversification: The Case of R&D Productivity

Time&Date: 

 10:30 am -12:00 pm, 2019/12/05 (Thursday)

Venue:

 Room W203, Administration Building

Speaker:

Prof. Haifeng You (Hong Kong University of Science and Technology)

Abstract:

This paper examines the effects of corporate structure on innovation productivity. We find that conglomerates achieve greater innovation productivity relative to single-segment firms even though they spend less on R&D. We further show that conglomerates with segments more closely related in technology or with senior executives coordinating their innovation endeavors have greater R&D productivity. Using a quasi-experiment in the M&A setting, we find similar evidence as Seru (2014) that acquired target firms become less innovative following mergers relative to withdrawn target firms. However, we find that post-merger R&D productivity increases significantly for both acquiring and combined firms. This highlights that while disruption from post-merger integration may impede innovation for targets, it tends to be outweighed by the knowledge spillover gain for acquirers. Our results collectively suggest that a conglomerate corporate structure facilitates intra-firm knowledge spillover and thereby improves innovation productivity.