Innovative mergers and acquisitions and the integration of European regions

Abstract

Mergers and acquisitions (M&A) entail the substantial reallocation of economic activities. When they involve distant acquiring and target companies, they transfer control and diffuse knowledge across locations, which in turn facilitates the process of the integration of business systems. This study aims to understand how cross-regional European M&A facilitate the process of European integration. We applied social network analysis and regression techniques to a sample of cross-regional acquisitions between 2003 and 2017. The data allow us to identify whether or not a target company had an active patent portfolio at the time of deal completion. Both types of deals are highly concentrated in economically more developed regions and cluster into communities constituted by countries or groups of neighbouring countries. However, a large and increasingly non-trivial proportion of deals connect different communities, and to a larger extent for innovative than for non-innovative M&A. More populous and richer regions host a disproportionally larger number of acquiring and target companies and thus connect fragmented communities. The intensity of R&D-related expenditures provides an additional factor favouring the connection of fragmented groups of regions by attracting technology-seeking acquirers.