Do acquisitions affect innovation in EU digital industries?
This study examines the impact of acquisitions of EU-based firms by incumbent firms on innovation in digitally intensive sectors. Using a cross-country firm-level dataset spanning 2009–2020 and an augmented inverse probability weighting (AIPW) difference-in-differences (DiD) model, the analysis reveals that acquisitions generally reduce the number of EPO patent families filed by EU firms. This effect is most pronounced when non-EU firms acquire innovative targets. However, the observed average effects mask significant heterogeneity in outcomes. Specifically, acquisitions of high-patenting firms result in a substantial decline in patenting activity, driving the overall negative trend, while acquisitions of low-patenting firms typically have minimal impact, with some years even showing a slight increase. These divergent outcomes reflect varied merger and acquisition (M&A) strategies, including market consolidation, resource extraction, or innovation suppression. The persistent negative effect on high-patenting firms raises concerns about strategic competitor neutralization or intellectual property appropriation, which could undermine the EU’s innovation objectives in digitally intensive sectors.
BELLO Michela;
RABELLOTTI Roberta;
RAVANOS Panagiotis;
SMALLENBROEK Oscar;
2025-12-05
Publications Office of the European Union
JRC143527
978-92-68-31433-3 (online),
1831-9424 (online),
EUR 40450,
OP KJ-01-25-461-EN-N (online),
https://publications.jrc.ec.europa.eu/repository/handle/JRC143527,
10.2760/3654970 (online),
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