We provide a model and empirical tests showing how an active acquisition market positively affects firm incentives to innovate and conduct R&D. Our model shows how the incentives of small firms to conduct R&D in order to innovate increase with competition, demand and the probability that they...

We examine the determinants of vertical acquisitions using product text linked to product vocabulary from the input-output tables. We find that the stage of innovation is important in understanding vertical integration. R\&D-intensive firms are less likely to become targets in vertical...