The Q-theory of investment says that a firm's investment rate should rise with its Q. We argue here that this theory … also explains why some firms buy other firms. We find that 1. A firm's merger and acquisition (Mamp;A) investment responds … to its Q more -- by a factor of 2.6 -- than its direct investment does, probably because Mamp;A investment is a high …

of investment requires a new idea, an quot;optionquot;. When options are scarce, new capital is harder to put in place …, Q rises gradually, as options are used up. Because investment represents an exercise of options, it has an intertemporal …

The prospect of capital obsolescence inhibits investment. Investors thus become more optimistic when the obsolescence … of their capital slows down. We propose a model with no fixed costs of investment, and random technological progress that … variable, investment spikes are larger …

of investment requires a new idea, an "option". When options are scarce, new capital is harder to put in place and the … gradually, as options are used up. Because investment represents an exercise of options, it has an intertemporal substitution …