We find a positive relation between mergers and acquisitions (M&A) activity of a firm and its subsequent innovation outcome measured by the number and the novelty of the patents the firm obtains. The positive relation between M&A activity and innovation appears at least as significant as that...

Are divestitures only an ex-post reactive correction of past inefficient acquisitions or are they also an ex-ante proactive strategy to enhance the value of future acquisitions? We find support for the latter. Firms engaging in divestitures before making acquisitions obtain higher abnormal...

We propose a novel mechanism through which established firms contribute to the startup ecosystem: the allocation of R&D tax credits to startups via the M&A channel. We show that when established firms become eligible for R&D tax credits, they increase their R&D and M&A activity. In particular,...