Abstract

This study investigates the impact of rivals' announcements of innovation-driven mergers and acquisitions (M&As) on focal firms' ex-post corporate innovation performance. Exploiting a hand-collected dataset of Chinese listed firms from 2011 to 2018, we find that focal firms file fewer patents after rivals' announcements of innovation-driven M&As. Further analyses show that focal firms become more conservative and hold more cash when rivals intend to obtain innovation resources through M&As. We find that such crowding-out effects are more pronounced for focal firms that are more financially constrained, those facing higher competition, those whose rivals are industry leaders, and those operating in traditional industries.