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General Management Department's Lecture

TIME:12:00 ,Jul4,2018
PLACE: Room 1008, Business Building
TOPIC:The Costs of Foreign Takeover Protection: Evidence from Firm Innovation
LANGUAGE: Chinese and English

This study examines the influence of foreign takeover protection on firm innovation activities. We argue that top executives will refrain from research and development (R&D) when firms are protected from foreign takeovers. This is because foreign takeover protection can render the market for corporate control ineffective and attenuate foreign-based product market competition. In addition, the negative influence of foreign takeover protection on R&D intensity is particularly strong for firms from industries with intensive foreign takeover activities as well as for firms with low international diversification. An increase in foreign takeover protection is detrimental not only to innovation efforts in terms of R&D intensity but also to innovation efficiency in terms of new product introductions relative to R&D expenditure. Using the enactment of the Foreign Investment and National Security Act (FINSA) as a quasi-natural experiment, we find support for our arguments. This study contributes to strategy research by highlighting the governance role of foreign takeovers in shaping firm innovation decisions.