The Impact of Corporate Restructuring on Industrial Research and Development
Bronwyn H. Hall
This paper investigates whether the recent wave of corporate
restructuring in the United States has had a negative impact on research
arid development investment by industrial firms. Using a newly
constructed sample of about 2500 manufacturing firms from 1974 to 1987,
I examine three major classes of restructuring events: leveraged buyouts
and other "going private" transactions, mergers and acquisitions in
general, and substantial increases in leverage.
The major conclusions are first, that leveraged buyouts do not
occur in R&D-intensive sectors or firms and cannot therefore be having
much of an impact on R&D spending; rather, the evidence seems consistent
with an agency cost and cash flow-driven model of buyouts. Second,
major increases in leverage are followed by substantial declines in the
R&D intensity of the firms in question, and the effect takes at least
three years to work through. Finally, although the evidence on
acquisitions by publicly traded firms is mixed, the basic conclusion is
that any declines in the R&D intensity of acquiring firms relative to
their past history appear to be associated with the leverage structure
of the transaction rather than the acquisition itself.
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