Influence of preferred source of R&D in the IT industry on the company market capitalization

Abstract

The question of outsourcing R&D through Mergers and Acquisitions in Technology industry and its Internet sector in particular is of high interest to academic researchers. In the current paper it was approached with a focus on the share of total R&D expenditures company prefers to spend on R&D driven M&A’s in comparison with internal R&D investments. The methodology provides useful tools for comparison of differently reported in financial statements types of R&D expenditures. The regression analysis of how company’s Market Capitalization depends on R&D source preferences shows no statistically significant influence. The paper concludes that for Internet sector companies the ratio of externallygenerated R&D is not a significant driver of Market Capitalization and companies should rather pay attention to the general strategic attractiveness of the deal.