I’ve been zooming out to gain a broader perspective of how finance and innovation interact in the economy for my work with the #FounderFriendlyStandard.
I asked the question: How much more money do companies invest in mergers & acquisitions (M&A) than in research and development (R&D)?
Here is the statistic that I found:
The above stat comes from merging two data sources.
The first data source is Mergers & Acquisitions United States from the Institute for Mergers, Acquisitions, and Alliances (IMAA).
The second data source is NSF 16-316 from the National Center for Science and Engineering Statistics, a division of the National Science Foundation (NSF).
I put the two data sources into this spreadsheet comparing IMAA and NSF data. The overlapping values reveal that companies spend 4x more on acquiring companies than on research and development.
My next questions are:
- By and large, what are companies hoping to gain from these acquisitions?
- Is innovation the primary driver?
- Is there a more capital-efficient way to acquire innovation?
With that, I’m off to hunt for answers.
3-YEAR UPDATE: In the time since I wrote this post, I’ve published two books with answers to the above questions: Gray Sports Almanac for Venture Capital and Innovation Casino.