The Impact of Corporate Restructuring on Industrial Research and Development

MANY CLAIM that the mergers, leveraged buyouts, and restructurings in the U.S. corporate sector during the 1980s had a detrimental effect on industrial spending for research and development. Critics of this recent activity point to the stagnation in real R&D expenditures by the private sector during the 1980s and suggest that these restructurings were a major cause of the decline. I Others view this process as a healthy revitalization of U.S. industry in the face of foreign competition and a changing regulatory and financial environment.2 Why are so many people concerned about this increase in restructuring activity? After all, the traditional view of economists (at least since the work of Merton Miller and Franco Modigliani) has been that the investment policy of a firm should be independent of its choice of