Technological Innovation and Acquisitions

I examine whether technological innovation is a motivating factor in firms' acquisition decisions and how an acquisition (or an acquisition withdrawal) affects technological innovation in subsequent years. I find that firms engaging in acquisition activities are less innovative and have often e...

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Bibliographic Details
Published in:	Management science 2009-07, Vol.55 (7), p.1170-1183
Main Author:	Zhao, Xinlei
Format:	Article
Language:	eng
Subjects:	Acquisitions Acquisitions & mergers Applied sciences Bidding Bids Business innovation Business studies citations Corporate mergers Data acquisition Economic activity Exact sciences and technology Firm modelling High technology industries Industrial research Innovation Innovations Management science Mergers New technology Open innovation Operational research and scientific management Operational research. Management science P values Product development R& D Rates of return Research & development Research and development stock returns Studies Take-overs Technological change Technological innovation
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Summary:	I examine whether technological innovation is a motivating factor in firms' acquisition decisions and how an acquisition (or an acquisition withdrawal) affects technological innovation in subsequent years. I find that firms engaging in acquisition activities are less innovative and have often experienced declines in technological innovation during the years prior to the bid. Among the bidders, the relatively more innovative ones are less likely to complete a deal. During the three years after the bid, successful bidders do not underperform matching firms, whereas failed bidders significantly underperform their nonbidding peers. I further find that formerly less innovative bidders benefit more from acquisitions. These findings suggest that technological innovation affects firms' acquisition decisions, and in turn, acquisitions help firms' innovation efforts.
ISSN:	0025-1909 1526-5501