The Impact of Technological Acquisitions on Innovation Quality

Abstract

In recent years M&A has been as a prominent strategy in the context of inter-firm technology transfer. Prior literature has evaluated the latter by using different types of post-merger innovation measurements. In this connection the chapter provides a framework to analyze the effects of corporate acquisitions on innovation quality. The approach presumes that an acquirer’s post-merger innovation outcome is a function of learning capabilities with respect to recent technologies. We investigate a sample of German domestic and cross-border takeovers, in order to analyze the ex-ante determinants of post-merger innovation quality. The data is based on patent information from the German Patent and Trade Mark Office. The results show that especially middle-aged and specialized acquirers achieve improved innovation quality subsequent to takeovers. Furthermore, the measurement via patent citations allows a more direct consideration of the value created by corporate acquisitions.