External technology acquisition: a double-edged sword

Abstract

Firms are known to actively utilise external technology acquisition to update and extend their technological knowledge base. Although external technology acquisition has various advantages, it should be considered as a double-edged sword as it also has some inherent negative aspects. This study examines the role of external technology acquisition to investigate whether external technology acquisition is complementary or substitutive to internal R&D activities in creating innovation. The results show that external technology acquisition has an inverted U-shaped relationship with subsequent technology innovation performance, and that is not complementary to internal R&D activities. We thus confirm that external technology acquisition has to be seen as a double-edged sword and that managers need to be aware of the potentially negative effects of strong diversity of the firm's external technology acquisition sources on internal R&D and subsequent innovation performance.