Do High Technology Acquirers Become More Innovative?

Abstract

Drawing on organisational, managerial and financial theories, we explore whether acquirers become more innovative and the factors that can enhance their absorptive and financial capacity to benefit from acquisition. Over a three year post-acquisition window, our sample of 2624 high technology US acquisitions records early reverses followed by positive R&D-intensity changes and insignificant R&D productivity changes. Controlling for acquisition endogeneity and deal-specific effects, significant acquirer characteristic effects emerge. In related acquisitions, a large knowledge base tends to increase R&D productivity, consistent with an enhanced capacity to select and absorb targets. In unrelated acquisitions, however, this relationship becomes increasingly negative as knowledge base concentration increases, consistent with arguments for an impaired peripheral vision and core rigidities. High leverage levels raise R&D productivity gains, consistent with enhanced monitoring induced efficiency. However, high leverage growth reduces R&D-intensity, consistent with increased financial constraints and short-termism.

Keywords: Acquisitions, Innovation, Propensity Score