Flourish or Perish? The Impact of Mergers and Acquisitions on Contributions to Open-Source Software Projects

Abstract

This study examines how mergers and acquisitions (M&A) impact the acquired firms’ key initiatives of open innovation – their community-based open-source software (OSS) projects. We distinguish between internal contributions made by the acquired firms’ affiliated developers and external contributions made by outside developers, focusing on the potential differential impacts of M&A on these two types of contributions. We also consider how the organizational characteristics of OSS projects influence the impact of M&A. Our empirical investigation using a large panel dataset of technology startups generates novel findings. While M&A causes a significant decline in internal contributions, external contributions are less affected by the negative impact of M&A. We also find that while the effort and geographic dispersions of OSS contributors significantly escalate the negative impact of M&A on internal contributions, they do not exert a similar effect on external contributions. The geographic dispersion may even cultivate a positive impact of M&A on external contributions. These findings augment the existing understanding of the relationship between M&A and technological innovation by illustrating how the impact of M&A may alter in the domain of open innovation, and provide insights on practices for organizing open innovation to brace for the impact of M&A.

Keywords: Open-Source Software, Mergers & Acquisitions, Effort Dispersion, Geographic Dispersion, Difference-in-Differences