Killer Acquisitions

67 Pages Posted: 12 Sep 2018

See all articles by Colleen Cunningham

Colleen Cunningham

London Business School

Florian Ederer

Yale School of Management; Yale University - Cowles Foundation

Song Ma

Yale School of Management

Date Written: August 28, 2018


Firms have incentives to acquire innovative targets to discontinue the development of the targets' innovation projects and preempt future competition. We call such acquisitions "killer acquisitions." We develop a parsimonious model in which killer acquisitions arise from an incumbent's desire to prevent the profit cannibalization of existing products that are substitutes for (or overlap with) the target's innovation. We provide empirical evidence for this phenomenon by tracking detailed project-level development for more than 35,000 pharmaceutical drug projects. Acquired drug projects are less likely to be developed when the acquired project overlaps with the acquirer's portfolio of products and projects. This pattern is more pronounced when the acquirer has strong incentives to protect its market power due to weak existing competition. Alternative interpretations such as optimal project selection and human capital and technology redeployment do not explain our results. Conservative estimates indicate that about 6.4% of all acquisitions in our sample are killer acquisitions and that such acquisitions often occur just below thresholds for antitrust scrutiny.

Keywords: Innovation, Mergers and Acquisitions, Drug Development, Competition

JEL Classification: O31, L41, G34, L65

Suggested Citation

Cunningham, Colleen and Ederer, Florian and Ma, Song, Killer Acquisitions (August 28, 2018). Available at SSRN: or

Colleen Cunningham

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

Florian Ederer (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States


Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Song Ma

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New Haven, CT 06511
United States


Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics