Impact of M&A on the R&D Process. An Empirical Analysis of the Role of Technological and Market Relatedness

IESE Working Paper No. D/500

36 Pages Posted: 17 Dec 2003

See all articles by Bruno Cassiman

Bruno Cassiman

IESE Business School; KU Leuven - Faculty of Business and Economics (FEB)

Massimo G. Colombo

Politecnico di Milano

Paola Garrone

Politecnico di Milano

Reinhilde Veugelers

Catholic University of Leuven (KUL) - Department of Applied Economics; Centre for Economic Policy Research (CEPR)

Date Written: April 2003

Abstract

While the impact of M&A on R&D and innovation examined at the aggregate level left inconclusive evidence, we find that at the level of the R&D process both the technological and the market relatedness between the target and the acquirer are helpful dimensions to identify effects. Using information on 31 in-depth cases of individual M&A deals, we show that technological relatedness between M&A partners directly affects the inputs and organizational structure of the R&D process. M&A partners that operate in the same technological fields tend to reduce their R&D effort and rationalize the R&D process after the M&A compared to firms that are active in complementary technological fields. These firms will also face less technological competition in the technology market, but risk creating a more bureaucratic R&D process with a less motivated workforce. Market relatedness between partners, while having comparable aggregate effects on the R&D process, operates on different dimensions of the R&D process. Former rivals that engage in a M&A are significantly less likely to expand into new R&D fields or leverage their technological competences across the products and markets of the new entity. Non-rival firms that join forces, in contrast, significantly increase R&D output and productivity through these activities.

Keywords: M&A, R&D, scale & scope, market relatedness, technological relatedness

JEL Classification: D21, O31, O32

Suggested Citation

Cassiman, Bruno and Colombo, Massimo G. and Garrone, Paola and Veugelers, Reinhilde, Impact of M&A on the R&D Process. An Empirical Analysis of the Role of Technological and Market Relatedness (April 2003). IESE Working Paper No. D/500. Available at SSRN: https://ssrn.com/abstract=462626 or http://dx.doi.org/10.2139/ssrn.462626

Bruno Cassiman (Contact Author)

IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain
+34 93 602 4426 (Phone)
+34 93 253 4343 (Fax)

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Massimo G. Colombo

Politecnico di Milano ( email )

Piazza Leonardo da Vinci, 32
20113 Milan
Italy

Paola Garrone

Politecnico di Milano ( email )

piazza Leonardo da Vinci 32
Milano, 20133
Italy
+39-02-23992742 (Phone)

Reinhilde Veugelers

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 16 32 6908 (Phone)
+32 16 32 6732 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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