Technological overlap and the performance implications for the acquisition of small technology firms

Sears, Joshua

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https://hdl.handle.net/2142/31134 Copy

Description

Title

Technological overlap and the performance implications for the acquisition of small technology firms

Author(s)

Sears, Joshua

Issue Date

2012-05-22T00:30:14Z

Director of Research (if dissertation) or Advisor (if thesis)

Mahoney, Joseph T.

Doctoral Committee Chair(s)

Hoetker, Glenn P.

Committee Member(s)

• Mahoney, Joseph T.
• Miller, Douglas J.
• Clougherty, Joseph

Department of Study

Business Administration

Discipline

Business Administration

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• technological acquisitions
• technological capabilities
• technological overlap
• value creation
• innovation
• mergers and acquisitions

Abstract

This dissertation focuses on the performance implications of acquisitions in high technology industries. I use this setting to understand what factors affect a firm’s ability to successfully acquire external technology to enhance its innovative productivity, decrease the time elapsed until the initial post-acquisition innovation utilizing the target firm’s knowledge, and to create shareholder value. In the three essays, I focus on how the overlap in the technological knowledge possessed by the target firm and the acquiring firm affect acquisition performance. The first essay of my dissertation submits that our current understanding of technological overlap is incomplete. I maintain that technological overlap is actually best viewed as two distinct constructs: target overlap, the proportion of the target’s knowledge base that the acquirer already possesses, and acquirer overlap, the proportion of the acquirer’s knowledge base duplicated by the target. Treating target and acquirer overlap as distinct concepts allows me to simultaneously incorporate three drivers: the acquirer’s absorptive capacity, knowledge redundancy, and organizational disruption due to potential conflict between the acquirer’s and target’s knowledge workers. The second essay addresses how different rationales for acquiring small technology firms affect the post-acquisition utilization of the target’s and the acquirer’s technological capabilities. I identify four general rationales that have previously been identified in the literature. I then identified two general characteristics of the four rationales that can assist researchers in empirically differentiated between the rationales: the technological relatedness between the target and the acquirer and the technological leader/laggard status of the acquirer. Through the identification of the two variables and how they relate to the four different rationales, I am able to explain prior conflicting results on whether the technological capabilities of the target and acquirer are substitutive or complementary. I find that the target’s technological capabilities increase post-acquisition patenting and create more value when less technological overlap exists. On the other hand, the acquirer’s technological capabilities increase patenting and create more value when the acquirer is a technological leader. Further, acquirers benefit most when both little technological overlap is present and the acquirer is a technological leader. My third essay investigates the independent and interactive effects that geographic distance, crossing national borders, and technological overlap have on the time it takes the acquirer to utilize the pre-acquisition knowledge of the target in post-acquisition innovation. Further, I hypothesize that whether these factors facilitate or impede the acquirer’s ability to innovate expeditiously using the target’s pre-acquisition knowledge depends on whether the acquirer integrates the target’s knowledge with its own or rather the acquirer maintains target innovative autonomy. I show that the acquirer crossing national borders has a significantly greater impact on time compared to mere distance. Cross-border acquisitions lengthen the time to knowledge integrating innovations while cross-border acquisitions shorten the time to non-integrating innovations. I also show that technological overlap facilitates knowledge integrating innovation while impeding non-integrating innovations. Further, I show that technological overlap moderates the effect that cross-border acquisitions have on integrating innovations.

Graduation Semester

2012-05

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http://hdl.handle.net/2142/31134

Copyright and License Information

Copyright 2012 Joshua Sears

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