What they know vs. what they do: how acquirers leverage technology acquisitions

TLDR

Acquisition of small technology firms by large firms shows that post‑merger integration can both enable and hinder acquirers’ ability to leverage acquired technology. The study resolves this paradox by distinguishing the two qualitatively different ways acquirers leverage technology acquisitions. Integration enables acquirers to use the acquired firm’s existing knowledge as input to their own innovation processes, yet it hampers their ability to rely on the acquired firm as an independent source of ongoing innovation. Experienced acquirers better mitigate the disruptive loss of autonomy caused by integration, but they do not gain greater coordination benefits. © 2007 John Wiley & Sons, Ltd.

Abstract

Abstract Existing research suggests that in acquisitions of small technology‐based firms by large established firms post‐merger integration both enables and hinders acquirers' efforts to leverage the technology of acquired firms. This apparent paradox can be resolved once we account for the qualitatively distinct ways in which acquirers leverage technology acquisitions. Integration helps acquirers use the acquired firm's existing knowledge as an input to their own innovation processes (leveraging what they know), but hinders their reliance on the acquired firm as an independent source of ongoing innovation (leveraging what they do). We also show that experienced acquirers are better able to mitigate the disruptive consequences of the loss of autonomy entailed by integration, though we find no evidence that they achieve greater coordination benefits from integration. Copyright © 2007 John Wiley & Sons, Ltd.