On the origin of technological acquisition strategy: The interaction between organizational plasticity and environmental munificence

Research Summary Why do some firms routinely acquire more than others? I contribute to the study of technological acquisitions and capability development more broadly by documenting how the interaction between organizational plasticity and environmental munificence can create one demarcation point for some technology firms to become more acquisitive than others. Using a novel dataset on 1,201 firms that went public between 1983 and 2007, I find evidence of a persistent divergence even 20 years after initial public offering (IPO). Additional tests rule out alternative explanations and explore potential mechanisms. Managerial Summary There has been much evidence to suggest that mature innovative firms tend to have a preferred mode for accessing new technology: either by making it internally or buying it from other firms. However, we do not know very well how firms develop these preferences. This article investigates how financial market conditions affect young firms around the time of going public, and shows that recently IPO'd firms that experience depressed M&A markets go on to rely less on acquisitions when they mature. Conversely, these firms seem to develop more technologies in‐house. These findings suggest that some early events in a firm's life may have long‐lasting consequences, which may be difficult to change later.