The Revealed Preferences of High Technology Acquirers: An Analysis of the Characteristics of their Targets
AbstractIn this paper we investigate the motives of high-tech acquirers by analysing their revealed preferences in terms of the high-tech companies they acquire. Using a large sample of acquisitions involving publicly traded firms from various countries we ask whether high technology acquisitions are best understood in terms of acquirers seeking to source externally special innovation-related assets by acquiring firms with “superior” innovative performance; or acquirers seeking to acquire firms with “inferior” innovative performance in order to turn them around. We find evidence that acquisition is a very noisy phenomenon and that economic and innovation related variables explain only a modest part of the probability of becoming a target. We do however find that, compared to non-acquired firms, high-tech targets tend to be somewhat larger, to have poorer profitability, lower Tobin’s q and liquidity. In relation to their innovative profile, targets, in general, seem to have a relatively larger stock of accumulated knowledge (stock of citation-weighted patents), relatively higher R&D inputs (R&D-intensity), but they are more likely to generate no R&D output (citation-weighted patent- intensity) before they are acquired. We conclude that high technology acquisitions reflect a process which is primarily driven by acquirers wishing to exploit the potential for turning around firms which, despite a good past record, appear to be innovatively and economically inefficient before they are acquired.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0507009.
Length: 35 pages
Date of creation: 27 Jul 2005
Date of revision:
Note: Type of Document - pdf; pages: 35
Contact details of provider:
Web page: http://188.8.131.52
Mergers and acquisitions; acquisition likelihood; R&D; patents;
Find related papers by JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-COM-2005-08-13 (Industrial Competition)
- NEP-FIN-2005-08-13 (Finance)
- NEP-INO-2005-08-13 (Innovation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Singh, A., 1991. "Corporate Takeovers: A Review," Cambridge Working Papers in Economics 9206, Faculty of Economics, University of Cambridge.
- Bronwyn H. Hall, 1999.
"Innovation and Market Value,"
- Bronwyn Hall, 1998. "Innovation and Market Value," Economics Series Working Papers 1999-W03, University of Oxford, Department of Economics.
- Hall, Bronwyn H., 1999. "Innovation and Market Value," Department of Economics, Working Paper Series qt9f31v1rw, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Hall, B.H., 1999. "Innovation and Market Value," Economics Papers 1999-w3, Economics Group, Nuffield College, University of Oxford.
- Bronwyn H. Hall, 1999. "Innovation and Market Value," NBER Working Papers 6984, National Bureau of Economic Research, Inc.
- Bronwyn H. Hall., 1999. "Innovation and Market Value," Economics Working Papers E99-265, University of California at Berkeley.
- Nicholas Bloom & John Van Reenen, 2000. "Patents, productivity and market value: evidence from a panel of UK firms," IFS Working Papers W00/21, Institute for Fiscal Studies.
- Blonigen, Bruce A & Taylor, Christopher T, 2000. "R&D Intensity and Acquisitions in High-Technology Industries: Evidence from the US Electronic and Electrical Equipment Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 47-70, March.
- Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
- Zvi Griliches, 1998.
"Patent Statistics as Economic Indicators: A Survey,"
in: R&D and Productivity: The Econometric Evidence, pages 287-343
National Bureau of Economic Research, Inc.
- Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December.
- Zvi Griliches, 1991. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
- Barber, Brad M. & Lyon, John D., 1996. "Detecting abnormal operating performance: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 41(3), pages 359-399, July.
- Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003.
"The effects of mergers: an international comparison,"
International Journal of Industrial Organization,
Elsevier, vol. 21(5), pages 625-653, May.
- Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "The Effects of Mergers: An International Comparison," CIG Working Papers FS IV 01-21, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Hasbrouck, Joel, 1985. "The characteristics of takeover targets and other measures," Journal of Banking & Finance, Elsevier, vol. 9(3), pages 351-362, September.
- Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
- Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
- Hall, B. & Jaffe, A. & Trajtenberg, M., 2001.
"The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools,"
2001-29, Tel Aviv.
- Hall, Bronwyn H & Jaffe, Adam B & Trajtenberg, Manuel, 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," CEPR Discussion Papers 3094, C.E.P.R. Discussion Papers.
- Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
- Bronwyn H. Hall, 1988.
"The Effect of Takeover Activity on Corporate Research and Development,"
in: Corporate Takeovers: Causes and Consequences, pages 69-100
National Bureau of Economic Research, Inc.
- Bronwyn H. Hall, 1988. "The Effect of Takeover Activity on Corporate Research and Development," NBER Working Papers 2191, National Bureau of Economic Research, Inc.
- Ambrose, Brent W. & Megginson, William L., 1992. "The Role of Asset Structure, Ownership Structure, and Takeover Defenses in Determining Acquisition Likelihood," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(04), pages 575-589, December.
- Randall Morck & Andrei Shleifer & Robert W. Vishny, 1988. "Characteristics of Targets of Hostile and Friendly Takeovers," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 101-136 National Bureau of Economic Research, Inc.
- Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2007.
"Mergers and acquisitions in the pharmaceutical and biotech industries,"
Managerial and Decision Economics,
John Wiley & Sons, Ltd., vol. 28(4-5), pages 307-328.
- Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2004. "Mergers and Acquisitions in the Pharmaceutical and Biotech Industries," NBER Working Papers 10536, National Bureau of Economic Research, Inc.
- Colin Mayer, 1998. "Financial Systems and Corporate Governance: A Review of the International Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(1), pages 144-, March.
- Andrade, Gregor & Stafford, Erik, 2004. "Investigating the economic role of mergers," Journal of Corporate Finance, Elsevier, vol. 10(1), pages 1-36, January.
- Klaus Gugler & Dennis C. Mueller & B. Burçin Yurtoglu, 2006.
"The Determinants of Merger Waves,"
CIG Working Papers
SP II 2006-01, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Palepu, Krishna G., 1986. "Predicting takeover targets : A methodological and empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 8(1), pages 3-35, March.
- Ronan G. Powell, 1997. "Modelling Takeover Likelihood," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(7&8), pages 1009-1030.
- Francis, Jennifer & Smith, Abbie, 1995. "Agency costs and innovation some empirical evidence," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 383-409, April.
- Darrell E. Lee & James G. Tompkins, 1999. "A Modified Version of the Lewellen and Badrinath Measure of Tobin's Q," Financial Management, Financial Management Association, vol. 28(1), Spring.
- Giovanni Amendola & Giovanni Dosi & Erasmo Papagni, 1993. "The dynamics of international competitiveness," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 129(3), pages 451-471, September.
- Capron, Laurence & Mitchell, Will, 1998. "Bilateral Resource Redeployment and Capabilities Improvement Following Horizontal Acquisitions," Industrial and Corporate Change, Oxford University Press, vol. 7(3), pages 453-84, September.
- Geroski, P. A. & Van Reenen, J. & Walters, C. F., 1997.
"How persistently do firms innovate?,"
Elsevier, vol. 26(1), pages 33-48, March.
- Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.