Building and Blocking: The Two Faces of Technology Acquisition
AbstractGaining access to technological assets and patents, in particular, has long been a major motive and objective for firm acquisitions. On the one hand, patents are used as a building instrument for the acquirer's technology portfolio. On the other hand, patents can be attractive because of their strategic value as a bargaining chip, e.g. in licensing negotiations. This is especially the case if patents have the potential to block competitors. Drawing on transaction cost economics and the resource-based view of the firm, we analyze the importance of these two faces of technology acquisition for the valuation of a target firm. Empirical evidence for European firm acquisitions in the period from 1999 to 2003 indicates that the price paid by an acquirer for a target increases with the patent stock, the relatedness, the value and the blocking potential of the target's patents, especially if blocking patents are in technology fields related to the acquiring firm's patent portfolio. Our results have implications for competition authorities, in that M&A transactions may considerably impact technology markets. This would also need to be reflected in the management's technology strategy. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-042.
Date of creation: 2008
Date of revision:
Firm acquisitions; technology; patents; blocking patents;
Other versions of this item:
- Grimpe, Christoph & Hussinger, Katrin, 2009. "Building and Blocking: The Two Faces of Technology Acquisition," ZEW Discussion Papers 08-042 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-31 (All new papers)
- NEP-COM-2008-08-31 (Industrial Competition)
- NEP-INO-2008-08-31 (Innovation)
- NEP-IPR-2008-08-31 (Intellectual Property Rights)
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