R&D and Patenting Activity and the Propensity to Acquire in High Technology Industries
In this paper we investigate the incidence of high technology acquisitions using a large international sample of acquisitions by public high technology firms. Controlling for firms’ financial characteristics, we examine the impact of the following innovation-related factors on the propensity to acquire: R&D-intensity as a proxy for R&D inputs; the citation-weighted patent-intensity as a proxy for R&D output; the stock of citation-weighted patents as a proxy for the accumulated stock of knowledge generated by past R&D efforts. The following conclusions can be drawn with respect to the characteristics of acquirers of non-public targets - mainly private firms and former subsidiaries. First, we find support for the view that the propensity to acquire new knowledge-related assets through acquisitions is driven by declining returns from the exploitation of a firm’s existing knowledge base. Second, we find evidence in favour of the make-or-buy theory that acquisitions are a substitute for in-house R&D activity. Third, our results are in accordance with the theoretical argument that a large stock of accumulated knowledge enhances a firm’s ability to absorb external knowledge through acquisitions. These results suggest that smaller acquisitions can be seen as part of an innovation strategy by acquiring firms with relatively low levels of internal R&D which seek to offset low R&D productivity by exploring a range of potential innovation trajectories in new and smaller business units. Interestingly, we find that these interpretations cannot be made for acquirers of the larger public companies.
|Date of creation:||Mar 2005|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.cbr.cam.ac.uk/|
References listed on IDEAS
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.:
- Geroski, Paul A & Samiei, Hossein & Van Reenen, John, 1996.
"How Persistently do Firms Innovate?,"
CEPR Discussion Papers
1433, C.E.P.R. Discussion Papers.
- Bronwyn H. Hall., 1999.
"Innovation and Market Value,"
Economics Working Papers
E99-265, University of California at Berkeley.
- Bronwyn H. Hall, 1999. "Innovation and Market Value," Finance 9902009, EconWPA.
- Bronwyn H. Hall, 1999. "Innovation and Market Value," NBER Working Papers 6984, National Bureau of Economic Research, Inc.
- 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.
- Granstrand, Ove & Sjölander, Sören, 1990. "The Acquisition of Technology and Small Firms by Large Firms," Working Paper Series 213, Research Institute of Industrial Economics.
- 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, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
- Zvi Griliches, 1990. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
- 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.
- Hall, B. & Jaffe, A. & Trajtenberg, M., 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," Papers 2001-29, Tel Aviv.
- Ang, James & Kohers, Ninon, 2001. "The Take-Over Market for Privately Held Companies: The US Experience," Cambridge Journal of Economics, Oxford University Press, vol. 25(6), pages 723-48, November.
- 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.
- Arora, Ashish & Gambardella, Alfonso, 1994. "Evaluating technological information and utilizing it : Scientific knowledge, technological capability, and external linkages in biotechnology," Journal of Economic Behavior & Organization, Elsevier, vol. 24(1), pages 91-114, June.
- Granstrand, Ove & Sjolander, Soren, 1990. "The acquisition of technology and small firms by large firms," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 367-386, June.
- 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).
- 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.
- 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.
- 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.
- Henrik Bresman & Julian Birkinshaw & Robert Nobel, 1999. "Knowledge Transfer in International Acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(3), pages 439-462, September.
- Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, 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.
- 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.
- 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.
- 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, 1987. "The Effect of Takeover Activity on Corporate Research and Development," NBER Working Papers 2191, National Bureau of Economic Research, Inc.
- Chandler, Alfred D., 1994. "The Competitive Performance of U.S. Industrial Enterprises since the Second World War," Business History Review, Cambridge University Press, vol. 68(01), pages 1-72, 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.
- Andrade, Gregor & Stafford, Erik, 2004. "Investigating the economic role of mergers," Journal of Corporate Finance, Elsevier, vol. 10(1), pages 1-36, January.
- Cassiman, Bruno & Veugelers, Reinhilde, 2002. "Complementarity in the Innovation Strategy: Internal R&D, External Technology Acquisition and Cooperation," CEPR Discussion Papers 3284, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:cbr:cbrwps:wp298. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb)
If references are entirely missing, you can add them using this form.