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Impact of M&A on the R&D process. An empirical analysis of the role of technological and market relatedness, The

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  • Cassiman, Bruno

    () (IESE Business School)

  • Colombo, Massimo

    (Politecnico di Milano)

  • Garrone, Paola

    (Politecnico di Milano)

  • Veugelers, Reinhilde

    (Catholic University of Leuven)

Abstract

While the impact of M&A on R&D and innovation examined at the aggregate level left inconclusive evidence, we find that at the level of the R&D process both the technological and the market relatedness between the target and the acquirer are helpful dimensions to identify effects. Using information on 31 in-depth cases of individual M&A deals we show that technological relatedness between M&A partners directly affects the inputs and organizational structure of the R&D process. M&A partners that operate in the same technological fields tend to reduce their R&D effort and rationalize the R&D process after the M&A compared to firms active in complementary technological fields that merge. These firms will furthermore face less technological competition in the technology market, but risk creating a more bureaucratic R&D process with a less motivated workforce. Market relatedness between partners, while having comparable aggregate effects on the R&D process, operates on different dimensions of the R&D process. Former rivals that engage in a M&A are significantly less likely to expand into new R&D fields or leverage their technological competences across the products and markets of the new entity. Non-rival firms that join forces, in contrast, significantly increase R&D output and productivity through these activities.

Suggested Citation

  • Cassiman, Bruno & Colombo, Massimo & Garrone, Paola & Veugelers, Reinhilde, 2003. "Impact of M&A on the R&D process. An empirical analysis of the role of technological and market relatedness, The," IESE Research Papers D/500, IESE Business School.
  • Handle: RePEc:ebg:iesewp:d-0500
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    References listed on IDEAS

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    Cited by:

    1. Ennen, Edgar & Richter, Ansgar, 2009. "The Whole Is More Than the Sum of Its Parts - Or Is It? A Review of the Empirical Literature on Complementarities in Organizations," MPRA Paper 15666, University Library of Munich, Germany.
    2. Jamasb, T. & Pollitt, M., 2005. "Deregulation and R&D in Network Industries: The Case of the Electricity Industry," Cambridge Working Papers in Economics 0533, Faculty of Economics, University of Cambridge.
    3. Albert Banal‐Estañol & Jo Seldeslachts, 2011. "Merger Failures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 589-624, June.
    4. Elena Cefis & Stephanie Rosenkranz & Utz Weitzel, 2009. "Effects of coordinated strategies on product and process R&D," Journal of Economics, Springer, vol. 96(3), pages 193-222, April.
    5. Massimo Colombo & Philippe Mustar & Mike Wright, 2010. "Dynamics of Science-based entrepreneurship," The Journal of Technology Transfer, Springer, vol. 35(1), pages 1-15, February.
    6. Fabian Homberg & Katja Rost & Margit Osterloh, 2009. "Do synergies exist in related acquisitions? A meta-analysis of acquisition studies," Review of Managerial Science, Springer, vol. 3(2), pages 75-116, July.

    More about this item

    Keywords

    M&A; R&D; scale and scope; market relatedness; technological relatedness;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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