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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

  • Cassiman, Bruno

    ()

    (IESE Business School)

  • Colombo, Massimo

    (Politecnico di Milano)

  • Garrone, Paola

    (Politecnico di Milano)

  • Veugelers, Reinhilde

    (Catholic University of Leuven)

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.

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Paper provided by IESE Business School in its series IESE Research Papers with number D/500.

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Length: 36 pages
Date of creation: 30 Apr 2003
Date of revision:
Handle: RePEc:ebg:iesewp:d-0500
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Web page: http://www.iese.edu/

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