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M&As and Innovation: A New Approach to Classifying Technology

Author

Listed:
  • Sara Amoroso
  • Ronald B. Davies

Abstract

A large literature considers the interplay between mergers and acquisitions (M&A) by multinationals and innovation, typically measured as patents. One theme that emerges is that technological similarity plays a role in which M&As occur. The challenge then becomes how to measure technological similarity. Typically, this is done by using either firms’ sectorsor the technological classifications of their patents. The first is a coarse measure of business activity and overlooks supply chains. The second may incorrectly match technical features with no overlapping business relation. In contrast, we offer an alternative based on a machine learning approach using patent technology descriptors. This decants over 600 technological codes into 21 technical business areas (TBAs). Similarity in this more parsimonious measure is highly related to the probability of a given M&A occurring. This provides a more intuitive approach to understanding the literature’s findings.

Suggested Citation

  • Sara Amoroso & Ronald B. Davies, 2025. "M&As and Innovation: A New Approach to Classifying Technology," Working Papers 202511, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:202511
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    File URL: http://hdl.handle.net/10197/31870
    File Function: First version, 2025
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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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