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The Role of Technology in M&As: A Firm Level Comparison of Cross-Border and Domestic Deals

  • Frey, Rainer
  • Hussinger, Katrin

Technological change is often hypothesized as one of the main drivers of merger activities. This paper analyzes the role of technology in mergers and acquisitions (M&As) at the firm level. Based on a newly created data set that combines financial information and patent data for public firms in Europe as well as country level variables, we apply a structural model to investigate technology-related motivations behind merger formation. Distinguishing between cross-border and domestic M&As, we find that technological relatedness of the M&A partners reduces uncertainty and the expected risk of failure associated with cross-border acquisitions significantly, whereas there is no evidence for technological complementarities driving domestic M&As. The relevance of technology for cross-border M&As further illustrates the international character of technology markets.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 06-69.

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Date of creation: 2006
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Handle: RePEc:zbw:zewdip:5463
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