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Building and Blocking: The Two Faces of Technology Acquisition

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  • Grimpe, Christoph
  • Hussinger, Katrin

Abstract

Gaining access to technological assets and patents, in particular, has long been a major motive and objective for firm acquisitions. On the one hand, patents are used as a building instrument for the acquirer's technology portfolio. On the other hand, patents can be attractive because of their strategic value as a bargaining chip, e.g. in licensing negotiations. This is especially the case if patents have the potential to block competitors. Drawing on transaction cost economics and the resource-based view of the firm, we analyze the importance of these two faces of technology acquisition for the valuation of a target firm. Empirical evidence for European firm acquisitions in the period from 1999 to 2003 indicates that the price paid by an acquirer for a target increases with the patent stock, the relatedness, the value and the blocking potential of the target's patents, especially if blocking patents are in technology fields related to the acquiring firm's patent portfolio. Our results have implications for competition authorities, in that M&A transactions may considerably impact technology markets. This would also need to be reflected in the management's technology strategy.

Suggested Citation

  • Grimpe, Christoph & Hussinger, Katrin, 2008. "Building and Blocking: The Two Faces of Technology Acquisition," ZEW Discussion Papers 08-042, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:7352
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    Cited by:

    1. Stiebale, Joel, 2016. "Cross-border M&As and innovative activity of acquiring and target firms," Journal of International Economics, Elsevier, vol. 99(C), pages 1-15.
    2. Jung , Taehyun & Walsh , John P., 2011. "Organizational paths of commercializing patented inventions: The effects of transaction costs, firm capabilities, and collaborative ties," Papers in Innovation Studies 2011/3, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    3. Dirk Czarnitzki & Katrin Hussinger & Cédric Schneider, 2012. "The nexus between science and industry: evidence from faculty inventions," The Journal of Technology Transfer, Springer, vol. 37(5), pages 755-776, October.
    4. repec:spr:scient:v:88:y:2011:i:3:d:10.1007_s11192-011-0454-2 is not listed on IDEAS

    More about this item

    Keywords

    Firm acquisitions; technology; patents; blocking patents;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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