Unravelling the link between technological M&A and innovation performance using the concept of relative absorptive capacity

Abstract

Technological merger and acquisition (M&A) has become an increasingly popular mode of innovation for firms. We investigate the determinants of innovation creation through technological M&As. Based on the concept of relative absorptive capacity, the study examines how the acquiring firm absorbs and assimilates the knowledge of the acquired firm and creates innovation. Specifically, the technological M&As are examined by presenting dyadic perspective variables, including technological similarity and technological digestibility which affect the assimilation, transformation, and exploitation processes of the absorptive capacity. We additionally investigate the role of M&A experience as a moderator of dyadic characteristics and innovation performance of technological M&As. Two hundred and twelve cases of technological M&As in the biopharmaceutical industry from 1993 to 2007 are investigated using zero-inflated negative binomial regression and negative binomial regression. The findings confirm a positive effect of acquiring small firms having a modest level of similar knowledge on post-M&A innovation performance. Moreover, this study highlights the importance of the dyadic perspective in advancing the understanding of technological M&A.

Keywords:

• technological M&A
• relative absorptive capacity
• technological similarity
• technological digestibility
• M&A experience

Acknowledgements

We wish to thank the editor, Professor Byung-Keun Kim, and two anonymous reviewers for their helpful suggestions. We are very grateful to Klaus Marhold for his comments on earlier versions of the paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Funding

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government [NRF-2014S1A5A2A01016776].