Acquisitions as a means of innovation sourcing by incumbents and growth of technology-oriented ventures

Abstract

The permanent need for innovation activities in high tech industries challenges large firms. Small firms, on the other hand, frequently face decisions as concerns their growth which may, e.g., in the case of lacking complementary assets, lead them to sell-off to larger incumbents. This paper investigates how this leads to a division of innovation activities between large and small firms in the electronic design automation (EDA) industry. Based on qualitative interviews and a structured survey the paper analyses empirically the reasons for acquisitions and shows that these mainly concern small firms that pursue (especially organisationally) radical innovation and that they enable radical growth of small firms.