Gone but not Forgotten: How Inventor Exit Helps in Technology Acquisitions

Abstract

Firms interact with the strategic factor market to acquire new or external knowledge. However, firms face information asymmetries while trading resources in the strategic factor market because it is not perfect. We argue that inventor-exit helps a firm to identify a target for knowledge acquisition. Inventor–exit from a focal firm to a hiring firm suppresses information asymmetry between the firms and therefore increases the probability of acquisition. Moreover, the positive effect of inventor–exit on the likelihood of acquisition is negatively moderated by the research experience of the hiring firm. The analysis based on the global biopharmaceutical industry in the period 1993–2010 supports the arguments.