Resource Complementarity and Performance in Technology-Intensive Mergers and Acquisitions

Abstract

This paper examines the influence of complementarity between technological resources and functional resources in ex-post performance of mergers and acquisitions. While prior work has looked at complementarity as an indication of fit within a particular resource domain, this study focused on the complementarity between different resource domains. We specifically tested the performance impact associated with complementarity between the technological resources of the one merger partner and the functional resources of the other merger partner, including financial, marketing and operational resources. Performance was measured in both marker-based (i.e., ex ante stock market returns at announcement) and operational terms (i.e., ex post increases in sales revenues of the combined firm). Our results indicate that complementarities between a target’s technological resources and the acquirer’s financial and marketing resources produce positive effects on post-merger sales growth and ex-ante stock market returns. Surprisingly, our results also revealed that complementarity between the target's technological resources and the acquirer’s operational resources had a negative effect on posr merger sales growth. We discuss the implications of these findings for managers contemplating mergers and acquisitions.