Abstract
Prior work has mostly studied the relation between product market competition and M&A deals. In this paper, we study how competition and differentiation in technology space relates to M&A transactions. Relying on a new text-based method to map each firm’s competitive position in technology space and to measure the differentiation of a firm’s technology portfolio relative to all other firms, we find that firms with unique and differentiated technology are typical targets while firms with less differentiated technology are more likely to become acquirers. Moreover, firms with unique technology are particularly targeted by close competitors in the product market and receive a higher acquisition price, particularly in case of M&As with close product market firms. Our findings illustrate that a unique and differentiated technology portfolio is an important resource traded in the market for corporate control and a key driver of M&A deals, particularly between close competitors in the product market.
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