Technology sourcing acquisitions

Abstract

PurposeThe purpose of this paper is to determine what the effects of acquisition are on R&D patterns.Design/methodology/approachThis paper tests whether the actual post‐acquisition R&D intensity of the combined firm deviated from the predicted R&D intensity, where the predicted amount is an asset‐weighted average of pre‐acquisition values.FindingsThe results indicate that the combination of technology sourcing and technological relatedness have strong predictive powers for determining changes in post‐acquisition R&D intensity. Technology sourcing acquisition of unrelated technologies results in an increase in post‐acquisition R&D intensity, as predicted. Acquirers in this situation may be using their acquisition as a platform for research expansion.Research limitations/implicationsThe dataset used in this paper was restricted to public acquirers and targets for completeness of financial information. It would be useful to determine the extent to which a technology sourcing acquirer is predicted to enter into an acquisition and also whether technology sourcing can be used as a predictor for the ultimate target company out of a pool of potential targets.Practical implicationsThe results can be used to inform managers on a strategic level when research strategy deviates from what the theory would predict. For example, if a company that did a technology sourcing acquisition of an unrelated product subsequently decreased R&D intensity, then rival pharmaceutical firms can ascertain that the acquired research was ultimately determined to be too risky or unviable.Originality/valueThe value in this paper is the unique measurement for technology sourcing.