Abstract
When are firms more likely to acquire, or be acquired, as a means of protecting the value of innovations? This paper examines how the fragmented ownership of intellectual property (IP) rights in an industry affects technology acquisitions. We theorize that the level of fragmentation has a curvilinear (inverted U-shape) effect on the rate at which firms engage in technology acquisitions, but that this relationship is weaker for firms that have a higher risk of being “fenced in” by owners of external IP rights. Firms with relatively more valuable IP rights are more likely to be acquired as fragmentation increases. Using a unique longitudinal dataset on the biopharmaceutical industry from 1986 to 2004, we test and find empirical support for our propositions.
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