Interplay Between Technology and Market Resources and Its Impact on Post-Acquisition Technological Inventions

Abstract

Acquisitions provide acquirers with opportunities to utilize resources available from target firms and, thereby, to advance their technological inventions. However, acquirers face fundamental challenges in this process due to the intrinsic trade-off between accessing new resources and effectively integrating the new resources to facilitate technological inventions. In this study, we investigate multidimensional nature of external resources gained from acquisitions and the interplay between them to better understand post-acquisition performance. Specifically, we maintain that post-acquisition technological inventions are influenced by the interplay between technology relatedness and market relatedness of the acquiring and target firms, and this relationship is further moderated by the acquiring firm’s technology share and its technological environment. Results of empirical analysis using cross-sectional and time-series data of 408 observations by 235 acquiring firms show that technology relatedness and market relatedness are in a substitutional relationship in that post-acquisition inventive performance would increase when either of them is high, not both. The results also show that the extent of the substitutional relationship becomes weaker when the acquiring firm occupies a technologically dominant position in its industry or the industry’s technological environment is dynamic. Our findings provide important insights into the multidimensional nature of external resources gained from acquisitions and contingencies that affect the extent of the interplay between technology and market resources.