Technology-oriented M&A, market reaction and innovation output
Nankai Business Review International
ISSN: 2040-8749
Article publication date: 24 April 2023
Issue publication date: 20 July 2023
Abstract
Purpose
The purpose of technology mergers and acquisitions (M&A) is to achieve innovation. The authors use the data from the China Patent Research System of China National Intellectual Property Administration to classify technical correlations into three types: similar, complementary and nonrelatedness (cross-sectoral category). And the authors explore three issues: the market reaction to technology-oriented M&A, the impact of technology-oriented M&A on goodwill and how technology-oriented M&A affects innovation.
Design/methodology/approach
The authors use data from China Patent Research System of China National Intellectual Property Administration to classify technical correlations into three types: similar, complementary and nonrelatedness (cross-sectoral category). And the authors explore three issues: the market reaction of technology-oriented M&A, the impact of technology-oriented M&A on goodwill and how technology-oriented M&A affects innovation. The empirical research shows that the cross-sectoral M&A is popular in the market and is positively correlated with cumulative abnormal return (CAR) and premium rate of M&A. However, the technology-similarity M&A, which is committed to in-depth exploration of original technology, is negatively correlated with CAR and goodwill.
Findings
The empirical research shows that cross-sectoral M&A is popular in the market and is positively correlated with CAR and premium rate of M&A. However, the technology-similarity M&A, which is committed to in-depth exploration of original technology, is negatively correlated with CAR and goodwill. In addition, empirical results show that there is an inverted U-shaped relationship between technology-oriented M&A and innovation output, and the inflection points are 41.8%, 48.9% and 38.8%, respectively.
Originality/value
The research contributions of this paper are as follows: first, most domestic studies simply and roughly measure the degree of technical relevance based on whether the firms belong to the same industry and whether there is common knowledge between them, but the authors provide a more accurate measure of technology-oriented M&A. Second, in the research on the economic consequences of technology-oriented M&As, a large number of literatures have mainly focused on the innovation performance of the acquirer after deals, including the number of patent applications, the number of patent citations, innovation output, etc., and they pay less attention to its impact on the market reaction and goodwill.
Keywords
Acknowledgements
Yi Yao acknowledges financial support from the National Natural Science Foundation of China Projects (NSFC No. 72072093, 71672090), 2022 Nankai University Liberal Arts Development Fund General Project. Yafei Xu acknowledges financial support from the Startup Research Foundation of Young teachers of Capital University of Economics and Business (XRZ2023041).
Citation
Yao, Y., Ling, Y. and Xu, Y. (2023), "Technology-oriented M&A, market reaction and innovation output", Nankai Business Review International, Vol. 14 No. 3, pp. 400-424. https://doi.org/10.1108/NBRI-09-2022-0093
Publisher
:Emerald Publishing Limited
Copyright © 2023, Emerald Publishing Limited