Technological acquisitions and the innovation performance of acquiring firms: A longitudinal study

This paper examines the impact of acquisitions on the subsequent innovation performance of acquiring firms in the chemicals industry. We distinguish b etween technological acquisitions, acquisitions in which technology is a co mponent of the acquired firm's assets, and nontechnological acquisitions: a cquisitions that do not involve a technological component. We develop a fra mework relating acquisitions to firm innovation performance and develop a s et of measures for quantifying the technological inputs a firm obtains thro ugh acquisitions. We find that within technological acquisitions absolute s ize of the acquired knowledge base enhances innovation performance, while r elative size of the acquired knowledge base reduces innovation output. The relatedness of acquired and acquiring knowledge bases has a nonlinear impar t on innovation output. Nontechnological acquisitions do nor have a signifi cant effect on subsequent innovation output. Copyright (C) 2001 John Wiley & Sons, Ltd.