M&A Knowledge Base Effects

Abstract

This paper expands on the framework of the M&A literature on firm knowledge bases to include indicators of both innovative and economic performance. Using a Poisson regression analysis on a dataset of high-tech M&As, the effects of the absolute size of an acquired knowledge base, the relative size of the acquired knowledge base, and the level of knowledge similarity are studied against a set of performance measures including innovation output, return on assets, and stock returns. The results suggest that the size of the acquired knowledge base has a positive effect on innovative output and a potential negative effect on long term returns. The relative size of the acquired knowledge base has a negative effect on innovation output and an insignificant effect on both economic indicators. The level of knowledge similarity has a positive effect on innovation output but a negative effect on short term returns. Taken together, the re- sults suggest while the acquired knowledge has a positive effect on innovation output, it has an insignificant or in some cases negative impact on economic performance