Technology Acquisitions: Performance and Functionality as Differentiators

41 Pages Posted: 7 Feb 2019

See all articles by Jan Paul Stein

Jan Paul Stein

Technische Universität München (TUM) - TUM School of Management

Joachim Henkel

TUM School of Management - Technical University of Munich (TUM)

Date Written: October 16, 2018

Abstract

We introduce a novel categorization of technology-focused acquisitions based on how a target’s technology relates to an acquirer’s existing products. Specifically, we distinguish between acquisitions aimed at improving product performance and those that shall add new functionality to the acquirer’s products. Based on an analysis of uncertainty in the combined innovation and acquisition process we formulate hypotheses on how this categorization relates to various dimensions of target maturity. Using a unique dataset of 215 acquisitions in the field of artificial intelligence, we find clear evidence that targets in performance-focused acquisitions are younger, smaller, and less likely to have a marketable product than those in functionality-focused acquisitions. We derive implications for managers, and suggest that the study of markets for technology should be conditioned on the distinction between performance- and functionality-focused acquisitions.

Keywords: acquisitions, markets for technology, technology, performance, functionality, innovation

JEL Classification: L24, M13, O23

Suggested Citation

Stein, Jan Paul and Henkel, Joachim, Technology Acquisitions: Performance and Functionality as Differentiators (October 16, 2018). Available at SSRN: https://ssrn.com/abstract=3322014 or http://dx.doi.org/10.2139/ssrn.3322014

Jan Paul Stein

Technische Universität München (TUM) - TUM School of Management ( email )

Freising
Germany

Joachim Henkel (Contact Author)

TUM School of Management - Technical University of Munich (TUM) ( email )

Arcisstr. 21
Munich, D-80333
Germany

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