The impact of acquisitions on the innovation performance of inventors at semiconductor companies

Abstract

In R&D-intensive industries, corporate acquisitions are becoming increasingly important as a mechanism for acquiring new knowledge. In this paper, we examine the impact of corporate acquisitions on the innovation performance of inventors at the acquired firms. We also explore several factors that shape the post-acquisition performance of these inventors. Our study utilizes a novel dataset comprising 353 inventors from semiconductor firms acquired between 1991 and 1998. A control group was constructed by pairing each inventor from the acquired firm with a carefully chosen inventor from the acquiring firm. Our results show a significant decline in the post-acquisition productivity of inventors, as compared to the control group. However, a higher post-acquisition performance is obtained when there is a high degree of business overlap, a low level of integration between the acquiring and acquired firm, and when the acquired company is not a startup. Our findings suggest that managers should be cautious when using acquisitions as a means of knowledge acquisition: there is a real risk that the acquired technical team will become unproductive, and the results are sensitive to the way the integration and business scope is managed.