Building and Blocking: The Two Faces of Technology acquisition

Katrin Hussinger, Maastricht University, KU Leuven, ZEW Mannheim.

Gaining access to technological assets and patents, in
particular, has long been a major motive and objective for firm
acquisitions. On the one hand, patents are used as a building instrument
for the acquirer's technology portfolio. On the other hand, patents can
be attractive because of their strategic value as a bargaining chip,
e.g. in licensing negotiations. This is especially the case if patents
have the potential to block competitors. Drawing on transaction cost
economics and the resource-based view of the firm, we analyze the
importance of these two faces of technology acquisition for the
valuation of a target firm. Empirical evidence for European firm
acquisitions in the period from 1996 to 2003 indicates that the price paid by an acquirer for a target increases with the building and blocking potential of the target's patents, especially if building and blocking patents are in technology fields related to the acquiring firm's patent portfolio. Our results have implications for the technology strategy of the firm, in that M&A transactions may considerably impact technology markets, increasing the concentration of key technologies.

About the speaker
Co-author: Christoph Grimpe, ZEW Mannheim, KU Leuven, University of Zurich.

Venue: UNU-MERIT Conference room.

Date: 11 February 2009

Time: 16:00 - 17:00