Borrow And Buy: Complementarity And Substitutability Of Acquirers’ Alliances And Technology Acquisitions

Abstract

What is the relationship between a firm’s alliances and its acquisition choice and performance? In this dissertation, I argue that alliances may not only substitute for, but also be complementary to technology acquisitions. I also propose that acquirer’s alliances and how they relate to the target have an important effect on that acquirer’s acquisition performance. I highlight the role of distinct components of the acquirer’s alliance portfolio – its functional and technological alliances in, or outside of its core business – for that firm’s technology acquisition choice and performance. When it comes to choice, I show that a higher number of functional alliances is correlated with a higher number of technology acquisitions in same business segments, and with a lower number of technology acquisitions in other business segments where the firm may not have functional alliances. At the same time, technological alliances generally substitute for technology acquisitions, but may be complementary to technology acquisitions within strategically important markets outside of the acquirer’s core business. Building on my investigation into acquisition choice, I show that both functional and technological alliances are an important factor in performance outcomes of technology acquisitions following these strategic choices. I find evidence supporting my claims using a sample of 208 large, public, high-tech US firms from 1996-2010, with their 13,074 total unique alliances and 5,215 unique acquisitions, as well as over 1.4 million unique patents. I contribute to corporate strategy and technology and innovation management research by showing how firms’ boundary choices, specifically when it comes to technology acquisitions, as well as the performance outcomes of these choices, are influenced not only by internal, but also by external resources and capabilities accessible through their alliance portfolios. I also address the enduring puzzle of why firms engage in seemingly unrelated acquisitions by showing that sometimes, such transactions may in fact be indirectly related and complementary to the acquirer through its alliance portfolio.