When Do Acquisitions Facilitate Technological Exploration and Exploitation?

Abstract

Previous research has suggested that firms need to balance exploitation and exploration. Acquisitions can be used as a way to explore (i.e., develop new areas of technological expertise) or exploit (i.e., reinforce existing technological capabilities). This article examines acquisitions in the semiconductor industry to answer the following question: Under what conditions do acquisitions facilitate exploitation and/or exploratory activity by the acquirer firm? The authors posit that an acquirer firm's ability to develop such exploratory innovation is a function of three key factors: opportunity available to the acquirer firm for exploration, ability of the acquirer firm to effectively assimilate and establish innovations in new technologies, and extent of control of target firm postacquisition. The results demonstrate strong support for the hypotheses indicating the benefits of target technological uniqueness and for the moderating effects of commonality between acquirer and target firms in geographic bases for exploration. However, the findings contradict expectations about the effects of mergers and suggest that merger enables the acquirer to engage in effective exploration. For exploitation, the authors find negative effects of target technological uniqueness and positive effects of commonality of geographic bases.

The evolving nature of China's regional innovation systems: Insights from an exploration–exploitation approach

“…We embrace the interpretation of exploration-exploitation as a continuum and accordingly take a single operationalization (i.e., the entropy index) which is consistent with some prior studies [59,[79][80][81]. However, there are still other studies that conceptualize the two constructs, exploration and exploitation, as independent activities and thus utilize separate measurements [56,82,83].…”

Three decades of strategic management research on M&As: Citations, co-citations, and topics

“…This stream of literature has often contrasted entry modes in terms of equity and non-equity entries, noting how equity entries provide greater control over the foreign subsidiaries but also greater risk (Kogut & Singh, 1988;Hennart, & Reddy, 1997;Isobe et al, 2000) and are better to transfer knowledge internally (Phene et al, 2012). This stream has identified several factors that influence the M&A outcome such as multinational experience (Harzing, 2002), local experience (Barkema & Vermeulen, 1998), product diversity (Brouthers & Brouthers, 2000), internal knowledge transfer (Phene et al, 2012), the selection of the target firms (Haspeslagh & Jemison, 1991) and post-M&A cross-border integration (Shimizu et al, 2004), but also industry and even country-level (Kogut & Singh, 1988;Hennart & Reddy, 1997) factors such as technological intensity, host country market attractiveness, internal isomorphic pressures, legal constraints. The cultural dimension in M&As has been one of the most often studied variables (Stahl & Voigt, 2005) in international strategy.…”

“…To some extent this research has the theoretical emphasis on the RBV. M&As have also been conceptualized for their learning potential (Vermeulen & Barkema, 2001;Hayward, 2002;Zollo & Singh, 2004;Phene et al, 2012), although it may depend on a complex, and hazardous, integration process (Haleblian & Finkelstein, 1999). Learning from a target firm and building new capabilities is one of the reasons why firms acquire others (Zollo & Singh, 2004).…”

“…The literature on M&As is rather extensive and scholars have uncovered multiple motivations, process issues, hazards and outcomes of M&As. For instance, firms may deploy M&A for a variety of reasons, such as enlarging their product scope and geographical reach, to learn (Morosini et al, 1998;Barkema & Vermeulen, 1998;Zollo & Singh, 2004), to improve competitive capacity (Hitt et al, 2001), acquire resources and knowledge (Barney, 1988;Ranft, 2006;Phene et al, 2012), obtain synergies (Bradley et al, 1988), overcome shortcomings in the financial markets (Brouthers & Brouthers, 2000), reduce competition (Bradley et al, 1988), and access valuable strategic resources essential for a competitive advantage (Barney, 1991).…”

Technological alliance drivers, formation and performance: the case of Korean high-tech SMEs

“…Social networks encourage the exchange of information and act to restrain opportunistic behaviours during alliance formation. Phene et al (2012) assert that opportunistic behaviour of alliance partners can increase transaction costs which can be mitigated by building trust between partners. Two particular factors such as trust and reciprocity constructed in social networks have received ample attention from scholars (Light and Dana, 2013).…”