Rd Activity And Acquisitions In High Technology Industries

Economic analysis of high-tech industries often assumes that firms¿ abilities to survive in such an industry depend on their own internal R&D efforts. High-tech firms may choose to specialize in either this internal growth (through R&D) strategy or an external growth strategy of acquiring other firms or firms¿ operations. They studied 200 electronics firms over 10 years to test the relationship between R&D intensity and the probability of acquisition. Robust to a variety of dependent variable specifications, they find a strong and significant negative correlation, suggesting that electronics firms may be specializing in one activity or the other. Firms with greater intangible assets, higher profitability and lower debt to asset ratios are more likely to acquire. Tables.

Theory suggests R&D intensity and acquisition activity may be either directly or inversely related. However, we know relatively little about which firms are responsible for acquisition activity in high-technology industries, which are not only R&D-intensive, but also have substantial acquisition activity in the United States. Using a panel of 217 US electronic and electrical equipment firms from 1985-93 and limited dependent variable estimation techniques, we find a substantial negative correlation between R&D-intensity and a firm's propensity to acquire. This result is surprisingly robust to numerous sensitivity tests and is significant in both the 'within' and 'between' dimensions of our data.

Acquisition activity persists despite evidence that acquisitions do not improve firm performance. Further government policy toward the defense industry has advocated consolidation in the name of nominal cost savings. We explore the role acquisitions play toward technology transfer and begin to identify factors associated with acquisition success through a review of existing research on post-acquisition performance that primarily considers acquiring firm stock performance. Using this research as a foundation we build a model to analyze post-acquisition performance using a sample of high-technology firms. Results suggest critical success factors associated with post-acquisition stock performance are poorly understood. We conclude that proactive government policy toward high-technology industry mergers and acquisitions may be misguided due to difficulty in predicting acquisition outcomes.

This book deals with the critical issues in the management of high-technology enterprises. It focuses on management decisions in each of the major activities typical in such companies: research and development, manufacturing, marketing, and product support. The interplay and ongoing conflicts between these activities are analyzed, and methodology to ensure the smooth flow of products and services in the firm are described. Special attention is devoted to the global high-technology market and to factors affecting success in international competitions and joint ventures. In its effort to offer theories that have been found effective in the field, the subject of mergers and acquisitions in the high-technology industry presented here reflects the strategy and experience of Bernard Schwartz, former CEO of Loral and a world recognized authority in high-technology acquisitions. Through interviews and conversations with leading executives of U.S., European, Israeli, and Asian high-technology companies the author presents real cases, which illustrate the application of the theory and show proven approaches that bring noteworthy results.

A major method of acquiring the rights to technology is through the procurement of intellectual property (IP), which allow companies to both extend their technological advantage while denying it to others. Public databases such as the United States Patent and Trademark Office (USPTO) track this exchange of technology rights. Thus, IP can be used as a public measure of value accumulation in the form of technology rights. As perceived value increases in the child company, M&A occurs . Extensive bodies of research exist concerning merger and acquisition (M&A) activity. This is likely due to the increasing trend of M&A in the market overall and the trillions of dollars involved. Between 1985 and 2018, US M&A value increased by 5.32% with 2017 US deals alone amounting to $1.7 trillion. These figures demonstrate the increasing importance of M&A. This is especially true in technology-centric industries where prior surveys identify a specific product or technology as the prime motivator for mergers. Understanding the transfer of technology and its value will become important in the future if high-tech industries also follow this increasing trend. This study explores M&A activity within the context of the semiconductor industry by focusing on two parent companies, Intel and AMD, and their child company acquisitions from 1997 to 2017. These acquisitions total more than $53 billion and extend into 35 separate high-tech industries outside the parents’ core semiconductor business. In terms of IP as assets, all 91 acquired companies represent 5K in pipeline patent applications and 37K patents. The research suggests that there is a buildup of technological value as measured by the increase of applications and patents by the child company prior to the merger event with the parent (e.g. Intel or AMD). Additional relationships such as child company M&A acquisition value to IP quantities, IP lifespan to child company lifespan, and technology maturity are explored. This study also proposes and implements a TRL (Technology Readiness Level) scale specific to the semiconductor industry and maps it to IP cycle times (USPTO processing times). The application of TRLs to IP data creates an approximate idea as to which maturity of technology is most valuable: new concepts or mature ideas. Results suggest that the child companies seek technology IP with higher TRLs, and these child companies are in turn acquired by the parent company (e.g. Intel or AMD).

This Article will compare mergers and acquisitions in the technology industry in the U.S. to mergers and acquisitions in other sectors of the U.S. economy, as well as other countries. This Article will show that the U.S. technology industry is not disproportionately prone to consolidation relative to other important sectors of the U.S. economy. Furthermore, while technology mergers and acquisitions were historically more common in the U.S. than in the rest of the world, other countries are rapidly catching up to the U.S. Lastly, evidence in this Article suggests that the mergers and acquisition activity in the U.S. technology sector is not driven by the largest firms nor by a handful of prolific buyers.

Technology-focused acquisitions are an important complement to the firm’s internal product development efforts. There is considerable heterogeneity when comparing individual technology-focused acquisitions – especially with respect to acquisition timing and the deal value. To resolve some of this heterogeneity the author introduces the novel distinction between performance- and functionality-focused acquisitions. He characterizes this distinction based on a theoretical analysis, a qualitative study, and turns to a sample of acquisitions in the field of artificial intelligence for the quantitative study. There are two key findings. First, performance-focused acquisitions take place earlier in a target’s life cycle than functionality-focused ones. Second, the deal value is – at a comparable stage in a target’s life cycle – higher for performance-focused acquisitions. This thesis is relevant for management scholars and managers alike: Scholars learn about the implications of the distinction between performance- and functionality-focused acquisitions on markets for technology. Managers gain insights into how this distinction may guide their strategic decision making.