Building and Blocking: The Two Faces of Technology Acquisition

Christoph Grimpe and Katrin Hussinger

No 08-042, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: 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 1999 to 2003 indicates that the price paid by an acquirer for a target increases with the patent stock, the relatedness, the value and the blocking potential of the target's patents, especially if blocking patents are in technology fields related to the acquiring firm's patent portfolio. Our results have implications for competition authorities, in that M&A transactions may considerably impact technology markets. This would also need to be reflected in the management's technology strategy.

Keywords: Firm acquisitions; technology; patents; blocking patents (search for similar items in EconPapers)
JEL-codes: G34 L20 O34 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr and nep-pr~
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Building and Blocking: The Two Faces of Technology Acquisition (2009)
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