Mergers & Acquisitions

Transcription

1 Mergers & Acquisitions Their impact on the innovativeness of single firms and whole industries Content Literature Review The M&A context and process Selection of relevant studies Sample description Variables used in the studies Critical remarks Conceptual Framework Theory Hypothesis Variables Open Questions

2 Literature review : The M&A context and process R&D / Innovation Technology Innovation Competition Demand Types of Transactions: Acquisition / Merger / LBO etc. National / International M&A Technological / Non- Technological R&D Investment / Expenditure / Personnel Patents New Products Financial / Economic Performance Market Share Firm Growth Productivity Diversification Strategy Motive Propensity Relatedness Knowledge Base Prior Realations Firm Size Ressource-Transfer Human Ressources Management Integration Dept Control System Design Production Organisation Marketing Distribution etc. Literature review: Selection of relevant studies Quality: Academic journal with blind review process Minimum of 25 citations Actuality: After 985 Innovation focus: At least one hypothesis or central research question directly or indirectly focusing on innovation Technological motivation sufficiently plausible (i.e. high-tech industry) 2

3 Literature review: Selection of relevant studies Ahuja und Katila (200) Bertrand und Zuniga (2006) Bresman et al. (999) Capron et al. (998) Cassiman et al. (2005) und (2006) Chakrabarti et al. (994) Cloodt et al. (2006) Danzon et al. (2007) Ernst und Vitt (2000) Gerpott (995) Hagedoorn und Duyster (2002) Hall (987) Hall (990) Hall (999) Hitt et al. (99a) und (99b) Hitt et al. (996) Prabhu et al. (2005) Pranam et al. (2003) Puranam et al. (2006) Puranam und Srikanth (2007) Ranft und Lord (2002) Literature review: Independent variables used in the studies Type / Focus Study: Author (Year) Sample Size Period Industries Countries Ahuja und Katila (200) 72 largest firm 287 M&As Chemical Industry Europe, USA and Japan Cassiman et al. (2005) und (2006) 62 firms, 3 M&As Cloodt et al. (2006) 347 firms, 2429 M&As Medium- and high-tech industries (mainly machinery and chemical industry) aerospace and defence, computers and office machinery, phamaceuticals, electronics and communication Europe, USA and Canada USA, Europe, Asia Hagedoorn und Duyster (2002) 35 firms, 20 M&As computer industry USA, Asia, Europe Firm Characteristics Hall (987) 259 firms manufactoring USA Hall (999) 6000 firms; 300 exits; 848 for probability ; 479 for impact manufactoring USA plus target homecopuntries Hitt et al. (99a) und (99b) 9 M&As industries worldwide Hitt et al. (996) 250 firms compustat industrial firms worldwide Prabhu et al. (2005) 35 firms 57 M&As pharmaceutical industry USA plus target homecopuntries Gerpott (995) 92 M&As industrial manufactoring Germany Integration Pranam et al. (2003) Puranam et al. (2006) 207 M&As 49 acquiring firms (207 M&As, 49 firms) IT hardware manufactoring USA IT hardware industry USA Puranam und Srikanth (2007) 97 M&As, 43 firms ICT und Pharmaceuticals USA and worldwide Bresman et al. (999) 42 M&As all Sweden (targets USA, UK, GER, FIN, NED, ITA, NOR, Swiss) Transfer Capron et al. (998) Ernst und Vitt (2000) 253 M&As, 90 acquirers 43 M&As, 6 key inventors from 9 firms manufactoring industry Europe, North America mashinery, electronics, chemicals Germany Ranft und Lord (2002) 7 casestudies hightech: Biotechnology, ICT, electronics USA Strategy Chakrabarti et al. (994) Leverage Hall (990) 325 M&As, 86 firms 2500 firms 200 transactions manufacturing USA; BRD manufactoring USA International M&As (Industry-level) Bertrand und Zuniga (2006) M&As manufactoring sectors 4 OECD countries Growth Danzon et al. (2007) 383 firms 65 M&As Pharma-Biotech worldwide 3

4 Discription Literature review: Independent variables used in the studies Number of trentg in Study variable impact on the innovativeness in % trent in % studies numbers including Overall Result this variable positive neutral negative other trend trend all negative plus all positive plus un-specified Dependent Variables those those that were controll all that were that are negative (positive) (% positive) total positive in one variables and neutral or in one minus minus (00%) aspect and variables for insignificant aspect and (negative) (% negative) Independent Variables, Control Variables, insignificant in propensity insignificant and Dummies the other(s) estimation in the other(s) Other Management Financial aspects Firmsize Knowledge Motives (technological) % Technolgical relatednes % Absolute size of acquired knoweledge base % Relative size of acquired knowledge base % Firm heterogeneity/prior patenting % R&D expenditures or intensity % Prior products % Type of knowledge (tacitness) % Firm age % Absolute firm size acquirer % Absolute firm size target % Relative firm size (similarity in firm size) % Firm value % Tobin's Q (market value/book value) % Performance and profitability % Sales % Liquidity % Accounting performance (ROI, ROA etc.) % Leverage, dept % Degree of integration vs. autonomy % Speed / Pace of integration % Communication % Formalisation % M&A % Market relatedness % Diversification % M&A experience % M&A propenisty % Prior relations % Industry % Industry R&D intensity % Geografic/cultural/institutional distance % Year % Literature review: Independent variables identified as relevant Study Number of trentg in variable impact on the innovativeness in % studies numbers trent in % including Overall Result this variable positive neutral negative other trend trend Dependent Variables Independent Variables, Control Variables, and Dummies total (00%) all positive plus those that were positive in one aspect and insignificant in the other(s) all that were neutral or insignificant all negative plus those that are negative in one aspect and insignificant in the other(s) un-specified controll variables and variables for propensity estimation (positive) minus (negative) (% positive) minus (% negative) Motives (technological) % Technolgical relatednes % Absolute size of acquired knoweledge base % Relative size of acquired knowledge base % Absolute firm size acquirer % Absolute firm size target % Relative firm size (similarity in firm size) % M&A experience % Breadth of Knowledge % Depth of knowledge % Prior relations % R&D expenditures or intensity % 4

5 Literature review: Dependent variable and overall impact Impact in % of all studies Study Dependent Varoiable in % of all studies with respective overall impact positive neutral / conditional negative 38% 48% Ahuja und Katila (200) Bresman et al. (999) Capron et al. (998) Cassiman et al. (2005) und (2006) Cloodt et al. (2006) Gerpott (995) Hagedoorn und Duyster (2002) Prabhu et al. (2005) Bertrand und Zuniga (2006) Chakrabarti et al. (994) Danzon et al. (2007) Hall (987) Hall (990) Hall (999) Pranam et al. (2003) Puranam et al. (2006) Puranam und Srikanth (2007) Ranft und Lord (2002) Ernst und Vitt (2000) Hitt et al. (99a) und (99b) Hitt et al. (996) R&D output R&D output Ressources (R&D) R&D output and input R&D output Integration R&D output R&D output R&D input R&D input R&D input R&D input R&D input R&D input R&D output R&D output R&D output Ressources (Knowledge) Ressources (HR) R&D output & input R&D output & input 75% R&D Output 60% R&D Input 4% X Literature review: Critical remarks Second hand data that cannot be scrutinized Losing original context by aggregation and pooling of variables Double personal bias in interpretation and explanation of relations and results Therefore: Trends and tendencies rather then results Nevertheless: First literature meta-analysis of its kind (large selection, complete and comprehensive and at the same time focused, fine grained analysis of variables and their impact as well as hypothesis and results) 5

6 Conceptual framework: Theory Evolutionary economics (e.g. Schumpeter; Nelson and Winter; Dosi) Industrial organisation (e.g. Arrow; Scherer; Kamian and Schwarz) Industrial dynamics (e.g. Nelson and Winter; Dosi; Silverberg and Verpagen; Carlsson and Eliasson) Theories of organisational learning (e.g. Cohen and Levinthal; March; Nonaka; Simon,; Kogut and Zander; Conner and Prahalad; Grant; Lane and Lubatkin; Nooteboom; Lane) Conceptual framework: Theory Theory of the firm: Resource based theory of the firm (e.g. Arrow; Teece; Rumelt; Wernerfelt; Barney; Conner; Mowery) Knowledge based view (e.g. Conner; Kogut and Zander; Foss; Grant; Spender) Competence based view (e.g. Prahalad and Hamel; Freiling) Capability based view (e.g. Foss; Helfat; Duysters and Hagedoorn; Eisenhardt and Martin; Helfat and Peteraf; Teece; Winter; Zollo) Technology based view (e.g. Granstrand; Fontes and Coombs) Cognitive based view (e.g. Nooteboom) 6

7 Conceptual framework: Hypothesis H: Non-technological acquisitions will have a neutral or negative effect on post acquisition innovation output. H2: There is a positive relationship between the degree of similarity in terms of size between the partner firms and the post M&A innovativeness. H3: There is a positive relationship between the absolute size of the acquired knowledge base and the post-m&a innovativeness. H4: There is a negative relationship between the relative size of the acquired knowledge base and the post-m&a innovativeness. H5: There is a inverted-u shaped relationship between the relatedness of the acquired knowledge base and post-m&a innovativeness. H6: There is a positive relationship between the depth of the acquirer s knowledge base and the post-m&a innovativeness. H7: There is a positive relationship between the breadth of the acquirer s knowledge base and the post-m&a innovativeness. H8: There is a positive relationship between the level of R&D intensity of partner-firms in M&As and the post-m&a innovativeness. H9: There is a negative relationship between M&A experience and post-m&a innovativeness. H0: M&As between partners that had prior R&D relations lead to higher post-m&a innovativeness than M&As between partners that had no prior R&D relations. Conceptual framework: Variables Dependent variable: Innovativeness Patent output measured as patent frequency or intensity (i.e. the number of successfully applied patents in a given year/sales) Argumentation for Output instead of input measure Innovation input measures such as R&D expenditure can lead to misinterpretation in the M&A context. Not interested in desire, efforts or importance attributed to innovation, but the success in achieving it. 7

8 Conceptual framework: Technological Motive Target selection according to technological criteria. Special attention paid to technological resources during the integration. Enhancing technological knowledge and capabilities. Unsuited targets. The integration process might disrupt the innovation process and detract resources. Contribute little or nothing to the innovation potential. Conceptual framework: Hypothesis & Independent Variables H: Non-technological acquisitions will have a neutral or negative effect on post acquisition innovation output. Technological M&A: Technology as a major motive of the deal. This is assured by: choosing a high-tech industry; controlling for a technological motive in press releases and firm publications; controlling for any patent activity of the target in the five years before the transaction. 8

9 Conceptual framework: Similarity in Terms of Firm Size Control variable. Firm size as a proxy for Organisational fit or organisational relatedness (other aspects of organisational similarity e.g. formalisation, administrative routines, internal processes, hierarchies, divisionalisation, modularisation etc. are related to firms size). Missing organisational fit especially problematic in complex, nonstandardised activities such as R&D. Conceptual framework: Hypothesis & Independent Variables H2: There is a positive relationship between the degree of similarity in terms of size between the partner firms and the post M&A innovativeness. Firm size: The absolute firm size is calculated as the natural logarithm of employees and/or sales in the year of before the M&A (log to correct for few very large firms). The relative firm size is calculated by dividing the absolute firm size of the acquirer (larger firm) by the size of the target (smaller firm). 9

10 Conceptual framework: Absolute Size of Knowledge Base Economies of scale and scope through the reduction of duplicate and redundant R&D. Recombination effects and cross-fertilisation. Increase of internal knowledge base and absorptive capacities. Increase of strategic flexibility. Building of a competitive advantage that leads to economic success? -see relative size of acquired knowledge base - Conceptual framework: Relative Size of Knowledge Base - see absolute size acquired knowledge base - Exceeding absorptive capacity (information overload ). Difficult, time consuming and risky integration. Major disruptions during integration. 0

11 Conceptual framework: Hypothesis & Independent Variables H3: There is a positive relationship between the absolute size of the acquired knowledge base and the post-m&a innovativeness. H4: There is a negative relationship between the relative size of the acquired knowledge base and the post-m&a innovativeness. Size of acquired knowledge base: The absolute size of the acquired knowledge base consists of the number of patents acquired for the preceding five years plus the patents cited therein minus all duplicates. The relative size of the acquired knowledge base is calculated by dividing the absolute size of the acquired knowledge base by the absolute size of the acquirer's current knowledge base. Conceptual framework: Hypothesis & Independent Variables Absolute size of knowledge base: KB A, T = + A, T t= 5 t= 5 cited A, T Relative size of knowledge base: rkb KB + A A t= 5 t= 5 A = = KBT T + t= 5 t= 5 cited A cited T Absolute size of acquired knowledge base: KB acquired n n n = + n cited T T ( T ) ( i i i i= t= 5 i= t= 5 i= t= 5 i= t= 5 cited Ti ) Relative size of acquired knowledge base: rkb acquired acquired Ti KB i= t= 5 i= t = 5 = = KB A n + n cited Ti ( + n i= A t= 5 t= 5 ) ( Ti t= 5 i= t= 5 cited A n cited Ti )

12 Conceptual framework: Degree of Technological Relatedness Better integration, understanding and utilization (absorptive capacity) Similarities in educational background, language, cognitive structures etc. Similarities in organisational structures, routines, processes etc. Economies of scale and scope. Shorter time to market. Larger and broader R&D projects? Too similar knowledge contributes little to absorptive capacity possibility of inventive recombination cross-fertilisation. Conceptual framework: Hypothesis & Independent Variables H5: There is a inverted-u shaped relationship between the relatedness of the acquired knowledge base and post-m&a innovativeness. Technological relatedness: The technological relatedness of the acquired knowledge base is calculated by the number of patents and cited patents that the acquirer and its target have in common, divided by the absolute size of the acquired knowledge base. 2

13 Conceptual framework: Depth of Knowledge Base (Specialisation) Identify promising targets. Integration and utilisation of acquired knowledge. Core regidities. Technological lock-out. Conceptual framework: Breadth of Knowledge Base (Sophistication) Larger absorptive capacity Broader range of promising targets. Cross-fertilisation and recombination. Less risk of rigidities and lock-out. Resources are spread too thinly. Distraction within the firm. Coordination and organisational problems. 3

14 Conceptual framework: Hypothesis & Independent Variables H6: There is a positive relationship between the depth of the acquirer s knowledge base and the post-m&a innovativeness. H7: There is a positive relationship between the breadth of the acquirer s knowledge base and the post-m&a innovativeness. Depth and breadth of knowledge base: The breadth of a firm's knowledge base is measured as the average number of granted patents in each patent subclass and year for the preceding five years. The depth of a firm's knowledge base is measured as the number of patent subclasses covered by the firm's patents and year for the preceding five years. Conceptual framework: R&D Intensity Future oriented capabilities and skills that lead to growth and economic success. Actuality, quantity and quality of knowledge base. Concerns the depth of the knowledge base (as opposed to relatedness that refers to the breadth of the knwoledge base). 4

15 Conceptual framework: Hypothesis & Independent Variables H8: There is a positive relationship between the level of R&D intensity of partner-firms in M&As and the post-m&a innovativeness. R&D intensity: R&D intensity of the target is calculated as the average R&D expenditure divided by sales for the five years before the M&A. To control for the average industry R&D intensity, the R&D intensity of every firm is calculated in relation to the average industry R&D intensity. If a firm acquired more than one target in the respective year, the ratios of all targets are summed up and divided by the number of targets. Conceptual framework: M&A Experience Better planning and preparation of transaction. Better assessment of targetvalue. Reduction of disruptions and problems during integration. Standardisation and routine-procedures ignore individual character and problems of every transaction. 5

16 Conceptual framework: Hypothesis & Independent Variables H9: There is a negative relationship between M&A experience and post-m&a innovativeness. M&A experience: M&A experience is measured as the natural logarithm of the number of M&As made during the previous five years. Conceptual framework: Prior R&D Relations Better identification of promising targets. Better assessment of targetvalue. Reduction of uncertainties and risk. Smoother transaction and integration because of mutual understanding, common experiences, language, knowledge etc. 6

17 Conceptual framework: Hypothesis & Independent Variables H0: M&As between partners that had prior R&D relations lead to higher post-m&a innovativeness than M&As between partners that had no prior R&D relations. Prior R&D relations: How to get data? Open Questions How to set the time-frames for measuring: technological motivation (patent activity in previous?? Years). knowledgebase (patent activity in previous?? Years). M&A experience (M&A activity in previous?? Years). (patents expire after 8-0 years of commercialisation. But is the embodied knowledge still new and economically useful at that time? The existing studies vary between two and five years in this respect.) How and where to get data on prior R&D relations? Should international M&As in the sense of acquisitions of foreign targets by German acquirers be included in the study? How could the concept of technological relatedness be conceptualised differently? 7