Firms’ Innovation Trajectories and Inventors’ Productivity in the Context of Acquisitions

Abstract

Studying acquisitions in the US pharmaceutical industry, we first question how the alignment of acquirers’ innovation trajectories (as path-dependent or path-breaking change through the acquisition of targets with similar or distant innovations) with their own inventors’ pre-acquisition knowledge (as specialized or diversified) may influence these inventors’ post-acquisition productivity. We examine two characteristics of productivity – namely whether acquirers’ future innovations are indicative of knowledge deepening or broadening, as well as their impact. Second, we focus on both the acquirers’ and targets’ human capital (i.e., inventors’) knowledge resources, and study characteristics of who the knowledge is being acquired from at the target firm and who it is being absorbed or integrated by at the acquirer, and further how this alignment may also impact the acquirer’s inventors’ productivity.