Just as other tech oriented industries, the fintech industry is shaping up quickly, and M&A is becoming the inorganic growth strategy of choice, just as it is in many other high tech settings.
But what do we know about high tech acquisitions when it comes to market response?
For instance, we know that geography plays an important role in explaining their actual innovative performance. Based on an empirical study of 3680 high tech acquirers prior work coauthored by one of the FINDER members, only 21.04% of high tech firms examined proved more innovative after an acquisition.
Considering the effect of an acquisition on the innovation trajectory of the two firms, work featuring in Research Policy, considers some of the innovation consequences of high tech acquisitions, not too different from the ones currently under observation in the scope of the FINDER project. Drawing on insights from the transaction costs and international business literatures findings suggest that both geographic distance and borders influence post-acquisition innovative performance. Examining the patent portfolios of 3683 high tech acquirers in the period 2000–2012 support for a ‘liability of distance’ hypothesis is found – showcasing every 1000 km between the target and the acquirer to cost as much as 19 lost patent applications. The study does not find support for a ‘liability of foreignness’ hypothesis, however, but shows in fact, that else equal, cross-border deals result in 3.15 additional patent applications in a high tech context. For high tech acquirers ‘foreignness’ appears, therefore, to be more of an ‘asset’ than a ‘liability’. Would the lion’s share of these differences, just as in the case of the high tech acquisitions observed in this study, also be accounted for by cultural differences? Current work by this ESR explores some of the underlying drivers of M&A success in a fintech context. Keeping you posted on the outcome when we can!