Technological Acquisitions: The Impact of Innovation on Stock Performance

Abstract

This paper investigates technological acquisitions and innovation’s impact on US acquiring firms’ stock performance between 2012 and 2016. Firms pursue technological acquisitions with the rationale of creating value, improving market share, and achieving economies of scale. Acquisitions have not always yielded the desired results. Overall, acquirers’ long-run abnormal returns tend to be negative. This study suggests that innovation positively impacts stock performance around the announcement date and one year after the acquisition. The 3-year post-acquisition analysis finds that technological acquisitions do not affect acquiring companies’ stock performance. A bump in the one-year post-acquisition performance dissipates over the three-year horizon.