Does M&A Diversification Improve Post-Deal Technological Performance?

Firms often choose to grow and diversify via mergers and acquisitions (M&A) because acquiring and integrating an ongoing entity is perceived to be a fast and less risky means of entering desirable markets, gaining new knowledge and new capabilities, or adding to the firm’s product line. In this paper, we analyzed the effects of diversifying via M&A on post-deal technological performance in the U.S. communication services sector. Seeking patterns of whether the more-diversified firm draws upon a broader range of technological domains in its post-acquisition, subsequently- patented inventions, we observe patterns of changing patenting activity into related technological classes, and with various patterns of patenting lags.