With today's economy moving at the speed of light, it's no wonder that companies are increasingly choosing to buy the ability to innovate, rather than to develop it in-house. But technology-grafting acquisitions are risky business. Although some provide a jump-start on the competition, others turn out to be costly mistakes.Two recent studies shed light on the question of which technology-driven acquisitions are most likely to succeed. The results? Smaller acquisitions deliver more innovation than mergers of near equals. Furthermore, closely integrating the acquired company into the parent organization tends to drive stronger technological results.One study, “Technological Acquisitions and the Innovation Performance of Acquiring Firms: A Longitudinal Study,” analyzed 72 acquirers and 283 technology-related acquisitions in the global chemicals industry between 1980 and 1991. Published in the March 2001 issue of Strategic Management Journal, it concludes that the size of the target's knowledge base — measured as the sum of the company's successful patent applications and the patents cited in those applications in the previous five years — had a positive effect on the number of patents granted to the acquirer in the four years following the acquisition.
