Quantity at expense of quality? Measuring the effects of technological M&A on innovation and firm performance

This study examines the effects of technological mergers and acquisitions (M&A) on post-deal innovation and firm performance. We argue that technological M&A lead to an increase of the innovation output in terms of patent counts while non-technological deals do not. By using the novel matching estimators and propensity score methods in order to take in consideration the endogeneity bias in the sample, we better capture the differences between technological and non-technological M&A. Our empirical results showed that firms engaged in technological M&A had lower innovation performance -in comparison to firms involved in non-technological deals- as reflected by a statistically significant decrease of the average quality of the inventive output, captured by citation-based patent analysis.