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The Inter-temporal tradeoff in technology grafting acquisitions

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Technology grafting acquisitions represent mechanisms by which established firms combine the capacity for innovation of entrepreneurial firms with their own complementary capabilities at commercialisation. Such acquisitions are motivated by the need to bring products speedily to market, as well as develop future product pipelines. The authors argue that these are conflicting objectives because of the inter-temporal trade-off, which arises because acquisition integration has opposite effects on short and long term technological performance. A high integration approach raises the hazards of disruptions in the development and commercialization of existing products in the acquired firm, but is also likely to improve the coordination and cooperation between acquirer and target on the development of the pipeline of future products. They propose a theoretical framework that explains how the coordination benefits and disruption effects of integration play out over time, and test the predictions of the framework on a sample of 207 technology grafting acquisitions by 49 established acquirers in the IT industries. They find support for the existence of the inter-temporal trade-off theorized: following a high integration strategy increases the time to market of the first product, but raises the likelihood of subsequent product launches, conditional on the first. Implications for further theory development and for practice are drawn.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2002/2002-94.pdf

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