Internalization and Resource AcquisitionSohum DaftaryAdvisors: Minyuan Zhao & Lisa Tang
Big Blue and Little Red: A Story of an Acquisition May 1st, 2015 Lenovo acquires IBM’s ThinkPad division Hands-off & Lighter-touch approach Wholesale access to brand, technology, and markets (Zhou and Huang, 2014)
Outline
Research Question & Theoretical Development Operationalization Data Sources & Sample Selection Results Next Steps
Knowledge-Based View of the Firm
Global Question: How do firms acquire resources when the knowledge they seek is tacit and requires complementary knowledge?
Narrower Question: Are firms more likely to be acquired if the resources they possess are dependent on each other?
Hypothesis: Higher levels of a firm’s integration are positively associated with an acquisition of the firm.
Firm internalization or interdependence
Acquisition
Knowledge-Based View of the Firm Boundaries of the firm are determined by the nature of knowledge it
contains and how efficiently the firm can organize and transfer that knowledge (Kogut and Zander, 1993).
In contrast to Transaction Cost Economics Theory: firms are opportunistic actors
3 Reasons for Hypothesis: Hard to contract: Knowledge transfer is more difficult if the knowledge is tacit
and not codified (Kogut and Zander, 1993). Hard to export: Internalized firms lack of experience teaching new knowledge
(Teece, 1977, McFetridge, 1984). Hard to steal: Essential technology requires complementary knowledge (Zhao
2006, Belderbos and Somers 2015).
Visual Representation of Theory
Hard to Contract or Steal
Tacit and not codified
(there’s no explicit blueprint for the
technology)
Lack of Experience in Exporting Technology
The Key Technology
Requires Other Technologies
More likely to buy
Decision Map for Acquiring Resources
Image Source: Capron and Mitchell 2012
Operationalization of Theory
Firm internalization or interdependence
AcquisitionTheory
ProxiesSelf-citation score Was the company
acquired? (1/0)
(Zhao 2006, Belderbos and Somers 2015)
Data Sources
Sample Selection
Semiconductor & Related Industries (SIC Code 367) Only firms in the United States First year of analysis is 2006 Acquisition window from 2005-2008
Small Sample with Missing Values
3 Million -> 1
Million Citations
425 Firms left after
NBER Matching
5255 Firms from Orbis 2006
Results
NBER’s missing self-citation data
Preliminary results do not suggest a rejection of the null hypothesis
Next Steps
Use a newer patent citations data set from UC Berkeley's Lee Flemming Build a custom self-citation score algorithm Integrate subsidiaries’ technology into the self-citation score Observe multiple samples of firms by the year
References
Belderbos, R., & Somers, D. (n.d.). Do Technology Leaders Deter Inward R&D Investments? Evidence from Regional R&D Location Decisions in Europe. SSRN Electronic Journal SSRN Journal. doi:10.2139/ssrn.2577821
Capron, L., & Mitchell, W. (2012). Build, borrow, or buy: Solving the growth dilemma. Boston: Harvard Business Review Press.
Hall, B. H., A. B. Jaffe, and M. Trajtenberg (2001). "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools." NBER Working Paper 8498.
Huang, S. (2014). HOW CHINESE “SNAKE” SWALLOWS WESTERN “ELEPHANT”: A CASE STUDY OF LENOVO’S ACQUISITION OF IBM PC DIVISION. Journal of International Business and Economy, 15(1), 23-50.
Kogut, B., & Zander, U. (1993). Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation. Journal of International Business Studies J Int Bus Stud, 24(4), 625-645. doi:10.1057/palgrave.jibs.8490248
Teece, D. J. (1977). Technology Transfer by Multinational Firms: The Resource Cost of Transferring Technological Know-How. The Economic Journal, 87(346), 242. doi:10.2307/2232084
Zhao, M. (2006). Conducting R&D in Countries with Weak Intellectual Property Rights Protection. Management Science, 52(8), 1185-1199. doi:10.1287/mnsc.1060.0516
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