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Can Innovation Be Bought?

In his Harvard Doctoral Dissertation, Saikat Chaudhuri (2004) examines the degree to which acquisitions are an effective path toward adding new technology and new products to a company. Acquisitions can be used as an alternative to internal R&D, but the question is whether this path is more or less effective at generating new products and improving corporate financial performance.

Chaudhuri's analysis indicates that companies are successful at acquiring valuable technology and they can effectively integrate the acquisition into the host company. However, he found that executive leaders and other decision-makers were less confident about the viability of the acquired technology, primarily because of their lack of familiarity with its development from the very beginning. This lack of confidence led the acquiring company to bring the technology to market much more slowly than it did for its own internally conducted research.

The impact of a lack of familiarity or confidence is a very interesting angle on the value of acquired R&D. It brings out a behavior that has immediate face-validity, but it is something that does not appear in the acquisition or R&D press at all.