Department of Economics and Business Economics

In and Out of Balance: Industry Relatedness, Learning Capabilities and Post-Acquisition Innovative Performance

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  • Elena Cefis, Bergamo University, Sant'Anna School of Advanced Studies
  • ,
  • Orietta Marsili, University of Bath
  • ,
  • Damiana Rigamonti

The existence of an inverted U-shaped effect of the relatedness between acquirer and acquired firm on the innovative performance subsequent to an acquisition is normally regarded as indicative of the existence of a trade-off between exploration and exploitation in external innovation search. We argue that acquirers endowed with heterogeneous learning capabilities can alter the shape of the trade-off to their favour. In particular, we focus on a notion of industry relatedness that captures the coherence between the domains of operation of the acquirer and the acquired firm. Using a longitudinal dataset of 1,736 domestic acquisitions in the Netherlands, we show that the heterogeneous learning capabilities of the acquirers alter the shape of the inverted-U relationship, according to first- and second-order moderating effects. Our results confirm that learning capabilities by internal R&D and by acquisition experience both improve what acquirers can achieve in innovative performance when industry relatedness is at the point of balance between exploration and exploitation. In contrast, they have opposite implications on the potential losses in innovative performance when industry relatedness is outside the point of balance: internal R&D increases the tolerance of the trade-off, smoothing out potential innovation losses, whereas acquisition experience reduces it.

Original languageEnglish
JournalJournal of Management Studies
Pages (from-to)210-245
Number of pages36
Publication statusPublished - 2020

    Research areas

  • exploration and exploitation, industry relatedness, innovation, learning capabilities, M&A

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