The Economics of Technology-Related Ownership Changes. A study of innovativeness and growth through acquisitions and spin-offs
Doctoral thesis, 1994
The study reported in this thesis describes and analyzes technology-related acquisitions and spin-offs. The basic idea is that an economic system where large and small firms interact through technology-related ownership changes is highly conducive to overall innovativeness and long-term growth, given certain conditions. Williamson proposed in 1975 a 'systems solution' to creating an efficient innovation process. This solution advocates that small firms specialize in early stages of the innovation process for subsequent acquisition by large firms specializing in late stages. In this thesis an 'extended systems approach' is introduced and elaborated. This extended system in addition includes the mechanism by which large and small firms spin off small technology-based firms (STBFs) for possible acquisition so that a market for technology-based firms is created as a supplement to other forms of technology markets. This study is a first attempt to empirically explore and analyze both the internalization process of technology-related acquisitions, and the externalization process of technology-related spin-offs.
The general research problem is to investigate the nature, causes and effects upon growth and innovativeness through technology-related acquisitions and spin-offs. Several analyses are made, based on data from three different empirical studies of Swedish industry. The first one analyzes the acquisition and growth of small technology-based firms. Data are collected from 75 large Swedish manufacturing firms, a cross-sectional study of 106 STBFs, and a case study of seven acquired and three non-acquired STBFs. In the second empirical study, 60 STBFs are analyzed, both independently established firms and firms spun off from other firms (entrepreneurial spin-offs, ESOs). The study aims to analyze the ESOs and their consequences on innovativeness and growth. Also, the interaction between ESO firms and spin-off parents is analyzed. The third empirical study consists of two large manufacturing firms (Perstorp and Saab-Scania) in the LTBF case studies. Both firms have been acquiring as well as spinning off technology-based firms, i.e. they represent corporate-level systems. In the LTBF cases the two internal organizations for venture-development, Pernovo in Perstorp and Combitech in Saab-Scania, are examined. A comparative analysis of the two LTBF case studies, is made and innovativeness and growth are analyzed from both the large and the small firms' point of view.
The results indicate that technology-related acquisitions are increasingly important for the sourcing of technology among large Swedish manufacturing companies. Growth and innovativeness are found to be higher among the acquired firms than among the non-acquired firms, both before and after the acquisitions. Several factors influencing growth and innovativeness among acquired firms have been found. The results indicate that spin-off parents often fail in taking advantage of growth and innovativeness in spin-off firms. This is especially so in the cases of ESOs, even though informal co-operation is common after the spin-off. One conclusion is that large firms often are aware of the potential advantages in acquiring STBFs, but not of the potential advantages in spinning off firms. Managerial guidelines to an extended systems solution, including quasi-integrated acquisitions and spin-off firms, are presented.