Acquisitions by Business Group and Technology Transfer

Young Gak KIM ; Sadao NAGAOKA

Young Gak Kim, Professor, Senshu University, Japan ykim@isc.senshu-u.ac.jp
Sadao Nagaoka, Researcher, RIETI, Tokyo Keizai University, Japan snagaoka@tku.ac.jp

JEL Classification: O3, G34

Abstract

Two important opportunities for accelerating the growth of newly established firms are initial public offerings and acquisitions. This study focuses on the acquisition of a firm and its subsequent transformation into a subsidiary by business groups and investigates how such governance facilitates technology transactions (i.e., transfer of patent rights) and firm growth in Japan. The analysis reveals that such acquisitions can lead to increased technology transactions even when the transactions directly related to the acquisition are excluded and the transactions with firms outside the business group are included. However, the increase in technology transactions is limited mainly to wholly owned subsidiaries. The transfer of patent rights to a subsidiary is accompanied by an improvement in its sales, R&D, and productivity, controlling for the increase in its capital base. The sales and other performance of the business group also improve with the number of acquisitions.

Keywords:

Acquisitions, Patent transactions, Innovation

Acknowledgments

This study was conducted as a part of the Project “Developing an Entrepreneurial Ecosystem” undertaken at the Research Institute of Economy, Trade and Industry (RIETI). The first author acknowledges the financial support from JSPS KAKENHI Grant Numbers JP19H01486 and JP20H00071.

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