Knowledge Similarity and Structural Integration in Technology Acqusitions

We examine how the similarity between acquiring and target firm knowledge stocks influence the decision to structurally integrate the two firms following a technology acquisition. We find that the relationship between knowledge similarity and the likelihood of structural integration is U-shaped, such that acquiring firms integrate target firms when their knowledge stock has either low or high degree of similarity. When knowledge similarity is low, acquiring firms structurally integrate target firms to extend their knowledge base, whereas when knowledge similarity is high, acquiring firms structurally integrate target firms to deepen their knowledge base. However, such a tendency to structurally integrate a target firm when knowledge similarity is low or high is weaker when the two firms have a prior alliance relationship but stronger when the acquiring firm has greater general acquisition experience. Our findings suggest that the role of post-acquisition structural integration in managing acquired knowledge varies depending on the degree of knowledge similarity between acquiring and target firms.