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Jin Wang
Jin Wang

How do alliances formed by technology conglomerates facilitate innovation?

When firms form technological conglomerates through mergers, acquisitions, and strategic alliances, they experience an increase in innovative activity. In this paper, researchers Kai Li, Jiaping Qiu, and Jin Wang create a new method to measure the extent of a firm’s technology conglomeration. This is then used to offer evidence as to what accounts for the increased innovation output by such a technology conglomerate.


Technology conglomerates that form through mergers, acquisitions, and strategic alliances experience high levels of innovative activity. Li, Qui and Wang show that these mergers, acquisitions, and alliances stimulate significant knowledge sharing and accelerated development among the members which accounts for the increase in innovative activity. This leads to an increased output of patents that are unique and/or impactful.


What Did the Researchers Do?

The researchers wanted to expand on previous studies that looked at the forming of alliances among technology firms and try to answer question surrounding how these alliances impact innovation. They hypothesised overlapping technologies among firms increases the likelihood that an alliance will form, and that these alliances result in increased innovation output. To explore this hypothesis, researchers developed a new method to measure the extent of a firm’s technology conglomeration and applied it to a large dataset of patents issued to firms in alliances.

What Did the Researchers Find?

In analysing the dataset, the researchers found that technology conglomerates are more likely to form alliances compared to other types of firms. An analysis of activity of alliance members post-deal shows an increase in backwards citations to partner patents and, more significantly, a higher number of new, unique patents being issued by the conglomerate; patents that have a greater impact, which is defined as those patents that are among the top 10 per cent in terms of citations received. Reasons for this increase in innovative activity can be attributed to knowledge sharing among alliance members and the cross-pollination that occurs between partners.


Companies looking to accelerate and increase their innovative activity and development can consider forming alliances with other technology firms. Companies that may be hampered by a lack of synergy or a low tolerance for failure, can use this research to inform future decision-making regarding how and when to partner with other firms to increase knowledge-sharing while decreasing risk. This research can also be used to help companies optimize firm boundaries by choosing between undertaking acquisitions and forming alliances.


Contact: Jin Wang

Article citation: Li, K., Qiu, J., Wang, J. (2019). Technology Conglomeration, Alliance, and Firm Innovation. Management Science, pp.1-26. DOI: 10.1287/mnsc.2018.3085

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