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Emerging Issue Paper 1- Mergers and Acquisitions- beneficial or harmful?

by on January 20, 2010

Mergers and acquisitions are a corporate strategy involving combining of different companies in order to improve financial performance. This paper aims at exploring the nature of Mergers and Acquisitions (M&A), how it has evolved in the wake of the global economic crisis and how it impacts innovation in organizations. There are a number of dimensions of M&A, such as similarity in technology among partners, cross border M&A, pre-M&A relations, motives for the M&A (innovation related or non-innovation related). These dimensions are factors or determinants, which make this impact beneficial or harmful. We will explore these determinants in this paper and delve deeper into how M&A and innovation are intricately related.

When two companies get together through Mergers or Acquisitions, they can combine resources and technological capabilities and develop knowledge that did not exist before the deal. Post-M&A integration is a difficult task and can lead to detrimental impacts on organizational innovation especially R&D, which is one of the major source of innovation in an organization. With the help of industry examples we will see that, in spite of the problems, M&A is a crucial vehicle for external technology sourcing and entry into new technological areas, hence innovation. As long as care is taken to see that combining two separate operations does not divert time and energy from R&D and other long-term investments, M&A can be beneficial to innovation even in the global economic crisis.

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