Does patenting increase the probability of being acquired? Evidence from cross-border and domestic acquisitions

A firm that owns a patent has a legal right to exclude. Applying for the patent, however, discloses discovery of an invention by the firm. Both the ownership of the right and the disclosure of the discovery expose the firm to an acquisition, because other firms may be interested in buying the right or the invention for a number of reasons. In this paper we put forward the idea of patentdriven mergers and acquisitions (M&As). We test the idea using a large sample of Finnish firms that are mostly small and private. Multinomial logit estimations show that if a Finnish firm owns a number of patents registered via the European Patent Office (EPO), the patents increase the probability that the firm is acquired by a foreign firm. The same does not hold for the probability that the firm is acquired by a Finnish firm. The finding suggests that patenting via the EPO exposes Finnish firms to cross-border M&As. We relate the finding to the existing explanations for the M&A-activity and argue that it speaks for the notion that M&As serve many different economic roles.O252 – Merger ; acquisition ; takeover ; patent ; M&A ; FDI ; technology ; internationalization