The role of technology in M&As: a firm-level comparison of cross-border and domestic deals

Technological change is often hypothesized as one of the main drivers of merger activities. This paper analyzes the role of technology in mergers and acquisitions (M&As) at the firm level. Based on a newly created data set that combines financial information and patent data for public limited companies in Europe as well as country level variables, we apply a structural model to investigate technology-related motivations behind merger formation. Distinguishing between cross-border and domestic M&As, we find that technological relatedness of the M&A partners reduces uncertainty and the expected risk of failure associated with cross-border acquisitions significantly, whereas there is no evidence for technological complementarities driving domestic M&As. The relevance of technology for crossborder M&As further illustrates the international character of technology markets.