Internet Appendix for “Corporate Innovations and Mergers and Acquisitions”
The Internet Appendix is organized as follows. Section I contains a more detailed discussion on
construction of innovation output variables. In Section II, we list tables containing robustness tests and
additional results not included in the main text.
I. Measures of Innovation Output
Our innovation measures rely on the International Patent Classification (IPC) system. The IPC
system is a hierarchical patent classification system created under the Strasbourg Agreement (1971) and
updated on a regular basis by a committee of experts, consisting of representatives of the contracting
states of that agreement. The structure of the IPC classification is made up of a section, class, subclass,
main group, and subgroup. We use the second level of the IPC classification (about 400 classes) to
differentiate innovations from different technology fields.
Assessment of the innovation output of a given firm using variables based on patent counts can be
made only relative to some benchmark, for the following reasons. First, technology classes differ in the
nature of R&D activities and resources required in producing a patentable innovation to the extent that
patent counts in two distinct classes may not be comparable. Second, there are technology class-specific
time trends in the number of awarded patents that may not fully reflect changes in innovation output. In
particular, large increases in the number of awarded patents in some classes over time might reflect the
evolution of U.S. Patent and Trademark Office practices with respect to what is a patentable innovation,
and hence patent counts from different years may not be time-consistent measures of innovation output
even within the same technology class. We address both issues by computing firms’ patent counts using
the scaled number of patents, where we divide the number of patents a firm received in a given

Citation format: Bena, Jan, and Kai Li, Internet Appendix for “Corporate Innovations and Mergers and
Acquisitions,” Journal of Finance, DOI: 10.1111/jofi.12059. Please note: Wiley-Blackwell is not responsible for the
content or functionality of any supporting information supplied by the authors. Any queries (other than missing
material) should be directed to the authors of the article.
1
technology class and year by the median number of patents received in the same technology class and
year.
In the end, to capture innovation output we employ two variables: Citation-Weighted Patents and
Patent Index. The former is the sum of the citation-weighted number of awarded patents to the
acquirer/target firm. We use citation weighting following Hall, Jaffe, and Trajtenberg (2001, 2005), who
argue that the number of citations a patent receives conveys information about its importance and allows
one to gauge the sheer heterogeneity in the quality of patents. The latter measures a firm’s innovation
output benchmarked relative to the median innovation output in each technology class and time period
where and when the firm was active in patenting. In both cases, we only consider patents with an
application year within the three-year period preceding a deal, to capture patents that might be the most
relevant for triggering acquisition bids. When we count patents over a five-year period before each bid,
our results are unchanged.
REFERENCES
Hall, Bronwyn H., Adam B. Jaffe, and Manuel Trajtenberg, 2001, The NBER patent citation data files:
Lessons, insights and methodological tools, NBER working paper 8498.
Hall, Bronwyn H., Adam B. Jaffe, and Manuel Trajtenberg, 2005, Market value and patent citations,
Rand Journal of Economics 36, 16-38.
2
II. Index of Tables
Table IA.I Summary Statistics
This table supplements the summary statistics reported in Tables I and II in the main text.
Table IA.II Which Firms Are the Acquirers?
This table reports various robustness checks to Table III in the main text using different econometric
specifications and control samples.
Table IA.III Which Firms Are the Target Firms?
This table reports various robustness checks to Table IV in the main text using different econometric
specifications and control samples.
Table IA.IV Acquirer-Target Firm Pairing
This table reports various robustness checks to Table V in the main text using different econometric
specifications and control samples.
Table IA.V Different Sources of Merger Synergy
This table reports various robustness checks to Table VI in the main text using different econometric
specifications and control samples.
Table IA.VI Post-Acquisition Innovation Output
This table reports various robustness checks to Table VII in the main text using different econometric
specifications and control samples.
3
Table IA.I
Summary Statistics
This table reports the number of corporate acquisitions by the acquirer’s two-digit SIC industry in the Acquirer
Sample and the Acquirer-Target Sample, and by the target firm’s two-digit SIC industry in the Target Sample (as
covered in Table 1 in the main text) and summary statistics for two other samples in Table I (that are not reported in
Table II).
4
Panel A: Mergers and Acquisitions by Industry
Acquirer Sample
Target Sample
Acquirer-Target Sample
SIC2
All
Acquirers
(1)
01
10
12
13
14
15
16
17
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
42
44
45
47
48
49
50
51
52
53
54
55
56
57
58
2
8
3
109
1
8
5
6
46
13
23
10
18
30
45
218
24
20
2
15
46
48
242
193
90
194
34
11
16
3
33
4
110
138
45
59
2
41
22
4
18
6
23
Acquirers
with
Patents
(2)
17
13
9
9
5
15
26
17
182
11
10
1
9
29
47
199
161
80
161
25
22
26
1
21
All Targets
(3)
4
2
1
89
1
3
4
3
39
9
14
10
8
19
15
103
11
17
3
14
26
30
163
127
39
160
21
5
17
3
21
5
58
92
42
26
2
16
16
5
9
5
17
Targets
with
Patents
(4)
Acquirers Acquirers
or Targets and Targets
with Patents with Patents
(5)
(6)
(7)
2
1
10
5
2
2
2
1
70
14
5
All Deals
2
1
2
1
10
2
3
1
5
12
2
74
5
11
4
13
20
112
87
26
114
13
3
9
4
1
1
3
2
4
41
2
7
14
6
13
23
27
142
15
16
1
12
33
28
161
134
62
137
25
10
12
2
24
3
72
108
29
35
2
24
15
3
6
5
17
2
1
29
1
5
8
2
12
22
11
127
11
13
8
1
9
26
28
146
124
58
126
22
5
3
1
2
1
29
34
11
20
2
4
14
88
5
9
3
19
17
86
82
32
76
10
1
10
3
5
6
6
1
2
1
5
59
70
72
73
75
78
79
80
82
83
87
99
Total
46
10
10
362
5
16
23
65
6
2
30
9
2,572
4
13
29
3
2
302
3
15
17
50
5
2
42
1,336
1,744
221
2
1
88
3
2
1
9
642
30
5
8
249
3
8
16
46
4
1
18
12
6
2
2
170
1
2
7
5
1
7
12
2
10
1,759
1,135
570
65
2
1
6
Panel B: Descriptive Statistics for the All Deals Sample
Mean
S.D.
Median
Mean
Patent Index
Citation-Weighted Patents
R&D (%)
Self-Cites Ratio (%)
Age of Patent Portfolio
90.90
525.71
4.10
4.01
4.09
Total Assets (2006 USD billion)
∆ Sales (%)
ROA (%)
Leverage (%)
Cash (%)
B/M
Stock Return (%)
8.40
18.97
13.97
22.29
14.90
0.46
12.15
Acquirers
362.91
2410.24
6.38
7.46
4.78
19.21
29.51
10.95
16.95
17.50
0.33
52.13
Target Firms
25.50
147.16
9.26
6.45
4.30
0.50
3.00
0.80
0.00
2.24
S.D.
Industry and Size
Matched Acquirers
54.92***
270.09
319.55***
1804.70
4.11
6.44
3.45***
7.24
3.68***
4.64
0.00***
0.00***
0.57
0.00
1.54***
1.64
13.37
14.70
21.00
7.17
0.38
2.99
5.72***
16.58***
12.86***
22.68
14.98
0.53***
5.47***
0.95***
11.55***
13.67***
21.59
7.07
0.43***
-1.61***
0.00
0.00
0.60
0.00
0.00
Industry and Size
Matched Target Firms
4.42
29.18
0.00
23.47
168.34
0.00
5.59
8.98
0.43
2.06
6.83
0.00
2.65
4.28
0.00
0.18
11.27
11.85
18.56
8.17
0.53
-14.91
0.83*
14.51
8.10
21.00
18.39
0.64
-3.54
Patent Index
Citation-Weighted Patents
R&D (%)
Self-Cites Ratio (%)
Age of Patent Portfolio
4.16
21.93
5.85
2.07
2.68
Total Assets (2006 USD billion)
∆ Sales (%)
ROA (%)
Leverage (%)
Cash (%)
B/M
Stock Return (%)
0.95
14.89
8.52
21.12
17.79
0.63
-5.53
Technological Proximity (%)
Knowledge Base Overlap
Acquirer’s Base Overlap Ratio (%)
Target’s Base Overlap Ratio (%)
Acquirer’s Cross-Cites Ratio (%)
Target’s Cross-Cites Ratio (%)
Acquirer-Target Firm Pairs
7.30
22.00
0.00
0.61
2.76
0.00
0.25
1.59
0.00
1.57
7.54
0.00
0.46
3.74
0.00
2.16
11.13
0.00
2.50
29.75
16.15
18.52
20.98
0.46
58.38
14.93
28.57
11.28
17.57
17.83
0.39
53.21
2.27
30.68
16.45
18.91
21.27
0.47
60.86
Median
0.17*
10.94
11.57
18.29
8.85
0.53
-13.99
Industry and Size Matched
Acquirer-Target Firm Pairs
4.48***
17.19
0.00
0.23***
2.02
0.00
0.07***
0.91
0.00
0.35***
3.07
0.00
0.10***
1.80
0.00
0.49***
5.14
0.00
7
Panel C: Descriptive Statistics for the Acquirers and Targets with Patents Sample
Mean
S.D.
Median
Mean
S.D.
Industry and Size
Matched Acquirers
Acquirers
Patent Index
211.56
569.65
23.25
131.84***
407.82
Citation-Weighted Patents
1253.30
3861.97
114.50
782.18***
2736.44
R&D (%)
6.91
7.25
4.99
7.34
7.23
Self-Cites Ratio (%)
8.17
8.31
6.52
7.58
8.56
Age of Patent Portfolio
6.50
4.04
6.00
6.10**
3.90
14.33***
68.00***
5.72
5.50**
5.42**
Total Assets (2006 USD billion)
∆ Sales (%)
ROA (%)
Leverage (%)
Cash (%)
B/M
Stock Return (%)
1.77***
9.41**
14.81***
16.22
12.66
0.36***
-1.42***
21.75
14.91
14.97
17.64
18.34
0.39
12.81
72.86
25.52
11.92
14.20
19.45
0.29
53.79
Target Firms
43.35
251.77
10.14
9.55
4.00
2.75
10.99
16.43
16.66
10.64
0.31
2.48
13.29***
12.85*
13.33***
18.01
19.34
0.45***
7.74**
2.00
10.00
6.76
0.69
4.25
Industry and Size
Matched Target Firms
13.95
51.65
2.50
74.23
276.39
12.00**
9.95
10.02
7.31
5.59
10.11
1.20
5.09
3.85
4.41
0.22
10.53
11.53
12.09
17.47
0.46
-13.57
1.10
12.46
6.47
15.25
25.78
0.55
-0.91
Patent Index
Citation-Weighted Patents
R&D (%)
Self-Cites Ratio (%)
Age of Patent Portfolio
11.75
62.38
9.60
5.33
5.09
Total Assets (2006 USD billion)
∆ Sales (%)
ROA (%)
Leverage (%)
Cash (%)
B/M
Stock Return (%)
1.23
13.52
7.30
16.05
24.35
0.56
-3.70
Technological Proximity (%)
Knowledge Base Overlap
Acquirer’s Base Overlap Ratio (%)
Target’s Base Overlap Ratio (%)
Acquirer’s Cross-Cites Ratio (%)
Target’s Cross-Cites Ratio (%)
Acquirer-Target Firm Pairs
22.44
33.93
0.00
1.87
4.60
0.00
0.78
2.73
0.00
4.74
12.41
0.00
1.19
4.90
0.00
6.50
18.36
0.00
3.13
30.41
17.90
16.42
23.60
0.39
59.09
55.95
25.24
12.33
15.06
19.50
0.34
57.91
Median
3.00
30.16
18.24
16.39
23.93
0.39
64.64
0.21
10.18
10.89
9.95
19.13
0.45
-12.76
Industry and Size Matched
Acquirer-Target Firm Pairs
17.17***
30.32
0.00
0.93***
4.11
0.00
0.26***
1.74
0.00
1.32***
5.85
0.00
0.41***
3.64
0.00
1.89***
9.73
0.00
8
Table IA.II
Which Firms Are the Acquirers?
This table reports various robustness checks to Table III using different econometric specifications and control samples.
R&D
1.841***
(0.494)
Panel A: Using Standard Logit Model
(3)
(4)
(5)
0.099***
0.110***
(0.024)
(0.023)
0.095***
0.080***
(0.016)
(0.018)
1.651***
1.687***
1.557***
1.646***
(0.503)
(0.497)
(0.504)
(0.494)
Self-Cites Ratio
-1.593***
(0.530)
-0.010
(0.007)
0.433***
(0.015)
0.747***
(0.096)
0.954***
(0.253)
-0.569***
(0.173)
0.586***
(0.181)
-0.671***
(0.081)
0.046
(0.036)
-1.552***
(0.520)
-0.011
(0.007)
0.433***
(0.015)
0.739***
(0.096)
0.931***
(0.253)
-0.561***
(0.172)
0.544***
(0.181)
-0.668***
(0.081)
0.045
(0.036)
-1.230**
(0.525)
-0.010
(0.008)
0.476***
(0.017)
0.707***
(0.097)
0.837***
(0.247)
-0.490***
(0.174)
0.499***
(0.185)
-0.617***
(0.080)
0.051
(0.036)
-1.209**
(0.515)
-0.011
(0.008)
0.474***
(0.017)
0.700***
(0.097)
0.823***
(0.247)
-0.484***
(0.173)
0.465**
(0.186)
-0.614***
(0.079)
0.050
(0.036)
-1.369***
(0.518)
-0.009
(0.007)
0.446***
(0.016)
0.649***
(0.095)
0.873***
(0.250)
-0.605***
(0.176)
0.717***
(0.182)
-0.612***
(0.080)
0.087**
(0.036)
-1.301**
(0.507)
-0.011
(0.007)
0.447***
(0.015)
0.642***
(0.095)
0.853***
(0.251)
-0.598***
(0.175)
0.680***
(0.182)
-0.611***
(0.080)
0.085**
(0.036)
-1.087**
(0.515)
-0.009
(0.008)
0.497***
(0.018)
0.601***
(0.096)
0.706***
(0.243)
-0.531***
(0.176)
0.661***
(0.186)
-0.561***
(0.080)
0.096***
(0.036)
-1.043**
(0.503)
-0.010
(0.008)
0.497***
(0.018)
0.595***
(0.096)
0.693***
(0.243)
-0.526***
(0.176)
0.633***
(0.186)
-0.560***
(0.080)
0.095***
(0.036)
No
No
80,711
No
No
80,711
Yes
No
80,711
Yes
No
80,711
No
Yes
80,711
No
Yes
80,711
Yes
Yes
80,711
Yes
Yes
80,711
0.12
0.12
0.13
0.13
0.13
0.13
0.14
0.14
Patent Index
(1)
0.120***
(0.022)
Citation-Weighted Patents
Age of Patent Portfolio
Total Assets
∆ Sales
ROA
Leverage
Cash
B/M
Stock Return
Industry FEs
Year FEs
No. of Observations
Pseudo R2
(2)
(6)
(7)
0.084***
(0.024)
(8)
0.085***
(0.017)
1.500***
(0.501)
1.431***
(0.498)
0.065***
(0.018)
1.339***
(0.504)
9
Panel B: Using Linear Probability Model
All Acquirers
Patent Index
R&D
Acquirer Controls
Deal FEs
No. of Observations
R2
Citation-Weighted Patents
R&D
Acquirer Controls
Deal FEs
No. of Observations
R2
Acquirers with Patents
Random
(1)
0.078***
(0.003)
0.345***
(0.035)
Industry,
Size
(2)
0.090***
(0.008)
-0.415***
(0.130)
Industry,
Size, B/M
(3)
0.065***
(0.007)
-0.220***
(0.083)
Random
(4)
0.040***
(0.003)
0.148***
(0.033)
Industry,
Size
(5)
0.094***
(0.008)
-0.582***
(0.152)
Industry,
Size, B/M
(6)
0.059***
(0.008)
-0.393***
(0.096)
Yes
Yes
14,447
Yes
Yes
14,500
Yes
Yes
10,023
Yes
Yes
8,268
Yes
Yes
7,600
Yes
Yes
4,808
0.22
0.08
0.05
0.22
0.11
0.07
0.054***
(0.002)
0.288***
(0.036)
0.057***
(0.005)
-0.394***
(0.132)
0.045***
(0.005)
-0.237***
(0.084)
0.027***
(0.002)
0.149***
(0.033)
0.066***
(0.007)
-0.542***
(0.151)
0.043***
(0.005)
-0.398***
(0.096)
Yes
Yes
14,447
Yes
Yes
14,500
Yes
Yes
10,023
Yes
Yes
8,268
Yes
Yes
7,600
Yes
Yes
4,808
0.22
0.07
0.05
0.22
0.10
0.06
Panel C: Using Expanded Control Sample
All Acquirers
Patent Index
R&D
Acquirer Controls
Deal FEs
No. of Observations
No. of Actual Acquirers
No. of Control Acquirers
Pseudo R2
Citation-Weighted Patents
R&D
Acquirer Controls
Deal FEs
No. of Observations
Pseudo R2
Acquirers with Patents
Random
(1)
0.279***
(0.022)
3.394***
(0.453)
Industry,
Size
(2)
0.592***
(0.024)
-3.049***
(0.542)
Industry,
Size, B/M
(3)
0.401***
(0.024)
-2.049***
(0.515)
Random
(4)
0.176***
(0.023)
1.436***
(0.526)
Industry,
Size
(5)
0.618***
(0.027)
-4.238***
(0.674)
Industry,
Size, B/M
(6)
0.391***
(0.026)
-3.451***
(0.669)
Yes
Yes
26,280
2,621
23,659
Yes
Yes
25,105
2,572
22,533
Yes
Yes
17,680
1,810
15,870
Yes
Yes
14,995
1,474
13,521
Yes
Yes
12,663
1,336
11,327
Yes
Yes
8,281
854
7,427
0.25
0.12
0.07
0.26
0.17
0.09
0.208***
(0.016)
3.038***
(0.471)
0.395***
(0.017)
-2.888***
(0.534)
0.282***
(0.017)
-2.151***
(0.515)
0.132***
(0.019)
1.407***
(0.532)
0.461***
(0.022)
-3.868***
(0.655)
0.296***
(0.021)
-3.394***
(0.669)
Yes
Yes
26,280
Yes
Yes
25,105
Yes
Yes
17,680
Yes
Yes
14,995
Yes
Yes
12,663
Yes
Yes
8,281
0.25
0.11
0.07
0.26
0.16
0.09
10
Panel D: Removing Largest Acquirers and Using Industry- and Size-Matched Control Sample
All Acquirers
Acquirers with Patents
(1)
(2)
Patent Index
0.404***
0.439***
(0.037)
(0.044)
R&D
-1.913***
-3.287***
(0.636)
(0.792)
Deal FEs
No. of Observations
No. of Actual Acquirers
No. of Control Acquirers
Pseudo R2
Citation-Weighted Patents
R&D
Acquirer Controls
Deal FEs
No. of Observations
Pseudo R2
Yes
10,143
1,826
8,317
Yes
4,695
843
3,852
0.07
0.08
0.241***
(0.024)
-1.774***
(0.634)
0.286***
(0.033)
-2.904***
(0.770)
Yes
Yes
10,143
Yes
Yes
4,695
0.06
0.07
11
Table IA.III
Which Firms Are the Target Firms?
This table reports various robustness checks to Table IV using different econometric specifications and control samples.
R&D
4.309***
(0.345)
Panel A: Using Standard Logit Model
(2)
(3)
(4)
(5)
-0.175***
-0.162***
(0.029)
(0.027)
-0.080***
-0.078***
(0.018)
(0.020)
4.229***
3.957***
3.917***
4.100***
(0.348)
(0.365)
(0.366)
(0.348)
Self-Cites Ratio
0.361
(0.343)
-0.001
(0.007)
0.083***
(0.014)
0.056
(0.090)
1.332***
(0.185)
-0.119
(0.162)
0.102
(0.174)
-0.097*
(0.053)
-0.158***
(0.047)
0.052
(0.386)
-0.003
(0.007)
0.070***
(0.014)
0.063
(0.089)
1.320***
(0.185)
-0.098
(0.162)
0.121
(0.175)
-0.095*
(0.053)
-0.156***
(0.047)
0.462
(0.341)
0.002
(0.007)
0.095***
(0.016)
0.049
(0.089)
1.246***
(0.185)
-0.092
(0.166)
0.025
(0.176)
-0.067
(0.054)
-0.149***
(0.046)
0.174
(0.382)
0.001
(0.007)
0.079***
(0.016)
0.057
(0.089)
1.244***
(0.184)
-0.076
(0.166)
0.044
(0.177)
-0.063
(0.053)
-0.147***
(0.046)
0.587*
(0.336)
-0.007
(0.006)
0.067***
(0.014)
-0.026
(0.089)
1.402***
(0.186)
-0.028
(0.163)
0.079
(0.174)
-0.039
(0.052)
-0.118***
(0.044)
0.343
(0.371)
-0.009
(0.007)
0.055***
(0.014)
-0.019
(0.089)
1.394***
(0.186)
-0.008
(0.163)
0.093
(0.174)
-0.036
(0.052)
-0.117***
(0.044)
0.671**
(0.335)
-0.005
(0.007)
0.079***
(0.017)
-0.037
(0.088)
1.323***
(0.186)
-0.002
(0.167)
0.018
(0.176)
-0.002
(0.052)
-0.110**
(0.044)
0.444
(0.367)
-0.006
(0.007)
0.064***
(0.017)
-0.028
(0.088)
1.325***
(0.185)
0.014
(0.167)
0.034
(0.176)
0.002
(0.052)
-0.109**
(0.044)
No
No
80,529
No
No
80,529
Yes
No
80,529
Yes
No
80,529
No
Yes
80,529
No
Yes
80,529
Yes
Yes
80,529
Yes
Yes
80,529
0.01
0.01
0.02
0.02
0.03
0.03
0.04
0.03
Patent Index
(1)
-0.172***
(0.027)
Citation-Weighted Patents
Age of Patent Portfolio
Total Assets
∆ Sales
ROA
Leverage
Cash
B/M
Stock Return
Industry FEs
Year FEs
No. of Observations
Pseudo R2
(6)
(7)
-0.167***
(0.029)
(8)
-0.077***
(0.018)
4.033***
(0.351)
3.740***
(0.367)
-0.078***
(0.019)
3.710***
(0.368)
12
Panel B: Using Linear Probability Model
All Targets
Targets with Patents
Random
(1)
-0.008**
(0.003)
1.077***
(0.056)
Industry,
Size
(2)
0.005
(0.008)
0.352***
(0.096)
Industry,
Size, B/M
(3)
0.020***
(0.008)
0.200**
(0.082)
Random
(4)
-0.058***
(0.013)
1.307***
(0.217)
Industry,
Size
(5)
-0.004
(0.012)
0.431**
(0.189)
Industry,
Size, B/M
(6)
0.004
(0.012)
0.248
(0.169)
Target Controls
Deal FEs
No. of Observations
Yes
Yes
9,777
Yes
Yes
9,637
Yes
Yes
8,341
Yes
Yes
1,503
Yes
Yes
2,605
Yes
Yes
2,072
R2
0.04
0.01
0.02
0.09
0.05
0.06
0.001
(0.002)
1.048***
(0.057)
0.005
(0.005)
0.344***
(0.096)
0.017***
(0.005)
0.185**
(0.082)
-0.025**
(0.010)
1.271***
(0.220)
Target Controls
Deal FEs
No. of Observations
Yes
Yes
9,777
Yes
Yes
9,637
Yes
Yes
8,341
Yes
Yes
1,503
Yes
Yes
2,605
Yes
Yes
2,072
R2
0.04
0.01
0.02
0.09
0.05
0.06
Patent Index
R&D
Citation-Weighted Patents
R&D
Panel C: Using Expanded Control Sample
All Targets
Patent Index
R&D
Target Controls
Deal FEs
No. of Observations
No. of Actual Targets
No. of Control Targets
Pseudo R2
Citation-Weighted Patents
R&D
Target Controls
Deal FEs
No. of Observations
Pseudo R2
0.004
(0.009)
0.409**
(0.190)
0.011
(0.009)
0.227
(0.168)
Targets with Patents
Random
(1)
-0.046
(0.030)
5.452***
(0.396)
Industry,
Size
(2)
0.046
(0.034)
1.748***
(0.418)
Industry,
Size, B/M
(3)
0.083***
(0.031)
1.229***
(0.407)
Random
(4)
-0.162***
(0.046)
3.755***
(0.712)
Industry,
Size
(5)
0.007
(0.042)
1.421**
(0.612)
Industry,
Size, B/M
(6)
-0.014
(0.039)
0.810
(0.624)
Yes
Yes
17,829
1,762
16,067
Yes
Yes
16,780
1,744
15,036
Yes
Yes
14,758
1,517
13,241
Yes
Yes
2,595
668
1,927
Yes
Yes
4,289
673
3,616
Yes
Yes
3,584
594
2,990
0.04
0.01
0.02
0.03
0.01
0.02
-0.004
(0.020)
5.329***
(0.402)
0.041*
(0.022)
1.698***
(0.419)
0.079***
(0.021)
1.141***
(0.408)
-0.071**
(0.032)
3.553***
(0.713)
0.033
(0.031)
1.337**
(0.615)
0.021
(0.028)
0.733
(0.625)
Yes
Yes
17,829
Yes
Yes
16,780
Yes
Yes
14,758
Yes
Yes
2,595
Yes
Yes
4,289
Yes
Yes
3,584
0.04
0.01
0.02
0.02
0.01
0.02
13
Panel D: Removing Largest Acquirers/Target Firms and Using Industry- and Size-Matched Control Sample
All Targets
Targets with Patents
(1)
(2)
Patent Index
-0.044
-0.064
(0.057)
(0.073)
R&D
1.767***
1.465
(0.518)
(0.925)
Deal FEs
No. of Observations
No. of Actual Targets
No. of Control Targets
Yes
6,414
1,171
5,243
Yes
1,535
388
1,147
Pseudo R2
0.01
0.01
Citation-Weighted Patents
-0.022
(0.033)
1.761***
(0.518)
-0.021
(0.048)
1.404
(0.924)
Target Controls
Deal FEs
No. of Observations
Yes
Yes
6,414
Yes
Yes
1,535
Pseudo R2
0.01
0.01
R&D
14
Table IA.IV
Acquirer-Target Firm Pairing
This table reports various robustness checks to Table V using different econometric specifications and control samples.
∆ Technological Proximity
∆ Knowledge Base Overlap
∆ Acquirer’s Base Overlap Ratio
∆ Target’s Base Overlap Ratio
∆ Acquirer’s Cross-Cites Ratio
∆ Target’s Cross-Cites Ratio
Panel A: Using Changes in Technological Overlap
Random
Industry, Size
(1)
(2)
(3)
(4)
(5)
0.219
0.142
(0.367)
(0.314)
1.050***
0.621***
(0.185)
(0.135)
8.781**
4.774
(4.127)
(3.699)
4.798***
3.995***
(1.237)
(1.130)
4.175*
(2.775)
5.392***
(1.291)
(6)
3.307*
(1.960)
2.858***
(0.649)
Industry, Size, B/M
(7)
(8)
(9)
0.221
(0.364)
0.494***
(0.139)
3.775
(3.734)
3.625***
(1.392)
4.045
(2.644)
1.884**
(0.740)
Acquirer, Target Innovation
Acquirer, Target Controls
Diversifying, Same State
Deal FEs
No. of Observations
Yes
Yes
Yes
Yes
2,040
Yes
Yes
Yes
Yes
2,040
Yes
Yes
Yes
Yes
2,040
Yes
Yes
Yes
Yes
4,089
Yes
Yes
Yes
Yes
4,089
Yes
Yes
Yes
Yes
4,089
Yes
Yes
Yes
Yes
2,805
Yes
Yes
Yes
Yes
2,805
Yes
Yes
Yes
Yes
2,805
Pseudo R2
0.51
0.50
0.51
0.05
0.04
0.05
0.04
0.04
0.04
15
Technological Proximity
Knowledge Base Overlap
(1)
0.383***
(0.043)
0.205***
(0.017)
Acquirer’s Base Overlap Ratio
Target’s Base Overlap Ratio
Acquirer’s Cross-Cites Ratio
Target’s Cross-Cites Ratio
Panel B: Using Linear Probability Model
Industry, Size
(3)
(4)
(5)
0.089***
(0.030)
0.133***
(0.018)
2.808***
1.625***
(0.581)
(0.615)
1.207***
0.827***
(0.128)
(0.169)
2.220***
(0.471)
0.748***
(0.088)
0.797***
(0.298)
0.468***
(0.083)
Industry, Size, B/M
(7)
(8)
(9)
0.162***
(0.053)
0.174***
(0.027)
1.680*
(0.869)
1.248***
(0.235)
0.753**
(0.350)
0.557***
(0.107)
Random
(2)
(6)
Acquirer, Target Innovation
Acquirer, Target Controls
Diversifying, Same State
Deal FEs
No. of Observations
Yes
Yes
Yes
Yes
2,040
Yes
Yes
Yes
Yes
2,040
Yes
Yes
Yes
Yes
2,040
Yes
Yes
Yes
Yes
4,089
Yes
Yes
Yes
Yes
4,089
Yes
Yes
Yes
Yes
4,089
Yes
Yes
Yes
Yes
2,805
Yes
Yes
Yes
Yes
2,805
Yes
Yes
Yes
Yes
2,805
R2
0.52
0.48
0.48
0.10
0.10
0.09
0.12
0.11
0.10
16
Technological Proximity
Knowledge Base Overlap
Acquirer’s Base Overlap Ratio
Target’s Base Overlap Ratio
Acquirer’s Cross-Cites Ratio
Target’s Cross-Cites Ratio
Panel C: Including Control Acquirers Paired with Control Target Firms
Random
Industry, Size
(1)
(2)
(3)
(4)
(5)
(6)
2.883***
0.916***
(0.491)
(0.207)
1.798***
1.109***
(0.289)
(0.106)
28.908
8.187***
(39.089)
(2.271)
21.268**
5.998***
(11.640)
(0.992)
16.530
5.240***
(20.191)
(1.233)
7.294**
2.732***
(3.435)
(0.407)
Industry, Size, B/M
(7)
(8)
(9)
1.263***
(0.238)
1.033***
(0.129)
9.969***
(3.123)
6.656***
(1.306)
4.834***
(1.815)
2.220***
(0.444)
Acquirer, Target Innovation
Acquirer, Target Controls
Diversifying, Same State
Deal FEs
No. of Observations
Yes
Yes
Yes
Yes
3,083
Yes
Yes
Yes
Yes
3,083
Yes
Yes
Yes
Yes
3,083
Yes
Yes
Yes
Yes
9,790
Yes
Yes
Yes
Yes
9,790
Yes
Yes
Yes
Yes
9,790
Yes
Yes
Yes
Yes
5,387
Yes
Yes
Yes
Yes
5,387
Yes
Yes
Yes
Yes
5,387
Pseudo R2
0.62
0.59
0.57
0.19
0.16
0.15
0.13
0.11
0.09
17
Technological Proximity
Knowledge Base Overlap
(1)
3.145***
(0.459)
1.898***
(0.239)
Acquirer’s Base Overlap Ratio
Random
(2)
30.273
(44.964)
25.331***
(10.564)
Target’s Base Overlap Ratio
Acquirer’s Cross-Cites Ratio
Target’s Cross-Cites Ratio
Acquirer, Target Innovation
Acquirer, Target Controls
Diversifying, Same State
Deal FEs
No. of Observations
No. of Actual Deals
No. of Control Deals
Pseudo R2
Panel D: Using All Deals
Industry, Size
(3)
(4)
(5)
0.629***
(0.189)
0.965***
(0.096)
8.784***
(2.416)
6.095***
(1.005)
17.610
(23.036)
8.939***
(3.121)
5.065***
(1.349)
2.717***
(0.372)
Industry, Size, B/M
(7)
(8)
(9)
0.855***
(0.219)
0.973***
(0.107)
9.567***
(3.454)
6.911***
(1.223)
4.664***
(1.754)
2.851***
(0.458)
(6)
Yes
Yes
Yes
Yes
17,312
1,762
15,550
Yes
Yes
Yes
Yes
17,312
1,762
15,550
Yes
Yes
Yes
Yes
17,312
1,762
15,550
Yes
Yes
Yes
Yes
17,328
1,759
15,569
Yes
Yes
Yes
Yes
17,328
1,759
15,569
Yes
Yes
Yes
Yes
17,328
1,759
15,569
Yes
Yes
Yes
Yes
13,646
1,639
12,007
Yes
Yes
Yes
Yes
13,646
1,639
12,007
Yes
Yes
Yes
Yes
13,646
1,639
12,007
0.56
0.55
0.54
0.06
0.05
0.05
0.06
0.06
0.05
18
Technological Proximity
Knowledge Base Overlap
(1)
2.497***
(0.445)
1.700***
(0.236)
Acquirer’s Base Overlap Ratio
Target’s Base Overlap Ratio
Acquirer’s Cross-Cites Ratio
Target’s Cross-Cites Ratio
Panel E: Using Acquirers or Target Firms with Patents
Random
Industry, Size
(2)
(3)
(4)
(5)
(6)
0.593***
(0.185)
0.972***
(0.096)
32.284
8.440***
(44.218)
(2.557)
17.215**
5.628***
(8.279)
(1.003)
16.515
4.932***
(24.372)
(1.312)
6.238**
2.472***
(2.729)
(0.393)
Industry, Size, B/M
(7)
(8)
0.880***
(0.212)
0.940***
(0.113)
9.143**
(4.568)
5.835***
(1.191)
(9)
4.293**
(1.721)
2.148***
(0.463)
Acquirer, Target Innovation
Acquirer, Target Controls
Diversifying, Same State
Deal FEs
No. of Observations
No. of Actual Deals
No. of Control Deals
Yes
Yes
Yes
Yes
5,892
1,105
4,787
Yes
Yes
Yes
Yes
5,892
1,105
4,787
Yes
Yes
Yes
Yes
5,892
1,105
4,787
Yes
Yes
Yes
Yes
8,468
1,135
7,333
Yes
Yes
Yes
Yes
8,468
1,135
7,333
Yes
Yes
Yes
Yes
8,468
1,135
7,333
Yes
Yes
Yes
Yes
6,143
1,019
5,124
Yes
Yes
Yes
Yes
6,143
1,019
5,124
Yes
Yes
Yes
Yes
6,143
1,019
5,124
Pseudo R2
0.50
0.48
0.47
0.08
0.07
0.06
0.07
0.06
0.05
19
Panel F: Removing Largest Acquirers/Target Firms and Using Industry- and Size-Matched Control Sample
(1)
(2)
(3)
Technological Proximity
0.590**
(0.284)
Knowledge Base Overlap
1.327***
(0.177)
Acquirer’s Base Overlap Ratio
8.006***
(2.954)
Target’s Base Overlap Ratio
10.578***
(1.919)
Acquirer’s Cross-Cites Ratio
5.160**
(2.041)
Target’s Cross-Cites Ratio
2.860***
(0.789)
Acquirer, Target Innovation
Acquirer, Target Controls
Diversifying, Same State
Deal FEs
No. of Observations
No. of Actual Deals
No. of Control Deals
Yes
Yes
Yes
Yes
2,229
322
1,907
Yes
Yes
Yes
Yes
2,229
322
1,907
Yes
Yes
Yes
Yes
2,229
322
1,907
Pseudo R2
0.13
0.12
0.09
20
Table IA.V
Different Sources of Merger Synergies
This table reports various robustness checks to Table VI using different econometric specifications and control samples.
21
Product Market Relatedness (PMR)
Technological Proximity
Knowledge Base Overlap
Technological Proximity × PMR
Knowledge Base Overlap × PMR
(1)
0.814***
(0.028)
Panel A: Using Linear Probability Model
Random
Industry, Size
(2)
(3)
(4)
(5)
(6)
0.809*** 0.812***
0.224*** 0.222*** 0.225***
(0.023)
(0.023)
(0.023)
(0.020)
(0.019)
0.618***
(0.057)
0.258***
(0.027)
-0.549***
(0.081)
-0.193***
(0.036)
Acquirer’s Base Overlap Ratio
0.100***
(0.034)
0.116***
(0.023)
-0.073
(0.057)
-0.008
(0.029)
5.322***
(1.048)
1.554***
(0.141)
-4.375***
(1.193)
-1.337***
(0.244)
Target’s Base Overlap Ratio
Acquirer’s Base Overlap Ratio × PMR
Target’s Base Overlap Ratio × PMR
Acquirer’s Cross-Cites Ratio
0.202***
(0.067)
0.142***
(0.036)
-0.193**
(0.088)
0.004
(0.041)
1.805***
(0.682)
0.765***
(0.184)
-0.802
(0.991)
-0.048
(0.283)
4.243***
(0.990)
1.133***
(0.134)
-3.756***
(1.043)
-1.022***
(0.168)
Target’s Cross-Cites Ratio
Acquirer’s Cross-Cites Ratio × PMR
Target’s Cross-Cites Ratio × PMR
Industry, Size, B/M
(7)
(8)
(9)
0.307*** 0.313*** 0.307***
(0.028)
(0.026)
(0.024)
2.113**
(0.953)
1.320***
(0.284)
-1.154
(1.357)
-0.626
(0.401)
1.082**
(0.420)
0.393***
(0.094)
-0.737
(0.513)
0.128
(0.169)
1.777***
(0.673)
0.396***
(0.107)
-1.629**
(0.711)
0.236
(0.203)
Acq./Targ./Deal Controls
Deal FEs
No. of Observations
Yes
Yes
2,040
Yes
Yes
2,040
Yes
Yes
2,040
Yes
Yes
4,089
Yes
Yes
4,089
Yes
Yes
4,089
Yes
Yes
2,805
Yes
Yes
2,805
Yes
Yes
2,805
R2
0.53
0.48
0.48
0.13
0.13
0.13
0.17
0.17
0.16
22
Product Market Relatedness (PMR)
Technological Proximity
Knowledge Base Overlap
Technological Proximity × PMR
Knowledge Base Overlap × PMR
Panel B: Including Control Acquirers Paired with Control Target Firms
Random
Industry, Size
(1)
(2)
(3)
(4)
(5)
(6)
4.721***
4.630*** 4.626***
2.341***
2.232*** 2.279***
(0.411)
(0.392)
(0.373)
(0.197)
(0.175)
(0.174)
3.607***
1.138***
(0.469)
(0.270)
1.773***
1.088***
(0.289)
(0.148)
-2.742***
-0.949***
(1.032)
(0.366)
-0.721
-0.309*
(3.857)
(0.174)
Acquirer’s Base Overlap Ratio
38.809*
(24.313)
22.167**
(12.751)
-23.790
(39.072)
-12.323
(22.372)
Target’s Base Overlap Ratio
Acquirer’s Base Overlap Ratio × PMR
Target’s Base Overlap Ratio × PMR
Acquirer’s Cross-Cites Ratio
7.864***
(2.580)
5.918***
(1.136)
-2.755
(4.628)
-1.686
(1.675)
25.000*
(18.552)
7.356**
(3.787)
-15.846
(34.789)
-4.376
(12.024)
Target’s Cross-Cites Ratio
Acquirer’s Cross-Cites Ratio × PMR
Target’s Cross-Cites Ratio × PMR
Industry, Size, B/M
(7)
(8)
(9)
2.560*** 2.459*** 2.446***
(0.218)
(0.200)
(0.200)
1.668***
(0.305)
0.958***
(0.174)
-1.464***
(0.440)
-0.265
(0.202)
11.134*
(6.151)
7.541***
(1.568)
-4.747
(6.745)
-4.711**
(1.882)
6.462***
(2.004)
2.836***
(0.480)
-3.951*
(2.274)
-0.718
(0.816)
10.344***
(2.737)
2.071***
(0.593)
-8.888***
(2.939)
-0.494
(0.949)
Acq./Targ./Deal Controls
Deal FEs
No. of Observations
Yes
Yes
3,083
Yes
Yes
3,083
Yes
Yes
3,083
Yes
Yes
9,790
Yes
Yes
9,790
Yes
Yes
9,790
Yes
Yes
5,387
Yes
Yes
5,387
Yes
Yes
5,387
Pseudo R2
0.62
0.58
0.57
0.25
0.23
0.22
0.22
0.20
0.19
23
Panel C: Using All Deals
Product Market Relatedness (PMR)
Technological Proximity
Knowledge Base Overlap
Technological Proximity × PMR
Knowledge Base Overlap × PMR
(1)
5.340***
(0.192)
4.078***
(0.374)
1.856***
(0.218)
-3.296***
(0.980)
-1.024
(1.668)
Acquirer’s Base Overlap Ratio
Random
(2)
5.309***
(0.193)
41.031**
(24.481)
28.183***
(11.606)
-27.708
(40.823)
-18.463
(20.117)
Target’s Base Overlap Ratio
Acquirer’s Base Overlap Ratio × PMR
Target’s Base Overlap Ratio × PMR
Acquirer’s Cross-Cites Ratio
Target’s Cross-Cites Ratio
Acquirer’s Cross-Cites Ratio × PMR
Target’s Cross-Cites Ratio × PMR
Acq./Targ./Deal Controls
Deal FEs
No. of Observations
No. of Actual Deals
No. of Control Deals
Pseudo R2
(3)
5.290***
(0.188)
Yes
Yes
17,312
1,762
15,550
Yes
Yes
17,312
1,762
15,550
0.45
0.44
29.744*
(20.902)
9.020***
(3.399)
-17.340
(35.692)
-6.262
(10.186)
Yes
Yes
17,312
1,762
15,550
0.43
Industry, Size
(4)
(5)
(6)
2.143*** 2.135***
2.135***
(0.111)
(0.109)
(0.108)
0.757***
(0.239)
0.963***
(0.130)
-0.479
(0.350)
-0.290*
(0.172)
10.358***
(3.660)
6.348***
(1.171)
-4.390
(4.172)
-2.614*
(1.472)
6.241***
(1.760)
2.806***
(0.421)
-3.351
(2.166)
-0.569
(0.794)
Yes
Yes
Yes
Yes
Yes
Yes
17,328
17,328
17,328
1,759
1,759
1,759
15,569
15,569
15,569
0.12
0.12
0.11
Industry, Size, B/M
(7)
(8)
(9)
2.280*** 2.265*** 2.258***
(0.123)
(0.119)
(0.119)
1.117***
(0.277)
0.941***
(0.137)
-0.969**
(0.403)
-0.234
(0.185)
9.051*
(4.729)
7.847***
(1.530)
-1.858
(6.311)
-4.675**
(1.877)
8.801***
(3.059)
2.657***
(0.493)
-6.636**
(3.206)
-0.481
(0.987)
Yes
Yes
Yes
Yes
Yes
Yes
13,646
13,646
13,646
1,639
1,639
1,639
12,007
12,007
12,007
0.13
0.13
0.12
24
Product Market Relatedness (PMR)
Technological Proximity
Knowledge Base Overlap
Technological Proximity × PMR
Knowledge Base Overlap × PMR
(1)
5.059***
(0.310)
3.233***
(0.396)
1.658***
(0.229)
-2.629**
(1.145)
-0.837
(1.657)
Acquirer’s Base Overlap Ratio
Target’s Base Overlap Ratio
Acquirer’s Base Overlap Ratio × PMR
Target’s Base Overlap Ratio × PMR
Acquirer’s Cross-Cites Ratio
Target’s Cross-Cites Ratio
Acquirer’s Cross-Cites Ratio × PMR
Target’s Cross-Cites Ratio × PMR
Acq./Targ./Deal Controls
Deal FEs
No. of Observations
No. of Actual Deals
No. of Control Deals
Yes
Yes
5,892
1,105
4,787
Pseudo R2
0.48
Panel D: Using Acquirers or Target Firms with Patents
Random
Industry, Size
(2)
(3)
(4)
(5)
5.001*** 4.972***
2.322*** 2.287***
(0.309)
(0.302)
(0.141)
(0.139)
0.797***
(0.242)
1.000***
(0.133)
-0.641*
(0.348)
-0.343*
(0.181)
40.192**
10.319***
(24.137)
(3.931)
18.279**
5.996***
(9.380)
(1.199)
-25.860
-4.967
(40.948)
(4.406)
-12.323
-2.560
(18.142)
(1.681)
25.877
(20.746)
6.348**
(2.953)
-14.006
(35.572)
-4.715
(10.645)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
5,892
5,892
8,468
8,468
1,105
1,105
1,135
1,135
4,787
4,787
7,333
7,333
0.46
0.46
0.16
0.15
(6)
2.286***
(0.137)
6.427***
(1.719)
2.777***
(0.471)
-3.744*
(1.985)
-0.932
(0.797)
Yes
Yes
8,468
1,135
7,333
0.15
Industry, Size, B/M
(7)
(8)
(9)
2.489*** 2.453*** 2.432***
(0.160)
(0.156)
(0.156)
1.276***
(0.284)
0.910***
(0.157)
-1.166***
(0.415)
-0.260
(0.207)
10.260*
(5.281)
6.760***
(1.419)
-4.769
(7.018)
-4.338**
(1.872)
9.284***
(2.694)
1.993***
(0.543)
-7.687***
(2.831)
-0.535
(1.013)
Yes
Yes
Yes
Yes
Yes
Yes
6,143
6,143
6,143
1,019
1,019
1,019
5,124
5,124
5,124
0.17
0.16
0.16
25
Panel E: Removing Largest Acquirers/Target Firms and Using Industry- and Size-Matched Control Sample
(1)
(2)
(3)
Product Market Relatedness (PMR)
2.489***
2.313***
2.358***
(0.252)
(0.248)
(0.239)
Technological Proximity
Knowledge Base Overlap
Technological Proximity × PMR
Knowledge Base Overlap × PMR
1.064***
(0.379)
1.458***
(0.264)
-1.248**
(0.534)
-0.500
(0.321)
Acquirer’s Base Overlap Ratio
9.601
(8.948)
9.753**
(4.194)
-4.153
(9.376)
-1.350
(4.954)
Target’s Base Overlap Ratio
Acquirer’s Base Overlap Ratio × PMR
Target’s Base Overlap Ratio × PMR
Acquirer’s Cross-Cites Ratio
10.547*
(5.920)
1.657*
(0.967)
-8.833
(6.055)
4.197
(2.858)
Target’s Cross-Cites Ratio
Acquirer’s Cross-Cites Ratio × PMR
Target’s Cross-Cites Ratio × PMR
Acq./Targ./Deal Controls
Deal FEs
No. of Observations
No. of Actual Deals
No. of Control Deals
Yes
Yes
2,229
322
1,907
Yes
Yes
2,229
322
1,907
Yes
Yes
2,229
322
1,907
Pseudo R2
0.22
0.21
0.20
26
Table IA.VI
Post-Acquisition Innovation Output
This table reports various robustness checks to Table VII using different econometric specifications and control
samples.
After
After × Treat
Panel A: Using One Measure of Technological Overlap at a Time
(1)
(2)
(3)
(4)
-0.083
-0.100
-0.185**
-0.144*
(0.097)
(0.083)
(0.081)
(0.082)
-0.133
-0.032
-0.005
0.051
(0.111)
(0.090)
(0.086)
(0.089)
Technological Proximity × After
Technological Proximity × After × Treat
(5)
-0.128
(0.081)
0.045
(0.087)
(6)
-0.155*
(0.080)
0.087
(0.086)
-0.322**
(0.147)
0.789***
(0.199)
Knowledge Base Overlap × After
-0.108***
(0.032)
0.145***
(0.033)
Knowledge Base Overlap × After × Treat
Acquirer’s Base Overlap Ratio × After
1.385
(5.117)
17.708***
(6.737)
Acquirer’s Base Overlap Ratio × After × Treat
Target’s Base Overlap Ratio × After
-2.701
(2.041)
3.105
(2.334)
Target’s Base Overlap Ratio × After × Treat
Acquirer’s Cross-Cites Ratio × After
-3.835**
(1.934)
3.239
(2.719)
Acquirer’s Cross-Cites Ratio × After × Treat
Target’s Cross-Cites Ratio × After
-0.632
(0.462)
0.388
(0.492)
Target’s Cross-Cites Ratio × After × Treat
Deal and Year FEs
No. of Observations
No. of Treatment Deals
No. of Control Deals
Yes
532
38
38
Yes
532
38
38
Yes
532
38
38
Yes
532
38
38
Yes
532
38
38
Yes
532
38
38
R2
0.94
0.94
0.94
0.94
0.94
0.94
27
Panel B: Removing Largest Acquirers/Target Firms and Using Industry- and Size-Matched Control Sample
Deals with
Deals without
Any Tech Overlap
Any Tech Overlap
All Deals
(1)
(2)
(3)
After
-0.375**
-0.041
-0.035
(0.147)
(0.179)
(0.151)
After × Treat
0.395***
-0.243
-0.163
(0.145)
(0.186)
(0.177)
Any Tech Overlap × After
-0.339**
(0.162)
Any Tech Overlap × After × Treat
0.555**
(0.228)
Deal and Year FEs
No. of Observations
Yes
162
Yes
202
Yes
364
R2
0.90
0.69
0.87
28