Resource Complementarity and Value Capture in Firm Acquisitions: The Role of Intellectual Property Rights

Extant literature holds that firm acquisitions create value through innovation if the knowledge
bases of the acquirer and the target complement each other. Little is known about the value
that patents associated with a target’s knowledge convey to the acquirer, i.e., their value in
securing market exclusion and freedom to operate in R&D. We argue that such property rights
hold preemptive power allowing firms to capture the value from combining complementary
technologies and to realize gains from trade in strategic factor markets. Our results for a sample
of 1,428 acquisitions indicate that—controlling for technological value—acquired preemptive
power is an important determinant of the acquisition price, particularly when the acquirer is
technology intensive and acquired patents are highly related to the acquirer’s knowledge base.