Mergers & Acquisitions and technological performance

I analyze the effect of M&A on technological performance as measured by patenting output and patents quality. I propose a model of the innovation process in which the process output depends on the resources available and on the incentives to employ them. I then discuss how M&A can provide new resources and modify the incentives. I identify the consequential effects on technological performance and test the predictions on sample of deals that took place in the U.S. "Medical devices and photographic equipment" sector between 1988 and 1996. Preliminary results indicate that M&A have a non-significant or positive effect on patenting output, but decrease patents importance, originality and generality.