Buying Innovation: Complexity and Uncertainty in High-Tech M&A

by Saikat Chaudhuri

The record-breaking mergers and acquisitions of the 1990s saw companies like Cisco, Computer Associates, CSC, and a host of other high-technology players buy up firms at a breathtaking pace to rapidly gain novel technologies and products amidst continuously shifting environments. However, after the dust settled, it became evident that while some purchases helped acquirers reap benefits, many failed to create the intended value. Unrealistic expectations and lofty prices no doubt played a role in this outcome, but my research shows that companies engaging in innovation acquisitions also wrestled with two fundamental sets of operational challenges: integrative complexity, the problems stemming from the amalgamation of resources of the merging organizations, as well as product and environmental uncertainty, the difficulties arising from the unpredictability of technologies and markets at the time of deal close.

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Buying Innovation: Complexity and Uncertainty in High-Tech M&A 14 April 2004