THE EFFECTS OF KNOWLEDGE SPILLOVERS ON POST-AQCQUISTION KNOWLEDGE LEVERAGE

Knowledge of the target firm can be spilled over to non-acquiring firms before acquisitions, and acquiring firms reabsorb other firms’ experience to leverage target firms’ knowledge after acquisitions. This study examines the effect of a target firm’s knowledge spillovers before acquisitions on knowledge leverage activities of an acquiring firm after acquisitions. We find that knowledge spillover events in target firms before acquisitions enhances post-acquisition knowledge activities in acquiring firms. Furthermore, acquiring firm’s prior experience to utilize acquired knowledge negatively moderates the relationship between the target firms’ knowledge spillover events and knowledge leverage activities of acquiring firms. In contrast, knowledge similarity between target and acquiring firms strengthens this relationship. The findings of this paper imply that pre-acquisition knowledge spillovers of target firms can provide vicarious learning opportunities for acquiring firms to generate post-acquisition innovation.