TWO SIDES OF THE SAME COIN: THE EFFECT OF KNOWLEDGE SIMILARITY ON STRUCTURAL INTEGRATION IN TECHNOLOGY ACQUISITIONS

We examine the effect of knowledge similarity between firms on the likelihood of the structural integration of target firms by acquiring firms in the context of technology acquisitions. We find that the relationship between knowledge similarity and the likelihood of structural integration is U-shaped, such that acquiring firms tend to integrate target firms when their knowledge stock has either a very low or high degree of overlap. When knowledge similarity is low, acquiring firms tend to structurally integrate target firms to achieve resource extension by facilitating access and transfer of the dissimilar acquired knowledge; when knowledge similarity is high, they tend to structurally integrate target firms to achieve resource deepening by facilitating economies of scale and collaboration. These findings suggest that the role of post-acquisition structural integration in managing acquired knowledge varies depending on the degree of knowledge similarity between acquiring and target firms. They also indicate that the tendency to structurally integrate a target firm when knowledge similarity is low or high is weaker when the two firms have a prior alliance relationship but stronger when the acquiring firm has greater general acquisition experience.