Killer Acquisitions

Posted by Social Science Research Network

Killer Acquisitions

By Colleen Cunningham, Florian Ederer & Song Ma

Firms have incentives to acquire innovative targets to discontinue the development of the targets’ innovation projects and preempt future competition. We call such acquisitions “killer acquisitions.” We develop a parsimonious model in which killer acquisitions arise from an incumbent’s desire to prevent the profit cannibalization of existing products that are substitutes for (or overlap with) the target’s innovation. We provide empirical evidence for this phenomenon by track…

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