Does access to patent information help technological acquisitions? Evidence from patent library openings

Technology acquirers face significant information asymmetry when identifying appropriate acquisition targets. Employing plausibly exogenous variation in technological information gathering costs caused by staggered openings of patent libraries, we find that firms become more active in technological acquisitions following local patent library openings. In addition, acquirers prefer targets that are geographically close or are similar in technological space to a lesser extent, technology M&A completion rates increase, acquirers’ abnormal announcement returns are higher, and long-term stock returns of combined firms are better. Acquirers’ access to patent libraries also leads to greater post-merger innovation output through fostering more collaboration between acquirers’ and targets’ inventors. Overall, our study sheds new light on the importance of information gathering costs in corporate takeovers and the search for human capital synergies.