Are M&As driving exploitation or exploration?

It has been suggested in the literature that the acquisition of external sources of knowledge may enhance the capacity of firms to combine exploration and exploitation. This study focuses on this issue by analysing the role of technology-based M&As. More specifically, we investigate the effects of knowledge relatedness, realised absorption and managerial experience on the level of exploitative and explorative innovative performance. Based on a sample of 152 global M&As between firms in the bio-pharmaceutical industry, our findings confirm that technology-based M&As have a positive influence on the level of explorative and exploitative patents. Moreover, we found that the level of realised absorption and managerial experience have a positive effect both on exploration and exploitation. The relationship between knowledge similarity and explorative innovation is an inverted U shape, whether or not the one between knowledge complementarity and explorative innovation is U shaped.