Title

Technology mergers and acquisitions in the presence of an installed base: A strategic analysis

Publication Type

Journal Article

Publication Date

1-2017

Abstract

We study the strategic benefits of M&A when competing IT vendors sell different generations of the same product with different quality. We assume the new product arrives unexpectedly when an installed base of old product exists. We show that the combination of consumers' purchase history and heterogeneity leads to new demand complexity that gives rise to innovative product strategies. We find that shelving the old product is an important motivation for M&A. The acquirer may exercise static or intertemporal price discrimination depending on whether it can exercise upgrade pricing. M&A may speed up or slow down new product consumption, and it can lead to delayed new product introduction in some markets. However, it always increases the acquirer's prot and can sometimes help maximize social welfare. We discuss relevant managerial and policy implications.

Keywords

Mergers and acquisitions, Installed base, Depreciation, Price discrimination

Discipline

Management Information Systems | Management Sciences and Quantitative Methods | Sales and Merchandising | Technology and Innovation

Research Areas

Information Systems and Management

Publication

Information Systems Research

ISSN

1047-7047

Identifier

10.1287/isre.2016.0659

Publisher

INFORMS (Institute for Operations Research and Management Sciences)

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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