Technology mergers and acquisitions in the presence of an installed base: A strategic analysis
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.
Mergers and acquisitions, Installed base, Depreciation, Price discrimination
Management Information Systems | Management Sciences and Quantitative Methods | Sales and Merchandising | Technology and Innovation
Information Systems and Management
Information Systems Research
INFORMS (Institute for Operations Research and Management Sciences)
QIU-HONG WANG and HUI, Kai-Lung.
Technology mergers and acquisitions in the presence of an installed base: A strategic analysis. (2017). Information Systems Research. Research Collection School Of Information Systems.
Available at: http://ink.library.smu.edu.sg/sis_research/3451
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