Publication Type
Journal Article
Version
acceptedVersion
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
Computer Sciences | Management Information Systems | Technology and Innovation
Research Areas
Information Systems and Management
Publication
Information Systems Research
Volume
28
Issue
1
First Page
46
Last Page
63
ISSN
1047-7047
Identifier
10.1287/isre.2016.0659
Publisher
INFORMS (Institute for Operations Research and Management Sciences)
Citation
WANG, Qiu-Hong and HUI, Kai-Lung.
Technology mergers and acquisitions in the presence of an installed base: A strategic analysis. (2017). Information Systems Research. 28, (1), 46-63.
Available at: https://ink.library.smu.edu.sg/sis_research/3451
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1287/isre.2016.0659
Included in
Computer Sciences Commons, Management Information Systems Commons, Technology and Innovation Commons