Managing disruptive innovation with technology acquisitions: the informing case of software-based high-technology industries

In high-technology industries, the use of acquisitions as a means of sourcing expertise is important, because it provides a potential remedy to the challenges of disruptive innovation. Investigating this issue empirically in the context of software-based high-technology industries with nested econometric, large-scale descriptive and case study methods confirms a substitutive relationship between acquisitions and firms’ own research activities as a main driver. This relationship confirms that acquisitions are a remedy for disruptive innovations. For a subset of acquisitions, this is related to target characteristics, which reveals that acquisition waves do not explain the timing of acquisitions. This confirms that for software-based industries, disruptive innovation theory needs to be modified, in that the large incumbents need not be tied to an existing technological trajectory. Specifically, those incumbents with low patenting intensity acquire targets with many prior patents, and in doing so avoid being trapped by disruptive innovation.