Understanding the Link between Post-Acquisition Resource Reconfiguration and Technology Out-Licensing

We develop a novel framework to explain how the unique properties of out-licensing enable R & D reconfiguration in the context of technology acquisitions. Out-licensing is an attractive R & D strategy following acquisitions as it expands opportunities for resource reconfiguration to outside the organization by using external partners while at the same time allowing firms to continue to benefit from the technology, both financially and strategically. We also propose that the positive relationship between technology acquisitions and out-licensing is weaker when firms cannot determine the full value potential of their R & D due to uncertainty or when they have high availability of short-term financial slack resources. Using a sample of bio-pharmaceutical firms, the result of a 2SLS fixed-effect regression that accounts for the potential endogeneity of technology acquisitions provides support for our theoretical framework.