Distance to Technology Aspiration and Entry into the Merger Wave

Drawing from the concepts of problemistic search, nonlocal search and merger waves, we investigate the effect of unmet technology aspirations on strategic decisions such as firm acquisitions. Our empirical results for a panel data set of large and successful U.S. firms support the predictions that an increase in the distance of innovation performance below aspiration level is positively related to the likelihood of engaging in an acquisition. Moreover, firms are more likely to diversify acquisitions into distinct or unrelated technology portfolios during the downswing of a merger wave.