|
|
|
| How Does Acquiring Digital Firms Affect Innovation: Evidence from the Perspective of Patent Structure Evolution |
| LUO Zhi, WANG Yangzi, WANG Yijing, DING Yucheng
|
| Center for Economic Development Research/Dong Fureng Institute of Economic and Social Development/Economics and Management School, Wuhan University |
|
|
|
Abstract With the rapid development of the digital economy, mergers and acquisitions (M&As) have increasingly become an important strategic tool for firms to acquire external resources and enhance innovation capability. In recent years, M&A transactions targeting digital firms have expanded substantially in China and have gradually become an important force reshaping firms’ innovation behavior and industrial competition patterns. Compared with conventional firms, digital firms possess distinctive digital resources, including data assets, digital technologies, platform ecosystems, and digital talents. These resources are characterized by scalability, modularity, interoperability, and cross-scenario applicability, enabling firms to integrate heterogeneous resources more efficiently and enhance innovation activities through digital collaboration. Therefore, an important question is whether acquiring digital firms generates stronger innovation effects than acquiring non-digital firms and through what mechanisms these effects occur.
Existing studies have examined the relationship between digital transformation, M&A activities, and corporate innovation. However, important gaps remain. Some studies regard digital M&A mainly as a means of facilitating digital transformation but pay insufficient attention to the underlying process of resource acquisition and integration. Other studies directly analyze the role of digital resources while overlooking digital firms as the organizational vehicles through which such resources are obtained. Moreover, most existing literature relies on traditional indicators such as patent quantity or quality to measure innovation outcomes. While these indicators capture changes in innovation performance, they may fail to identify structural changes in firms’ technological systems and knowledge allocation patterns.
To address these limitations, this paper investigates the impact of acquiring digital firms on innovation from the perspective of patent structure evolution. We argue that the value of digital M&As lies not only in increasing innovation output but also in reshaping the organization and allocation of innovation activities across technological domains. Patent structure evolution provides a more comprehensive perspective because it reflects changes in technological breadth, specialization, and knowledge allocation patterns.
Using Chinese A-share listed firms from 2008 to 2022, this paper combines information from the Zephyr global M&A database, patent records from the China National Intellectual Property Administration, and firm-level financial data from CSMAR. A difference-in-differences framework is employed to estimate the causal effects of digital M&As, and multiple robustness and endogeneity tests are conducted.
The empirical findings reveal several important results. First, acquiring digital firms significantly promotes corporate innovation. Firms engaging in digital M&As experience increases in both total patent applications and digital patent output, and these effects are significantly stronger than those associated with traditional M&A activities. Second, digital M&Aspromote the simultaneous expansion of innovation in both breadth and depth. Specifically, corporate innovation activities gradually expand into a broader technological coverage across upstream and downstream industrial-chain activities, while concurrently building deeper digital technology accumulation and improving technological complexity and impact. Third, digital resource acquisition serves as the primary mechanism through which digital M&As affect innovation. Different types of digital resources also play distinct roles in the innovation process. Platform ecosystem resources contribute more strongly to increases in innovation output, whereas digital technologies play a greater role in optimizing innovation structure and enhancing technological depth. Furthermore, stronger innovation effects are observed among non-state-owned firms, firms acquiring technologically advanced targets, and firms operating in regions with stronger intellectual property protection and more competitive market environments.
This paper contributes to the literature by establishing an integrated framework linking digital firms, digital resources, and innovation outcomes, and by extending innovation measurement from conventional indicators to patent structure evolution. The findings suggest that policymakers should improve mechanisms for identifying and allocating digital assets and provide institutional support for efficient resource integration. Firms should place greater emphasis on strategic matching and resource complementarity in digital M&A activities. Future research may further investigate the long-term effects of digital M&As on technological trajectories and organizational transformation.
|
|
Received: 28 January 2026
Published: 06 August 2026
|
|
|
|
|
|
|
|
