Technology Conglomeration, Strategic Alliances, and Corporate Innovation

We examine whether and how the competitive pressure in technology race redraws firm boundaries. We develop a new measure, technological threats, to capture the closeness in the development of a firm’s patent portfolio to those of other firms in the economy. We show that firms facing greater technological threats are more likely to form alliances. Moreover, alliances lead to higher patent output, especially when alliance firms face greater technological threats. Our results are robust to endogeneity concerns. We further show that firms facing greater technological threats choose alliances over acquisitions, whereas firms with more related technologies choose acquisitions over alliances.