Technology Mergers and Acquisitions in the Presence of an Installed Base: A Strategic Analysis

Qiu-Hong Wang () and Kai-Lung Hui
Additional contact information
Qiu-Hong Wang: School of Information Systems, Singapore Management University, Singapore 188065

Information Systems Research, 2017, vol. 28, issue 1, 46-63

Abstract: We study the strategic benefits of mergers and acquisitions (M&As) when competing information technology vendors sell different generations of the same product with different quality. We assume the new product arrives unexpectedly when an installed base of the old product exists. We show that the combination of consumers’ purchase history and heterogeneity leads to new demand complexity that gives rise to innovative product strategies. We find that shelving the old product is an important motivation for M&A. The acquirer may exercise static or intertemporal price discrimination depending on whether it can exercise upgrade pricing. M&A may speed up or slow down new product consumption, and it can lead to delayed new product introduction in some markets. However, it always increases the acquirer’s profit and can sometimes help maximize social welfare. We discuss relevant managerial and policy implications.

Keywords: mergers and acquisitions; installed base; depreciation; price discrimination (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1287/isre.2016.0659 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:28:y:2017:i:1:p:46-63

Access Statistics for this article

More articles in Information Systems Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().