Complementarities and Spillovers in Mergers : An Empirical Investigation Using Patent Data

We investigate the merger behavior of firms in the plant biotechnology sector using firm-level patent data for public and private firms in the 1980's and 1990's. Conditional logit estimation is used to estimate the probability that firms will "match" in mergers and spinoffs. We calculate several patent portfolio-based measures of complementarity and spillovers between firms, and find that both are important to defining a good match of acquirer and target. However, complementarities provide the more robust explanation. The mergers and spinoffs observed in plant biotechnology may have been designed to overcome the anti-commons problem of mutually blocking technology, an extreme form of complementarity. Our results highlight the need to integrate patent and competition policy