Abstract
While resource-based theory and the business press both suggest that the stock market should reward acquirers who purchase targets with more flexible, hard-to-imitate knowledge resources, few empirical studies to date have explored this hypothesis, with mixed results. This study uses a new, fine-grained, firm-based measure of target resources to investigate the relationship between target resource type and acquirer stock market performance. Our findings suggest that the market punishes acquirers of knowledge-based resources more than those that buy property-based resources due to the perceived uncertainty regarding the value of targets' knowledge resources. In support of the underlying uncertainty argument, we find that managers announcing knowledge-based mergers provide more information in their press releases than those announcing property-based transactions. While prior studies have suggested that resource relatedness may moderate the resource type and acquisition performance link, our findings do not support either a direct or moderating relationship. This research does not answer the question of why managers increasingly undertake knowledge-motivated acquisitions given their relatively poor performance; however, it does provide guidance to practitioners about which acquisitions are likely to outperform others and how to gain relevant information from acquirer press releases. Directions for future research are suggested, including investigating longer term performance of knowledge-motivated acquisitions as well as more in-depth investigation of managers' reasons for undertaking these underperforming, at least in the short-run, acquisition strategies.