Novelty Score and Technological Relatedness Measurement Using Patent Information in Mergers and Acquisitions: Case Study in the Japanese Electric Motor Industry

Technological mergers and acquisitions (M&A) have been major strategic options for firm growth. However, it is not a rudimentary task to build a long list of target firms among a vast number of candidates. Technological relatedness measurement based on patent information is expected to support such a task. Although different measurement indicators have been proposed, there is still room to explore their functionality in regards to M&A. Therefore, we aim to quantify the technological relatedness between acquirers and acquired firms by investigating the cases in the Japanese electric motor industry. Our results showed that the common-IPC mode can efficiently eliminate the effects of irrelevant elements and effectively focus on the novelty level of the technologies in M&A. The measure is expected to help extract potential acquired firms for acquiring firms, construct exit strategies for startups, and monitor the dynamic capability of the focal firm.