Technology complexity and target selection: the case of US hospital mergers

This article examines the role of technology in the selection of targets in a merger. Held technology should have a notable impact, especially in contexts in which specific know-how resides with experts as well as within organizational routines that are difficult to reproduce. By acquiring a target, firms obtain novel technologies, along with the knowledge and capabilities necessary to implement them. Such acquisitions become more relevant as the complexity of the technologies increases. With a focus on the US hospital market -- in which technology is a relevant factor and complexity has been growing -- the hypotheses tests use data from 222 mergers and acquisitions that took place between 1985 and 2000. The results confirm that technology is a fundamental driver of the US hospital consolidation process: hospitals prefer targets that hold a different set of technologies from their own, especially when those technologies are complex and involve some know-how that is difficult to replicate.