The Influential Mechanism of Target’s Digital Resources on Acquiring Firm Digital Innovation Performance in Digital M&A

Employing micro-econometric methods, we investigate the economic consequences of target firms’ digital resources on acquirers’ innovation outcomes through digital M&A, using ICT firms as our research sample. We have divided digital resources into three categories: digital technology resources (DTRs), digital human resources (DHRs) and digital cultural resources (DCRs). We then examined the influential mechanism of these three types of target’s digital resources on the acquirer’s digital innovation performance. Guided by the resource orchestration theory, we posited that this influential mechanism encompasses four stages: target’s digital resources, acquirer’s digital capabilities, digital transformation, and digital innovation performance. Through empirical regression analysis, we found that DTRs and DHRs propel digital innovation performance, while the DCRs of target firms moderately hinder digital innovation performance. Robustness checks addressing potential endogeneity concerns, including Heckman two-stage corrections and Instrumental Variables-Generalized Method of Moments (IV-GMM) estimations, confirm the stability of these findings. In further analysis, we establish that the negative impact of DCRs of the target firm on digital innovation performance is primarily attributed to the misalignment and mismatch of DCRs between the two parties. Our study provides actionable insights for ICT firms to optimize resource allocation and attain digital innovation goals through digital M&A.