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Institute of Intellectual Property

The Impact of M&A on Patent Activities of Japanese Firms. April 14. 2008. Institute of Intellectual Property. Researcher Isamu Yamauchi. Based on “Survey on the Application Behavior for Industrial Property Rights of Japanese Firms" JPO Research Reports (FY 2007). Today’s Topic.

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Institute of Intellectual Property

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  1. The Impact of M&A on Patent Activities of Japanese Firms April 14. 2008 Institute of Intellectual Property Researcher Isamu Yamauchi Based on “Survey on the Application Behavior for Industrial Property Rights of Japanese Firms" JPO Research Reports (FY 2007)

  2. Today’s Topic Contents of the Report (“Survey on the Application Behavior for Industrial Property Rights of Japanese Firms”) Impact of M&A on Patent Activities Intellectual Property Activities of Medium and Small Firms Strategic Use of Patents, Design Patents and Trademarks 2

  3. Questions Does M&A actually improve firms’ technological capabilities? In which technological fields can we see the improvement of firms’ technological capabilities? if so, 3

  4. Background The increase in M&As in Japan Figure. Trend of M&As (excluding intra-group M&As), Source: MARR (Recof. Corp) 4

  5. Does M&A actually improve firms’ technological capabilities? 5

  6. Purpose M&A Capability of producing technology Number of patent applications Capability of using technology Rate of requests for examination Firms’ Technological Capability? Econometric analysis 6

  7. Analytical Framework

  8. Description of the data Sample satisfies the following conditions. the merger deals concluded in the latter half of 90s complete with financial data (especially R&D expense) horizontal mergers 4 merger deals (chemical, paper manufacturing) × IPC subclass each firm applies (84 subclass on average) × 11 years (5 years before and after the merger) 3698 observations 8

  9. Econometric Analysis ・・・total number of applications in each IPC subclass, growth rate in each industry, time trend, export sales, tangible fixed assets, etc. 9

  10. Results (1) Merger Increases the number of applications in each IPC subclass by 2.5 on average (a total of 210 applications) raises the rate of requests for examination 6.4% on average Merger improvesfirms’ capability of producing technology capability of using technology 10

  11. Average number of applications of a chemical firm 11

  12. Average number of applications of a chemical firm Declining trend in the number of applications of a merged company Let the number of application in the year of merger as 100, 5year average before merger：91.8 5year average after merger：86.6 The effect of other factors can be larger than the effect of merger 12

  13. Merged vs. Non-merged Number of Applications of merged/non-merged firm before/after merger 13

  14. Results (2) The decrease in the number of applications of non-merged companies is much larger than that of merged company. 5year average before and after the year of merger Merged： 91.8→86.6 Non-merged： 131.3→96.8 Merger prevents the sharp fall in firms’ technological capabilities 14

  15. 2. In which technological fields can we see the improvement of firms’ technological capabilities? 15

  16. Number of Applications 16

  17. Number of Applications The subclass which showed large application has sharply decreased. The subclass which showed small application has increased Firms’ technological capabilities are improved especially in non-core technological field and decreased in core field 17

  18. Rate of requests for examination 18

  19. Results (3) The technological fields in which the number of applications greatly decreased after merger must have shown the rapid decline of the rate of requests for examination – and vice versa In the technological fields where the application was reduced, firm’s capabilities and opportunities for using technology was also reduced The firm rationalized core business as well as improved the technological capabilities in some new fields 19

  20. Conclusion M&A improves firms’ capabilities of producing and using technology The firms in the sample aimed to rationalize the core business by using M&As Even if the purpose of M&A is to rationalize core business, the firm’s technological capabilities, especially in new field, are improved 20

  21. Thank you! Institute of Intellectual Property Researcher Isamu Yamauchi E-mail : yamauchi-isamu@iip.or.jp URL： http://www.iip.or.jp/e/index.html 21

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