Network centrality and technology acquisitions: Evidence from China's listed business groups

The social network view claims that connections are an important determinant of information access. However, whether business group networks provide an information advantage has received little attention. This paper provides evidence of the information advantage in the context of technology acquisitions. Using a sample of listed business groups in China from 2004 to 2017, we find that the propensity for technology acquisition is positively associated with network centrality in business groups. Greater centrality allows affiliates to gather valuable information, thus resulting in lower acquisition premiums, acquiring companies with more patents, and greater innovation efficiency. Additional analyses show that technology acquisitions by business groups with greater centrality enhance firms’ marginal innovation output and generate superior acquisition performance. We also find that non-state-owned firms and firms in high-tech industries benefit more from network centrality in technology acquisitions. Overall, this study sheds light on the information benefits of network centrality in business groups.