Prior target selection research has generated valuable insights into how acquirer-target similarity positively influences acquisition likelihood and success. In this study, we go beyond this dyadic perspective. We examine how the distinctiveness of a firm’s knowledge portfolio vis-à-vis its industry peers influences acquisition likelihood and premium. Though the acquisition of firms with a distinct knowledge portfolio is associated with significantly greater valuation and integration risks, we argue and find that a distinctive knowledge portfolio significantly increases the probability of a firm to become an acquisition target and the acquisition premia paid in these deals. Our findings advance extant theorizing on target selection and on the question of optimal distinctiveness.
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