I recently discussed encouraging creativity.

If you can’t do it internally, can you buy innovation?

In The Innovation-through-Acquisition Strategy: Why the Pay-off Isn’t Always There from Wharton the author discusses the work of  Saikat Chaudhuri who argues that buying companies with early-stage products and entering uncertain markets had substantially adverse effects.

So the question becomes: Is the entire innovation-through-acquisition strategy flawed? Should companies abandon it entirely?

No, says Chaudhuri. The strategy itself can be a valuable one, if applied correctly. For managers, that means first, targeting and buying only the right companies, and second, using smart strategy to integrate them into their company’s structure. As he writes: “Fundamentally, the challenges in conducting acquisitions surrounded by high levels of product and environmental uncertainty lie in selecting the right
technologies and markets, and adjusting to new information as external conditions evolve. The managerial implications are that technical and organizational complexity can be planned for and thereby handled effectively, while it may perhaps be safer to delay acquisitions” to a
time when the uncertainty of technologies and markets has lessened.