Structural Change and Economic Dynamics 17 (2006) 174–199 The boundaries of firms in the new economy: M&As as a strategic tool toward corporate technological diversification John Cantwell a,b , Grazia D. Santangelo c,∗ a Rutgers Business School, 111 Washington Street, Newark, NJ 07102-3027, USA b University of Reading, PO Box 218, Whiteknights, Reading RG6 6AA, UK c Facolt` a di Scienze Politiche, Universit` a degli Studi di Catania, Via Vittorio Emanuele 8, 95131 Catania, Italy Received October 2003; received in revised form February 2005; accepted June 2005 Available online 22 September 2005 Abstract Following the dynamic capabilities approach, we understand the recent wave of M&As as a cor- porate strategy mainly stimulated by the increasingly complex and uncertain techno-socio-economic environment in which firms operate. In this new situation, the boundaries of firms are in greater flux since firms are unable to develop individually all the competencies required to keep pace with the con- tinual redefinition of business lines being driven by corporate competition. Using US patents granted to the world’s largest firms, this paper analyses the dynamics of the sectoral specialisation of corporate technological profiles following large shocks that require some M&A deal. The findings of the analy- sis enable us to evaluate the adoption of M&As as a strategic tool to reshape corporate technological boundaries. On these grounds, we are able to identify patterns of technological diversification into strategic fields according to different models of industrial technological development. © 2005 Elsevier B.V. All rights reserved. JEL classification: O32; O33; L2 Keywords: MNCs; M&As; Corporate technological dynamics ∗ Corresponding author. E-mail addresses: cantwell@rbsmail.rutgers.edu (J. Cantwell), grsanta@unict.it (G.D. Santangelo). 0954-349X/$ – see front matter © 2005 Elsevier B.V. All rights reserved. doi:10.1016/j.strueco.2005.06.001