Mergers and acquisitions have become a prominent strategic means for firms to extend their resources and capabilities. Particular among them are technological acquisitions, which refer to acquisitions motivated by the desire to acquire advanced technology and superior capabilities of target firms. Prior studies on technological acquisitions has largely focused on how technological acquisitions affect the innovative performance of acquiring firms. This thesis advances the literature by investigating the absolute size of knowledge base of the target firm on the post-acquisition innovative performance of the acquiring firm. The thesis develops a framework relating technological acquisitions to innovative performance of acquiring firms. Furthermore, the thesis proposes that the acquiring firm’s absorptive capacity determines the extent to which it can utilize technological acquisitions to enhance its innovative performance. Using data on technological acquisitions by firms operating in the semiconductor industry during the period of 1998 to 2011, the thesis provides evidence that the absolute size of acquired knowledge base has a positive relationship with the post-acquisition innovative performance of the acquiring firm. Moreover, this positive relationship is stronger when the acquiring firm is smaller, and when the technological relatedness between the acquiring and the target firm is higher.