Stearns for their helpful comments. We also thank Sarah Leonard for her assistance in data collection. Finally, we acknowledge the financial support for this project provided by the Anderson Graduate School of Management at the University of California, Riverside and the Amos Tuck School at Dartmouth College.Drawing on work from behavioral learning theory in psychology, this study examines the influence of prior organizational acquisition experience on the performance of acquisitions. This theory, which examines both the conditions preceding organization events and organizational responses, predicts that experience effects may range from positive to negative. Consistent with this theory, data from 449 acquisitions show an overall U-shaped relationship between organization acquisition experience and acquisition performance. In addition, the more similar a firm's acquisition targets are to its prior targets, the better they perform. These findings suggest that relatively inexperienced acquirers, after making their first acquisition, inappropriately generalize acquisition experience to subsequent dissimilar acquisitions, while more experienced acquirers appropriately discriminate between their acquisitions. Behavioral learning theory, then, may enhance understanding of organization experience effects.'The vast majority of research on organization experience adopts a learning-curve perspective that predicts positive returns to experience. This work has been restricted, however, to the narrow context of manufacturing settings, where gains in manufacturing experience are associated with decreases in unit costs (e.g., Yelle, 1979; Dutton, Thomas, and Butler, 1984). Outside manufacturing settings, however, the effects of organizational experience may be more difficult to predict, and studies have often produced contradictory results. This is particularly true of the effects of an organization's prior acquisition experience on an acquisition's subsequent performance. To extrapolate findings from manufacturing settings to such other organizational situations may be misleading to organization researchers because it assumes that manufacturing conditions are similar to other organizational conditions, and the positive effects of experience found in manufacturing contexts will also be found wherever organization experience is applied from one event to another. For acquisitions, however, the outcomes of organizational experience may depend on the similarity between past acquisitions and the present acquisition, which, in turn, could determine the appropriateness of applying or disregarding past acquisition experience in managing a new acquisition. Hence, experience with a dissimilar acquisition may not be relevant.We chose acquisitions as an appropriate context in which to study the effects of organizational experience for a number of reasons. First, a firm makes acquisitions that may vary from similar to dissimilar to previous acquisitions, which implies that there may be positive and negative effects of experience. Second, un...

Scholars from multiple fields have shown increasing interest in the causes and consequences of mergers and acquisitions (M&A). Although this proliferation of research has the potential to significantly improve our understanding of M&A activity, absent is the necessary step of consolidating and integrating extant knowledge. Accordingly, this article develops a framework to organize and review recent empirical findings, principally from management, economics, and finance in which interest in acquisition behavior is high but also from other areas that have tangentially explored acquisition activity such as accounting and sociology. This article identifies patterns and theoretical gaps and provides recommendations for future research aimed at developing a more integrated M&A research agenda for management scientists.

No abstract

We draw upon theories of organizational learning to examine acquisition likelihood in a sample of banking industry acquisitions from 1988 through 2001. Although research on organizational learning suggests that routines arising both from experience and from performance feedback guide organizational learning, the combined effect of these two sources of learning has rarely been examined. Findings are consistent with our theoretical predictions: (1) prior acquisition experience, (2) recent acquisition performance, and (3) the interaction between acquisition experience and recent acquisition performance are all positively related to the likelihood of subsequent acquisition.

Drawing on work from transfer theory at the individual unit of analysis, this study examines positive and negative transfer effects in organization acquisitions. Data from 96 organizations reveal that, consistent with theories on positive transfer of industry knowledge, similar acquisitions are positively related to acquisition performance. In addition, consistent with theory on negative transfer of past acquisition knowledge, second acquisitions underperform first acquisitions, particularly when first and second targets are from different industries. In combination, these findings suggest that the routines and practices established in prior situations transfer to new situations, and that the effect of such transfer depends on the similarity of industrial environments.