Despite the long-standing research interest in the pre-deal phase of mergers and acquisitions, many important questions remain unanswered. We review and synthesize the extensive but rather fragmented research on this topic area in the fields of management, finance, accounting, and economics. We organize our review according to six themes, that is, deal initiation, target selection, bidding and negotiation, valuation and financing, announcement, and closure, which represent the main categories of activities performed during the pre-deal phase. Our review shows that most of the existing research relies on a rather high-level, simplified, and static conception of the pre-deal phase. On the basis of our review, we put forward a research agenda that calls for a more granular examination of individual activities and decisions, a more comprehensive analysis of the interplay among the different actors involved in the pre-deal phase, a better understanding of the role of the temporal dynamics, and the extension of the theoretical base from variance-based to process-based theorizing.

Research Summary In corporate acquisitions, overconfident chief executive officers (CEOs) often make biased decisions, subsequently paying unjustifiably high acquisition premiums. We investigate the predeal process in which the acquisition premium is decided upon and, drawing from procedural rationality theory, argue that the pursuit of greater procedural rationality through slow‐paced predeal processes reduces the tendency of overconfident CEOs to inflate acquisition premiums. The empirical results based on a sample of acquisitions involving publicly held US firms show that overconfident CEOs tend to pay high acquisition premiums, replicating earlier findings of such a relationship. More importantly, the results show that the tendency of overconfident CEOs to overpay for acquisitions decreases under conditions in which the predeal processes are slower in pace. Managerial Summary CEOs often exhibit excessively high levels of confidence in their ability to make successful corporate acquisitions. Driven by the belief in their ability, overconfident CEOs often end up overpaying for acquisitions. Our study provides suggestive evidence that setting a slow acquisition process pace is an important prerequisite for an acquiring firm and its board of directors to attenuate the inflating effect of CEO overconfidence on acquisition premiums. Our arguments and results imply that boards of directors should slow the pace of predeal acquisition processes if their CEO is exhibiting signs of overconfidence.

How does the appointment of an outside CEO affect the hiring firm's performance? Prior research reports that outside CEOs tend to underperform compared to inside CEOs, with high performance variance. Extending CEO-centric perspectives, we predict that experiential learning enhances post-succession performance, while negative transfer learning undermines it. We then offer a novel stakeholder-centric perspective, conjecturing that stakeholders' negative sentiment toward the CEO appointment undermines post-succession performance. We further conjecture that outside CEOs are less effective in leveraging their executive experience and suffer more from negative transfer and negative sentiment compared to inside CEOs, who can leverage their familiarity and social embeddedness in the firm, which explains why outside CEOs may underperform. Analyzing the appointments of CEOs in US public firms, we find that counter to expectations, the length and breadth of their executive experience do not explain post-succession performance nor the performance differences between outside CEOs and inside CEOs. Rather, the misfit between the CEOs' corporate background and their firms' characteristics and the negative sentiment surrounding their appointments explain performance differences and the underperformance of outside CEOs. Accordingly, our study directs attention to the important yet previously understudied reactions of stakeholders to CEO appointments.

Alliance research emphasizes that firms can access research and development (R&D) collaboration opportunities when they enjoy relational or geographic embeddedness with potential partners. However, how can firms that are not embedded with prospective partners establish alliances? We emphasize the microfoundations of R&D alliance formation and propose that scientist mobility is an important substitutive mechanism that helps foster collaboration opportunities between firms that are poorly embedded. Specifically, we posit and show that in high-tech industries, scientist mobility is more facilitative for R&D alliance formation when potential partners lack relational ties between them or are not geographically colocated. Our findings demonstrate how incorporation of the competitive labor market context and its interplay with the cooperative context significantly changes the insights of a fundamental research stream emphasizing the importance of the cooperative context for alliance formation.

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