Entry Timing as a Mixed Gamble in Cross-border Acquisition Waves: A study of Family Firms

Abstract

We draw upon the mixed gamble perspective to investigate the entry timing decisions made by family firms in the context of cross-border acquisition (CBA) waves. We argue that family-controlled firms trade-off short-term SEW and financial losses in favor of long-term SEW and financial gains, while moving early in CBA waves. Findings suggest that family-controlled firms have a higher preference for early movement compared with nonfamily-controlled firms. Further, we show that founder’s presence on the board and acquirer’s superior performance amplifies the mixed gamble trade-offs, thereby strengthening the relationship between family control and early movement within CBA waves.

Family firms and their participation in cross-border acquisition waves: evidence from India

“…Finally, prior literature on family firms has largely focused on developed markets to analyze family firms' behavior during acquisitions (Anderson and Reeb, 2003; Miller et al , 2010; Villalonga and Amit, 2006). Our study adds to the literature on family firms in emerging markets (Fuad et al , 2021; Gomez-Mejia et al , 2020; Ray et al , 2018; Singla et al , 2014), specifically in the context of acquisition conducted by Indian firms. In doing so, our study responds to the call of scholars (Lahiri et al , 2020) to examine the acquisition behavior of emerging market family firms.…”

“…We theorize the heterogeneity between these two acquisition environments rather than assuming them as homogenous (Fuad and Gaur, 2019). In doing so, our study extends the nascent literature on family firms' acquisition behavior in emerging economies (Bhaumik et al, 2010;Chen et al, 2009;Fuad et al, 2021;Lahiri et al, 2020).…”

“…When conducting acquisitions, family firms prefer unrelated acquisitions in order to reduce their dependency on core business (Defrancq et al , 2016; Miller et al , 2010). However, recent studies highlight that family firms are more likely to conduct related acquisitions in order to maintain family control over the business and achieve long-term financial growth (Hussinger and Issah, 2019) Further, family-controlled firms have been found to conduct CBAs earlier than non-family controlled firms (Fuad et al , 2021).…”

“…Further, we argue that family firms may conduct risky acquisitions by considering the trade-offs between SEW and financial gains (Fuad et al , 2021; Gomez-Mejia et al , 2018; Hussinger and Issah, 2019). This is because in the CBA wave context, the industry undergoes reorganization and firms need to reconfigure their assets by conducting necessity-based acquisitions within waves (Fuad and Sinha, 2018).…”

International Expansion and Firm Growth in Domestic Markets: Family Versus Non-Family Firms

“…Early SEW theory considered only the stock of SEW and the risk of its loss (Gomez-Mejia et al, 2007). With the mixed gamble approach, FF scholars recognize that SEW gains are paramount in influencing FFs’ behaviors (Fuad et al, 2021; Gomez-Mejia et al, 2014). However, the mixed gamble approach considers prospective gains and current losses at the time the investment decision is made.…”