Motivation and ability in the decision to acquire

Abstract

This study considers the decision to undertake an acquisition using a framework built around the concepts of motivation and ability to acquire. The paper develops an integrative model to examine how firm characteristics contribute to motivation and ability in predicting the likelihood of an acquisition and draws on two streams of literature to motivate the model: behavioral theory of the firm to explain a firm's motivation to acquire, and absorptive capacity to explain a firm's ability to acquire. Results from a publicly traded sample show that firms failing to meet aspirations (i.e., those with motivation) are more likely to acquire, as are firms that have a high absorptive capacity (i.e., those with ability). Most interestingly, absorptive capacity moderates the influence of performance shortfalls in the decision to acquire and is most important when the motivation to acquire is low.

Firm-specific resources and foreign divestments via selloffs: Value is in the eye of the beholder

“…However, it has to be noted that although during a financial crisis, divestments via sell-offs are more likely to take place, some firms decide to acquire the subsidiaries that other MNEs divest (Wan and Yiu, 2009). We can explain this decision by focusing on studies that are based on prospect theory and the behavioural theory of the firm (Ruth et al, 2013;Cerrato et al, 2013, Zona, 2012Iyer and Miller, 2008). These studies suggest that under conditions of great external uncertainty, such as during a financial crisis, the behaviour that different managers exhibit can vary substantially.…”

“…Other managers however exhibit risk seeking behaviour and respond to lower than expected levels of performance by undertaking greater risks such as making acquisitions (Cerrato et al, 2016;Zona, 2012). These managers attempt to close the performance shortfall by searching for opportunities that will alter a firm's existing capabilities because current capabilities do not generate the desired level of performance (Ruth et al, 2013). Such opportunities include acquisitions, as by acquiring new units, firms can gain access to a stronger stock of capabilities that can be used to increase future revenues and restore performance to expected levels.…”

The impact of intangibles on firm growth

“…In particular, the literature highlights the positive role of absorptive capacity, which positively moderates the decision to acquire external intangibles, especially when the motivation to acquire is low, or financial resources are limited (Ruth, Iyer, and Sharp 2013).…”

Similarities and differences between absorptive capacity and appropriability: a bibliometric perspective

“…Regarding RQ3, many authors have used the KA mechanism for measuring AC dimensions and AC when it has been considered a nondimensional process (Cu ellar et al, 2022). For instance, KA mechanisms, specifically patents, have been used to measure AC (Appio et al, 2019;Bishop et al, 2011;Deeds, 2001;Dushnitsky and Lenox, 2005;Kim and Inkpen, 2005;Malik et al, 2020Malik et al, , 2021Ramani et al, 2008;Rothaermel and Thursby, 2005;Ruth et al, 2013;Shin and Jalajas, 2010;Srivastava et al, 2015;vom Stein et al, 2015;Wagner, 2011). The state-of-the-art subtopics show the importance of KA as a proxy for AC dimensions.…”