Organizational characteristics of cross-border mergers and acquisitions

Abstract

Purpose Given that several publicly announced international merger and acquisition deals have been abandoned in recent years, the purpose of this paper is to present a synthesis of influential articles that examine organizational characteristics of cross-border acquisition transactions. The synthesis is framed through general traits and resources, learning and prior acquisition experience, and top-level management and governance attributes. Specifically, the paper conceptualizes key organizational attributes influencing the propensity of cross-border negotiations, and the most common characteristics and post-deal effects by illustrating several case examples from around the world. Design/methodology/approach Owing to fairness and integrity principles of the literature survey studies, the paper adopts an exploratory review design to present a synthesis of several influential articles published in strategy, international business and corporate finance journals. Since case method and storytelling are the best qualitative approaches to conceptualizing extant theoretical contributions, a number of case examples—successful, delayed and abandoned—from around the world have been discussed by leveraging the case information from archival sources. Findings Drawing on resource-based view, organizational learning, upper echelons and agency theory perspectives, the paper underscores three observations. First, organizational characteristics such as firm age, firm size, ownership structure, slack resources, marketing resources, technological intensity, export intensity and business group affiliation have different impacts on the propensity of publicly announced cross-border deals. Second, firm’s prior acquisition experience and firm’s acquisition experience in the target country have positive or moderating effects on the success of a cross-border merger. Third, top-level management characteristics such as CEO foreign nationality and CEO international career experience, and governance characteristics such as board size, the number of independent directors and directors with overseas experience, have mixed effects on the incidence of cross-border acquisitions. Practical implications The paper puts forth several recommendations for top-level managers participating in cross-border acquisition negotiations, such as learning from peers in the same industry, learning from predecessors in the target country and learning from failure negotiations in the same industry and other industries. Originality/value Nested within the organizational, international business strategy and corporate finance literature, the paper presents a synthesis of influential publications that study organizational characteristics affecting the propensity of cross-border acquisitions. The cases discussed in this paper are unique examples from around the world.

Experiential learning for Chinese companies to complete cross-border acquisitions: the case of Chinese acquirers

“…Acquisition learning has been shown to have inconsistent impacts on outcomes (Barkema and Schijven, 2008), from positive (Ermolaeva, 2019;Fowler and Schmidt, 1989;Hayward, 2002;Hitt et al, 1998;Li et al, 2018;Vermeulen and Barkema, 2001), to negative or nonsignificant (Bruton et al, 1994;Zollo and Singh, 2004). Consequently, we need further studies about how previous acquisitions and underlying conditions predict performance (Hayward, 2002).…”

“…Al-Laham et al, 2010;Hayward, 2002), indicating that learning curves are more complex in M&A experiences than in traditional operating settings (Dutton et al, 1984;Hitt et al, 1998;Zollo and Singh, 2004), and learning from acquisitions contains causal ambiguity (Castellaneta and Conti, 2017). For instance, experience and varying approaches can have positive, negative or insignificant impacts on corporate strategic activities (Haleblian and Finkelstein, 1999;Li et al, 2018). In other words, even though firm's prior acquisition experience and more specifically firm's acquisition experience in the target country can have positive effects on the success of a CBA (Li et al, 2018), experiential learning in M&A contexts depends on whether learning transfers effectively (Ermolaeva, 2019;Haleblian et al, 2009;Hayward, 2002).…”

“…For instance, experience and varying approaches can have positive, negative or insignificant impacts on corporate strategic activities (Haleblian and Finkelstein, 1999;Li et al, 2018). In other words, even though firm's prior acquisition experience and more specifically firm's acquisition experience in the target country can have positive effects on the success of a CBA (Li et al, 2018), experiential learning in M&A contexts depends on whether learning transfers effectively (Ermolaeva, 2019;Haleblian et al, 2009;Hayward, 2002). For instance, whereas acquisition experience is likely to be more beneficial when the involved companies have similar sizes (Ellis et al, 2011) or are from similar industrial sectors (Finkelstein and Haleblian, 2002) or cultural regions (Barkema et al, 1996), effective transfer of the experience in international acquisitions can increase the likelihood of subsequent acquisitions even in high-risk and culturally distant countries (Rienda et al, 2018).…”

“…Some scholars have studied how learning from acquisition experience affects the likelihood of M&A completion, the main components in our work (e.g. Basuil and Datta, 2015;Chakrabarti and Mitchell, 2016;Ellis et al, 2011;Haleblian and Finkelstein, 1999;Li et al, 2018;Muehfeld et al, 2012;Rienda,et al, 2018), but we provide a more fine-gained characterization of acquisition experience by testing an expanded experiential learning framework in the Chinese context. Moreover, we respond to calls to combine dominant industrial logic and cultural distance to observe their interactions in CBAs (Argote and Miron-Spektor, 2011).…”

Industry drivers of multinational companies’ externalization choice: a conceptual framework and application to Korea–China film co-productions

“…The majority of these existing studies have adopted one of four theoretical perspectives, which include transaction cost economics (TCE), eclectic paradigm, resource-based view (RBV) and institutional theory (Malhotra et al, 2003;Li and Qian, 2008;Surdu and Mellahi, 2016;Kruesi et al, 2018). However, the analyses of these theories and studies on the determinants of entry modes have been mostly limited to either the firm or country level (Ahsan and Musteen, 2011;Xie et al, 2017;Li et al, 2018;Schellenberg et al, 2018).…”