Resource availability, international acquisition experience, and cross-border M&A target search

Abstract

Purpose The purpose of this study is to explain how factors relating to resource availability affect managerial risk-taking with regard to the geographic and institutional proximity of cross-border merger and acquisition (M&A) targets. The paper further considers the impact of organizational learning by testing the moderating effect of the acquiring firms’ prior international M&A experience. Design/methodology/approach This study uses linear regression with robust standard errors to account for dependence among clustered observations at the firm level. The authors used country and industry fixed-effects specifications to account for unobserved heterogeneity. Findings The results suggest that when internal and external resources are more abundant, firms pursue cross-border M&As that are more geographically and institutionally distant. The findings further indicate that a firm’s prior international M&A experience positively moderates the aforementioned relationships.. Research limitations/implications Extending the behavioral theory of the firm beyond organizational slack resources, the results highlight the importance of taking a multi-level, open-systems perspective of the strategic impact of resource availability. The authors’ theory and findings also provide a more nuanced view of the critical role organizational learning plays in the relationship between resource availability and organizational outcomes. Originality/value This is the first study to the authors’ knowledge that develops and tests a theoretical model exploring the impact of both internal (organizational slack) and external (environmental munificence at both the industry and home-country levels) resource availability, as well as prior organizational experience on an important multinational business practice.

Do frequent acquirers outperform in cross-border acquisitions? A study of Indian companies

“…Similarly, the results are in concurrence with Rahahleh and Wei (2012), Ahern (2008); Billett andQian (2008), Ismail (2008); Aktas et al (2007) and Doukas and Petmezas (2007), who have noted diminishing returns to frequent acquirers and in most studies, hubris hypothesis inter alia seems to be the dominant explanation for the observed return pattern. However, the results are in stark contrast with studies such as Galavotti et al (2017), Zakaria et al (2017); Rabbiosi et al (2012) and Haleblian and Finkelstein (1999), which indicate an improvement in the long-term performance of cross-border acquirers.…”

Cross-border mergers and acquisitions: links between acquiring firm capabilities and resources and target country location

“…For instance, we recognize the limitation of our control measure of international experience, perhaps, does not capture the multidimensional aspect of the construct (Sullivan, 1994). Prior international experience, particularly with respect to CBMAs (Galavotti et al , 2017; Zakaria et al , 2017), maybe an important variable worthy of additional consideration in future studies.…”

Resilience and risks of cross-border mergers and acquisitions

“…Two common streams of research on the risks of cross-border M&As have taken either a financial markets perspective or an organizational behavior perspective. Extant studies on the M&A risks take different theoretical underpinnings, and central hypotheses, such as financial, strategic and organizational, and process perspectives (Birkinshaw et al , 2000; Haspeslagh and Jemison, 1991; Zakaria et al , 2017).…”