The independent and joint effects of the skill and physical bases of relatedness in diversification

Farjoun, Moshe

doi:10.1002/(sici)1097-0266(199807)19:7<611::aid-smj962>3.3.co;2-5

Cited by 58 publications

(74 citation statements)

References 27 publications

(50 reference statements)

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“…We rely on Jensen's alpha to measure an acquiring firm's abnormal return. Jensen's alpha has been used previously in diversification research (Farjoun 1998;Hoskisson et al 1993Hoskisson et al , 1994. It measures the average difference or abnormal return between competing investments (Alexander andFrancis 1986, Jensen 1968).…”

Section: Methodsmentioning

confidence: 99%

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Performance Implications of Firm Resource Interactions in the Acquisition of R&D-Intensive Firms

King

Slotegraaf

Kesner

2008

Organization Science

213

151

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W e explore the role of resource interactions in explaining firm performance in the context of acquisitions. Although we confirm that acquisitions do not lead to higher performance on average, we do find that complementary resource profiles in target and acquiring firms are associated with abnormal returns. Specifically, we find that acquiring firm marketing resources and target firm technology resources positively reinforce (complement) each other; meanwhile, acquiring and target firm technology resources negatively reinforce (substitute) one another. Implications for management theory and practice are identified.Key words: merger and acquisition; resource-based view; high technology History: Published online in Articles in Advance January 7, 2008. IntroductionThe value of worldwide merger and acquisition (M&A) activity set a new record in 2006 with $3.79 trillion worth of transactions-a 38% increase over 2005 (Berman 2007a). 1 The dominant rationale used to explain acquisition activity is that acquiring firms seek higher performance (Bergh 1997, Sirower 1997. However, existing M&A research has not consistently identified variables that impact acquisition performance (King et al. 2004). These mixed signals represent an apparent inconsistency or unsolved puzzle (Agrawal and Jaffe 2000), because firms continue to use acquisitions as a strategic tool with no evidence establishing that acquisitions improve firm performance. Consequently, there is a recognized need for research to identify a theoretical framework that helps to explain acquisition performance (Hitt et al. 1998, Hoskisson et al. 1994, Sirower 1997.Research on resource interdependence may offer such a framework (Barney 1988, Capron and Pistre 2002, King et al. 2004). Using resource-based theory (RBT) as a theoretical lens, research in this area suggests that, in general, acquisition performance will be higher when acquiring and target firm resources complement one another (Capron and Pistre 2002;Hitt et al. 1998Hitt et al. , 2001Puranam et al. 2006). Most extant research on resource interconnectedness (Dierickx and Cool 1989) has focused on positive reinforcement (Milgrom and Roberts 1995, Tanriverdi and Venkatraman 2005, Teece 1986) or on complements, where the marginal benefit from higher levels of one resource increases from the level of another resource (Sigglekow 2002). However, firm resource transfers may also serve as substitutes , Miller 2003 or display negative interactions (Sigglekow 2002). We examine resource interactions involving both substitutes and complements between acquiring and target firm resources.Although an acquiring firm's ability to achieve improved performance is likely to depend on interdependence between its resources and those of the target firm, there is limited research that empirically examines target and acquiring firm resource interactions on firm performance (Song et al. 2005). For example, in three different studies, Capron and her colleagues use a methodology largely reliant on survey data, showing that substantial...

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Section: Methodsmentioning

confidence: 99%

“…Jensen's alpha (Jensen 1968), a variation of the two-parameter market model previously used (Farjoun 1998;Hoskisson et al 1993Hoskisson et al , 1994, was our primary performance measure. An advantage of Jensen's alpha is that it compares the return of an acquiring firm with a benchmark from a common starting point.…”

Section: Appendix Performance Measurementmentioning

confidence: 99%

Performance Implications of Firm Resource Interactions in the Acquisition of R&D-Intensive Firms

King

Slotegraaf

Kesner

2008

Organization Science

213

151

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“…Both, resource similarity and complementarity are moreover building blocks of the relatedness concept (Teece, 1994;Farjoun, 1998;Boschma and Iammarino, 2009). Inspired by insights from the literature on cognitive proximity (Nooteboom, 2000) as well as on the theory of recombinant innovation (Fleming 2001), the (knowledge) relatedness concept argues that effective collaboration is enhanced by partners having similar and complementary knowledge.…”

Section: Introductionmentioning

confidence: 99%

“…However, in the literature on relatedness, often a clear distinction between similarity and complementarity as elements 2 of relatedness is missing. As Makri et al (2010, p. 605) point out: "Relatedness has commonly been defined in broad terms often using similarity and complementarity interchangeably (i.e., Davis et al, 1992;Farjoun, 1998); others have provided incomplete or tautological definitions of complementarity (Mowery, Oxley, and Silverman, 1998), and a few have ignored it (Lane and Lubatkin, 1998;Ahuja and Katila, 2001)". This may produce misleading results concerning the determinants and effects of relatedness, as the underlying processes of knowledge integration and application are likely to differ for similar and complementary partner resources.…”

Section: Introductionmentioning

confidence: 99%

The structure and evolution of inter-sectoral technological complementarity in R&D in Germany from 1990 to 2011

Broekel

Brachert

2015

J Evol Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in

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“…Availability of capital has been found to be positively related to firm formation (Gartner, 1985) and to firm growth (Castrogiovanni, 1991). However, Farjoun (1998) contends thatthat tangible resources are limited in the range of industries in which they can be applied. Chatterjee&Wernerfelt (1991) support this notion and argue that there are limitations in reusing tangible resources.…”

Section: Introductionmentioning

confidence: 99%

Exploring Resources and Performance Relationships in Commercial Enterprises: An Empirical Perspective

Ombaka¹,

Awino²,

Machuki³

et al. 2015

JMS

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Despite a growing body of literature on firm performance, explaining why firms in the same industry and markets differ in their performance remains a fundamental question within strategic management field. Researchers have attributed differences in firm performance to resources owned by a firm but the results remain fragmented and no consensus has yet emerged.Therefore, the debate is still open and this study sought to contribute to the debate and address extant gaps. This study investigated the influence of organizational resources on performance of insurance companies in Kenya. The study was based on a survey of 46 insurance companies in Kenya. The study reports that both tangible and intangible resources have a statistically significant influence on non-financial performance of insurance companies in Kenya. However, there were mixed findings as regards the individual influence of resources on various firm performance indicators. Intangible resources evidenced statistically not significant results individually but when combined, they had a statistically significant influence on non-financial performance.The reverse was true for tangible resources. Based on the findings, implications of the study and suggestions for further study are presented.

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The independent and joint effects of the skill and physical bases of relatedness in diversification

Cited by 58 publications

References 27 publications

Performance Implications of Firm Resource Interactions in the Acquisition of R&D-Intensive Firms

Performance Implications of Firm Resource Interactions in the Acquisition of R&D-Intensive Firms

The structure and evolution of inter-sectoral technological complementarity in R&D in Germany from 1990 to 2011

Exploring Resources and Performance Relationships in Commercial Enterprises: An Empirical Perspective

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