The variegated role of proximities in acquisitions by domestic and international companies in different phases of economic cycles

Abstract

This paper aims at an understanding of acquisition processes in a strongly industrialized and export-oriented economy in Central Europe. Drawing on a proximity framework and behaviour theory, the paper investigates that the geographical proximity dimension is more influential than the cognitive proximity dimension. At the same time, cognitive proximity matters more for foreign firms investing into the economy than for domestic acquisitions. While the role of cognitive proximity diminished during the economic crisis, geographical proximity keeps its importance throughout the economic cycle. Moreover, cognitive proximity has become more important for acquisitions of large companies and less for SMEs.

Firm Heterogeneities, Multi-Dimensional Proximities, and Systematic Dynamics of M&A Partnering: Evidences from Transitional China

“…There is a consensus that corporations, especially acquirers, engage in M&A events out of motivations such as financial enticements [24,43], market expansion [18], and access to scarce resources and localized assets [13,29]. Certainly, the specific pursuits related to M&A activities would differ across individual corporations with various sizes, industrial attributes, and ownership structures [32,44,45]. Some studies on M&As have uncovered the preferences of acquisition target selection carried out by corporations with different attributes [44,46].…”

“…With few exceptions [21,34,47], research on the spatial merger behaviors and acquiring predilections of service firms, as well as the relevant differences between manufacturing and services, is relatively limited. Existing studies have also indicated that the acquiring preferences would vary across corporations with different ownership structures (e.g., domestic and foreignowned) [32,42]. Multinational enterprises (MNEs) frequently execute partial acquisitions rather than full acquisitions to reduce their liability of foreignness and to maintain an effective local partner [46].…”

“…The proximity framework has been increasingly used in examining the determinants of M&A partnering on regional, national, and global scales [31,32]. Particularly, a more comprehensive framework, including geographical, technological, organizational, and institutional proximity, generated by Boschma et al (2016), has proven to be effective in previous studies [32].…”

“…The proximity framework has been increasingly used in examining the determinants of M&A partnering on regional, national, and global scales [31,32]. Particularly, a more comprehensive framework, including geographical, technological, organizational, and institutional proximity, generated by Boschma et al (2016), has proven to be effective in previous studies [32]. Scholars have reached a consensus on the role played by multidimensional proximities in promoting M&A partnering, although there are still some mixed findings in the literature.…”

“…In addition to the firm-and place-specific attributes, previous studies have also explained the determinants of M&As from the perspective of inter-firm and inter-place relations [28,29]. Particularly, a multi-dimensional proximity framework, including geographical, cognitive, organizational, institutional, and cultural proximity, has been widely used in relevant research [30][31][32]. However, there are several research gaps in the systematic dynamics behind M&A partnering due to data availability and limited case locations (mainly in Europe and the USA).…”