When do firms learn from their acquisition experience? Evidence from 1990 to 1995

Abstract

I use an organizational learning perspective to examine how the nature, performance and timing of a firm's acquisition experience helps it to learn how to select the right acquisition. I predict the performance of 214 acquisitions made by 120 firms in 6 industries between 1990 and 1995. Results show that a firm's focal acquisition performance positively relates to prior acquisitions that are a) not highly similar or dissimilar to the focal acquisition, b) associated with small losses and c) not too temporally close to or distant from the focal acquisition. Taken together, these results identify the broad conditions in which firms generate adaptive and timely inferences from acquisition experience. Copyright © 2002 John Wiley & Sons, Ltd.

Lost in transaction? The transfer effect of strategic consistency

“…However, diverse empirical research studies have shown that the principle of learning-curve theory cannot be transferred one-to-one to complex strategic management settings (Ellis et al 2011;Finkelstein and Haleblian 2002;Haleblian and Finkelstein 1999;Hayward 2002;Zollo 2009; see Barkema and Schijven 2008b for an overview of research on organizational learning in acquisition settings). The results of prior empirical studies show evidence that in strategic management settings, as against manufacturing settings, learning relates to the quality rather than to the quantity of experience (Hayward 2002). Yet, questions with respect to the quality of experience, or, in other words, what kind of experience has a positive effect on performance and what kind of experience is more of a hindrance than a help, are still not completely answered (Barkema and Schijven 2008b).…”

“…This result can be interpreted as a signal that similarity of acquisitions refers to more than a shared industrial environment. Alike, Hayward (2002) finds evidence for an inverted U-relationship between the similarity of targets in respect of industry belonging and acquisition performance, i.e. experience from targets that are not highly similar or dissimilar to the focal acquisition increases acquisition performance.…”

“…Therefore, we use the CAR of a bidding company at the time of the announcement of the acquisition as a dependent variable on level I. Although, using this dependent variable is standard not only in M&A research (Betton et al 2009;Boone and Mulherin 2008;Lehn and Zhao 2006;Malmendier and Tate 2008), but also when it comes to analyze learning effects of serial acquirers (e.g., Haleblian and Finkelstein 1999;Hayward 2002), we would like to highlight one important particularity. In the logic of event studies, information transported via the announcement of an acquisition will be directly-positively or negatively-priced in.…”

“…Intuitively, one would expect that acquirers with more transactions experience would better manage the challenges coming along with acquisitions and, therefore, obtain a higher performance than inexperienced acquirers. However, prior empirical studies analyzing the relationship between acquisition experience and acquisition performance have been mixed, ranging from positive (Barkema et al 1996) via U-shaped (Haleblian and Finkelstein 1999) and inverted U-shaped (Hayward 2002) to negative results (Uhlenbruck et al 2006) (see Barkema and Schijven 2008b; as well as Ellis et al 2011 for an overview). As postulated by several researchers (e.g.…”

“…Prior empirical studies analyzing the performance effects of serial acquisitions generally pursue two variant key topics: the effect of time or more specifically acquisition patterns (Klarner and Raisch 2013;Laamanen and Keil 2008;Prescott 2011, 2012;see Shi et al 2012 for an overview) and the role of experience on learning effects (Ellis et al 2011;Finkelstein and Haleblian 2002;Haleblian and Finkelstein 1999;Hayward 2002;Meschi and Métais 2013;Vermeulen and Barkema 2001; see Barkema and Schijven 2008b for an overview). We interconnect these two perspectives by introducing the concept of strategic consistency, which we define in this paper as the coherence of strategic directions of acquisitions within a series.…”