Network Imitation to Deal with Sociocultural Dilemmas in Acquisitions of Young,Innovative Firms

This article expands current acquisition literature to include sociocultural challenges on inter‐organizational levels following acquisitions of young, innovative firms. Socioculture here denotes network parties' shared values, belief systems, and practices. Three acquisitions illustrate their consequences. The young, innovative firms and their acquirers are part of different networks, have dissimilar motives for pursuing business, and work within different time frames. To potentially improve knowledge transfer and integration, the acquirer can learn from the innovative firm's network interactions; choose targets among its own network parties; organize its governance into a separate business unit; practice reverse value integration from the acquired party; and carefully promote practices that foster innovativeness. The article contributes to research on acquisitions of young, innovative firms through pointing to how values and practices are interlinked in networks, and how the imitation of the acquired party's network interaction may help to sustain its innovativeness and transfer knowledge between the acquirer and acquired party. © 2013 Wiley Periodicals, Inc.     

Acquisitions Entry Strategies in Africa: The Role of Institutions,Target‐Specific Experience,and Host‐Country Capabilities—The Case Acquisitions of Finnish Multinationals in Africa

Acquisition is an important entry strategy for multinational enterprises (MNEs) seeking to gain faster entry into new and emerging markets and remain competitive in the global marketplace. MNEs utilize partial‐, staged‐, and full‐acquisition strategies when entering into foreign markets. This research analyzes how and why firms opt for these acquisition strategies in the context of Africa. The study applies institutional theory and explores constructs derived from the Uppsala internationalization process model. Using a case study of five Finnish acquisitions in Africa (Egypt, Morocco, Kenya, and South Africa), it was found that Finnish MNEs opt for partial acquisition rather than staged and full acquisition in the context of acquisitions made prior to late 1990s without earnout arrangements. Finnish MNEs opt for the choice of staged acquisition rather than partial and full acquisition in the contexts of mild regulatory framework in host countries and when the acquired firm business requires extensive improvements and the target host market structure is fragmented. Finnish MNEs opt for the choice of full acquisition rather than partial and staged acquisition in three contexts specifically: (1) when the acquiring Finnish MNE possesses host‐country capability, target‐specific experience, and ensures the retention of top management personnel of the acquired target; (2) when the size of the acquired target is relatively very small compared to the acquiring MNE; and (3) when the nature of the acquired firm business is well developed and the target host‐market structure is consolidating. © 2016 Wiley Periodicals, Inc.     

Forgotten or not? Home country embeddedness and returnee entrepreneurship

Building on the social network and strategic entrepreneurship literature, we investigate the overall relationship between returnee entrepreneurs’ networks in different periods and locations, domestic resource acquisitions and firm performance. While the labor mobility literature emphasizes the “gone but not forgotten” networks in the prior location of migrants, other studies argue that returnees suffer from a lack of local networks. Our findings show that returnee entrepreneurs are different in the extent of their home country embeddedness while they are overseas, which indicates different degrees of enduring networks in the home countries. The effect of home country embeddedness improves the performance of returnee entrepreneurship via domestic resource acquisition, and this effect could be substituted by pre-overseas local ties and the presence of local top management team (TMT) members. This study extends returnee research by shedding light on the importance of network maintenance in determining whether the home country’s network endures or decays and by highlighting the interactions of ties in the different periods of pre-overseas, during overseas, and after return.     

What determines performance of cross‐border M&As by Chinese companies? An absorptive capacity perspective

Chinese companies are increasingly using cross‐border merger and acquisitions (M&As) as a vehicle to source knowledge or strategic assets, so as to enhance their competitive advantage. However, a critical question is: Can strategic assets be effectively acquired by Chinese firms, thereby leading to superior firm performance? This article addresses this fundamental question from an absorptive capacity perspective. This approach concentrates on how an acquiring firm's absorptive capacity influences its ability to identify, assimilate, integrate, and apply external new knowledge into commercial use. By comparatively examining two high‐profile international M&A deals completed by leading Chinese firms Lenovo and TCL, we argue that the performance of Chinese companies' overseas acquisitions is substantially affected by the acquiring firm's absorptive capacity at multiple dimensions, thus drawing strategic implications for multinationals in other emerging markets. © 2010 Wiley Periodicals, Inc.     

Foreign Acquisition,Domestic Acquisition and Plant Survival

The literature has postulated that foreign capital participation (through mergers and acquisitions) is associated with more advanced technologies being injected into the acquired targets, and thus it might be reasonable to assume that foreign acquisitions would generate larger effects than domestic acquisitions to the acquired targets. This paper contributes to the discussion by examining the effects of foreign acquisitions versus domestic acquisitions on plant survival to both born-domestic and born-foreign plants. Using 26 cohorts of plants born in Canada between 1973 and 1998, the paper finds that both foreign acquisitions and domestic acquisitions significantly increase life durations of born-domestic plants, although domestic acquisitions generate larger effects. For born-foreign plants, neither foreign acquisitions nor domestic acquisitions significantly change their life span.     

Institutional,cultural and industry related determinants of ownership choices in emerging market FDI acquisitions

In this study, we tackle a relatively un-researched question: What explains partial FDI acquisitions? The choice between full, majority, and minority ownership is explained on the basis of three locational factors – the differences, or “distances,” between the countries of the acquirer and target firm – operationalized in terms of (i) institutions, (ii) culture, and (iii) sectoral relatedness. The sample comprises 1389 acquisitions in India and China by acquirers from 33 nations over an 11-year period. We find that the likelihood of minority acquisition over majority or full becomes higher when acquisitions involve low institutional distance or high uncertainty avoidance distance. However, the likelihood of minority acquisition over full or majority becomes lower when acquisitions involve industry relatedness. The results add to our understanding of the advantages and disadvantages of partial versus full FDI acquisitions in emerging markets. This study adds to the nascent literature that uses country or location “distance” metrics to show how the multinational firm, being “multiple embedded” (Meyer et al., 2011), can take advantage of the dual location of home and host countries.     

When Organizational Justice Matters for Affective Merger Commitment

We investigate when organizational justice matters to employees’ commitment in the postacquisition process after a company is taken over in a cross‐border acquisition. Overwhelming evidence from the literature suggests that employees who are treated fairly during acquisitions are more committed to their new firms. We extend this finding by dividing organizational justice into three subdimensions: informational justice, interpersonal justice, and procedural justice. We find evidence that procedural justice is an important antecedent of affective merger commitment at an early stage of the integration period, while informational justice becomes important at a later stage. Further analysis on heterogeneity between the target firm's employees and the bidder firm's employees reveals that, immediately after the acquisition, target firm's employees value knowing where they will be at the new firm (procedural justice), while bidder firm employees are more concerned about communication and transparency (informational justice). Our results point to the importance of organizational justice in a cross‐border merger and acquisition (M&A) setting and the need for a separate study of issues related to bidder firms and target firms. © 2016 Wiley Periodicals, Inc.     

Disentangling the Value Creation Mechanism in Cross‐Border Acquisitions: A Process‐Oriented Approach

This study investigates the value creation mechanism in cross‐border acquisitions (CBAs) by employing a structural equation modeling technique and surveying 103 CBAs performed by Nordic firms. The results reveal that resource possession, resource picking, and resource utilization are three important strategic dimensions for realizing synergy and creating value in CBAs. Furthermore, mediation analysis shows that the two acquisition‐based dynamic capabilities—value identification and resource reconfiguration—act as important mediators in how the joining firms’ resource base impacts acquisition outcomes. The results shed light on the mechanisms through which the constructs influence value creation in CBAs and highlight the procedural and dynamic character of these determinants. The results also indicate that an integrative and process perspective, such as the “input‐process‐output” model proposed in this study, is an important step forward in merger and acquisition (M&A) research. Moreover, numerous research findings offer tactical implications for international acquirers. © 2016 Wiley Periodicals, Inc.     

The impact of inward FDI on local companies’ labour productivity: evidence from the Italian case

The article aims to investigate the impact of inward foreign direct investment (FDI) occurring through acquisition upon the local target company’ performance, as measured by labour productivity. It relies upon the idea that multinational enterprises (MNEs) act as a device to transfer firm‐specific proprietary assets, thus causing their subsidiaries to exhibit better performance than their host country rivals. Specifically, our results show that foreign acquisitions generally increase the local target companies’ labour productivity in the medium term after the acquisition. The empirical evidence refers to foreign acquisitions that occurred in Italy in the period 1994–1997.     

New Moralities for New Media? Assessing the Role of Social Media in Acts of Terror and Providing Points of Deliberation for Business Ethics

Social media offers a platform for diffused stakeholders to interact with firms—alternatively praising, questioning, and chastising businesses for their CSR performance and seeking to engage in two-way dialogue. In 2014, 163,402 public messages were sent to Fortune 200 firms’ CSR-focused Twitter accounts, each of which was either shared, replied to, “liked,” or ignored by the targeted firm. This paper examines firm reactions to these messages, building a model of firm response to stakeholders that combines the notions of CSR communication and stakeholder salience. Our findings show that firm response to a stakeholder on social media is positively and most significantly associated with what we refer to as the stakeholder’s connective power but negatively associated with the firm’s own connective power. To a lesser extent, firm response is positively associated with the stakeholder’s normative power but negatively associated with the firm’s own normative power. Firm response is also shown to be positively associated with stakeholder urgency in terms of both the originality of a stakeholder message and the expression of positive sentiment.

     

Investigating Organizational Learning through Social Network Analysis: The Case of a Consultancy Firm in India

Three problems beset the literature on organizational learning—confusion about who learns (individuals, groups, or organization), absence of a robust theory, and tools for measurement. Social network analysis, it is argued, can be used to capture organizational learning at multiple levels, to capture relational data (expressed as linkages between actors), and can yield actionable insights for changes within the organization. Two subprocesses of organizational learning, information acquisition and distribution, were measured using social network analysis in a decade‐old consultancy firm in India. Results reveal who shares information with whom, who goes to whom for information, who is bypassed, who hoards, how groups interact, and how much information is shared at the organizational level. The study provides a deeper understanding of how “people” relationships affect learning at various levels. The theoretical and managerial implications of the approach taken to measure organizational learning using social network analysis are discussed. © 2016 Wiley Periodicals, Inc.     

The effect of investor origin on firm performance: Domestic and foreign direct investment in the United States

This paper evaluates the causal relationship between the source of origin of FDI and the performance of the target firm. The empirical analysis uses new data on a comprehensive sample of public U.S. firms that received FDI between 1979 and 2006. To account for the possibility that performance differences arise due to the selection of superior target firm rather than the change in ownership, I use propensity score matching to create similar comparison groups of target firms prior to acquisitions. The analysis reveals three major findings. First, acquiring firms from industrialized countries lead to labor productivity increases of 13% in the target firm three years after the acquisition compared to targets acquired by domestic firms. Firms that received developing country firm acquisitions, on the other hand, exhibit lower labor productivity gains four years after acquisition, compared to targets acquired by domestic firms. Second, targets receiving FDI by firms from industrial and developing countries also experience increases in profits, compared with firms receiving acquisition by domestic firms from the United States. Third, compared with domestic acquisitions, foreign industrial firm acquisition FDI tends to increase their targets' employment and sales, whereas targets acquired by firms located in developing countries experience a decrease in both revenues and total number of employees. These findings suggest that target firms are subject to significantly different restructuring processes depending on the origin of the acquiring firm.     

Language and cross-border acquisitions: An exploratory study

The aim of this study is to examine the effects of language on post-acquisition performance of US based cross-border acquisitions. In this study we attempt to show that post-acquisition performance is explained by the linguistic distance between the acquirer and target country of the acquisition. In addition, this study explains the moderating role of acquisition experience in the linguistic distance-acquisition performance relationship. An analysis of 1120 US acquisitions in 33 target countries over a period of 6 years (2007 to 2012) demonstrates that linguistic distance has explanatory value in post-acquisition performance. Our analysis also demonstrates that the acquirer’s cross-border acquisition experience plays a significant role as a moderator of this linguistic distance—acquisition performance relationship. In addition, our analysis of lingua franca proficiency also lends support to our hypothesized relationships and demonstrates the robustness of our findings.     

Upgrading from OEM to OBM through Reverse Acquisition in China’s Emerging Economy: The Case of Lacquer Craft Mfg

In this paper, we review how original equipment manufacturing (OEM) firms break the “lock in the global value chains” (GVCs) and upgrade to original/own brand manufacturing (OBM) through accelerated internationalization. We focus on investigating how Lacquer Craft Mfg (later referred to as Lacquer Craft), an OEM firm in southern China successfully upgraded to OBM through reverse acquisitions. By proactively utilizing the resources (including the mindset or perspectives formulated) generated from practicing OEM, Lacquer Craft developed the needed capabilities to build its own brand in an international setting. Lacquer Craft’s successful experiences show that in a globalized economy, the ability to identify and exploit opportunities to link with established players, and the ability to search, acquire, and integrate strategic assets from the developed world rather than replicating the entire previous technological trajectory greatly facilitate the OEM firm in climbing up the value-added ladder and upgrading to OBM. This is a more aggressive upgrading approach. Its experiences also reveal that a firm’s product and technological upgrading strategies are closely interwoven with its internationalization strategy.     

When less family is more: Trademark acquisition,family ownership,and internationalization

This study examines the relationship between international performance and the orientation of the firm towards trademark acquisition, and discusses family ownership as a moderator of this association. We conceptualize our study along three interrelated lines of ‘openness’ i.e. openness towards external resources, openness of governance, and openness towards international markets. The empirical investigation relies on a panel data analysis over four years, and on a cross-industry sample of European listed companies consisting of 712 observations. Our outcomes reveal that the attitude of the company to enrich the brand portfolio with externally developed trademarks is positively associated with the firms’ international performance. We also find that this relationship is moderated by family ownership. “Less family is more”: we find a positive relationship of openness towards trademark acquisitions with the firms’ international performance, which decreases with the presence of a family in a dominant position.     

New Geography of M&As: A Framing Device of Firms' Strategies

The emergence of new economic centers is changing the competitive scenario. The diffusion of power across an increasingly broad range of countries has opened a window of opportunity for firms from China that want to compete globally. These firms understand their options in exploiting economic geography, and they frequently use cross‐border mergers and acquisitions (M&As) to penetrate developed countries. The United States and Europe are becoming natural destinations for such investments because of their huge markets and leading‐edge technologies. This article provides a “framing device” for firms’ strategies in a multipolar world. © 2015 Wiley Periodicals, Inc.     

Subsidiary capability upgrading under emerging market acquirers

This article leverages a case study of a recent Chinese acquisition in the United Kingdom to explore the upgrading of capabilities in the subsidiaries in developed countries acquired by emerging market multinational enterprises (EMNEs). The seemingly implausible upgrading phenomenon is explained by the EMNEs’ complementary assets, their GVC lead firm positions and the unique power relationship between the acquirer and acquired firms, which enable the EMNEs to ‘impel’ upgrading and encourage ‘co-learning’ in their acquired subsidiaries. The contributions to the literature on EMNEs, global value chains, and organizational learning are outlined and discussed.     

Wealth effects on cross-border acquisition firms from emerging economies

Cross-border acquisitions (CBAs), as a corporate expansion strategy, are being espoused by emerging market firms (EMFs) to overcome their competitive disadvantage at the global level. The objective of this paper is to analyse the wealth effects of cross-border acquisition announcement on the acquiring firms from emerging economies during the period of 2001–17. Wealth effects have been measured in terms of short-term change in equity prices (investors' reaction) around the public announcement of 553 and 125 overseas acquisitions by Indian and Chinese listed firms respectively. The investors' reaction to the acquisition of a foreign target has been captured using the event study methodology. Further, a disaggregated analysis has been conducted to gauge the impact of various deal-specific factors, the legal structure of the target firm and the development status of the target country on the wealth creation potential of a cross-border acquisition.Both Indian and Chinese investors have responded favourably to the announcement of international acquisitions as exhibited in significant and positive average abnormal returns of 0.71% and 0.23% respectively on the event day. Further, it is revealing to note that investors in these economies differ widely with regard to their perception pertaining to the method of payment and acquisition strategy. At the same time, the extent of wealth creation is higher when acquired firms are based in developed economies possessing high quality resources and advanced technology along with better institutional and regulatory milieu; Indian as well as Chinese markets have experienced larger abnormal returns on acquiring advanced vis-à-vis developing market firms.     

Building a giant— Bank of America

A long‐term, durable, and well‐executed corporate strategy is essential for any banking institution working to build a world‐class financial firm. Over the course of several decades, Bank of America has set the gold standard with respect to timing, execution, and integration of newly acquired businesses. Bank of America's “Four Cornerstones” corporate strategy is the foundation of the firm's success story. This case study explores the “Four Cornerstones” corporate strategy and investigates whether or not Bank of America's recent bold acquisition of Merrill Lynch demonstrates the firm's hallmark corporate strategy and tactical execution. © 2009 Wiley Periodicals, Inc.     

The impact of mergers and acquisitions on brand equity: A structural analysis

An overlooked strategic benefit of mergers and acquisitions (M&As) is their impact on brand equity. M&As may affect consumer brand preferences, which in turn will affect a firm’s profit. We develop a structural model with a difference-in-differences specification to measure how M&As affect a firm’s profit through three mechanisms: brand equity, cost synergies, and product portfolios. We analyze Lenovo’s acquisition of IBM’s PC division in China’s PC market and find that the increase in brand equity contributed the most to increasing Lenovo’s profit, followed by cost synergies. To explore the generalizability of our modeling approach, we apply it to Geely’s acquisition of Volvo and also find that the gains in brand equity contributed the most to Geely’s profit increase.