Do cross-border acquisitions create value? Evidence from overseas acquisitions by Chinese firms

Based on the dynamic capability and organizational learning perspectives, we examine whether acquirers from emerging economies can create value for their shareholders in cross-border mergers and acquisitions, and the key drivers which may influence any such value creation. A sample of 367 cross-border mergers and acquisitions between 2000 and 2011 involving Chinese listed companies as the acquirers was analyzed to highlight the relationship between the cultural distance involved and the acquirers’ market valuation. On average, such cross-border transactions created value for the acquirer's shareholders, but cultural distance was negatively related to the extent of such value creation. Larger firms, more experienced firms, and acquisitions within the same industry were found to be less affected by cultural distance, emphasizing the importance of learning and absorptive capability, but employing a financial advisor did not seem to help. Thus firms with greater absorptive capacity were found better able to overcome the difficulties caused by cultural differences. Implications for research and practice are discussed.     

Do foreign mergers and acquisitions boost firm productivity?

This paper examines the causal relationship between foreign mergers and acquisitions (M&A) and the productivity of acquired firms using micro-data from the UK over the period 1999–2007. Our results suggest a significant heterogeneity in the total factor productivity (TFP) effects of foreign M&A at the industry level. Overall, we uncover a systematic pattern of post-acquisition TFP effects that is consistent with the most recent theoretical models of firm heterogeneity and cross-border mergers and acquisitions as mode of foreign entry. Furthermore, we find positive aggregate effects on labor productivity due to capital deepening but not due to changes in TFP.     

Do mergers and acquisitions promote trade? Evidence from China

Many studies have shown that mergers and acquisitions (M&A) raise firms' productivity. Few researches investigate whether exporters can enhance export performance after M&A through higher levels of efficiency. Based on detailed information on M&A activities of Chinese firms, China's customs trade data and National Bureau of Statistics surveys, we investigate the causal effect of M&A on trade performance. In particular, the value and the volume of firm exports, product quality, product scope and the number of export destinations have been examined. We find positive and significant effects of M&A on all the examined indicators of export performance. These findings are generally robust to a variety of robustness checks. We further observe that state-owned firms are the least likely to benefit from M&A. We also obtain evidence that firms benefit more from M&A deals if they are targets or merge with foreign firms. Overall, this paper is to our knowledge the first study that uses micro-level data in multiple industries to examine the relationship between M&A and exports of heterogeneous firms. Our results deepen our understanding of the consequences of M&A by suggesting another potential benefit, and hence provide policy implications for merger regulation.     

Do export status and export intensity increase firm performance?

This study examines the effects of export status and export intensity on the performance of firms in Ghana. Our measures of performance include productivity and profitability. Using the Regional Project on Enterprise Development (RPED) dataset covering the period 1991–2002, the results of this study indicate that export status and export intensity have positive effects on productivity, confirming the learning‐by‐exporting hypothesis. Competition on the international market exposes exporting firms to new technologies, and this has the potential of increasing their productivity. Thus, economic policy initiatives should be directed at encouraging firms to enter the export market. Existing exporters should also be motivated to intensify their exporting efforts by exporting more of their output to foreign markets. © 2011 Wiley Periodicals, Inc.     

Does the inflation rate affect the performance of the stock market? The case of Egypt

The intention of this paper is to examine the impact of the inflation rate on the performance of the Egyptian stock market. Particular attention is paid to the effects of the rate of inflation on various stock market performance variables, in terms of market activity and market liquidity. From the co-integration analysis through error correction mechanisms (ECM), significant long-run and short-run relationships between the variables are found, implying that the inflation rate has had an impact upon the Egyptian stock market performance generally.     

Paying for cross-border acquisitions: The impact of prior acquirers’ decisions

By examining the premiums paid by acquiring firms in cross-border acquisitions (CBAs), this study aims to determine why they might rely on prior premium decisions in the host market rather than rigorous assessments of the deal. An information-based imitation framework offers an explanation for foreign acquirers’ premium decisions. The developed hypotheses are tested with 2350 CBAs that occurred during 1995–2008. The results show that the premium paid by acquiring firms in CBAs relates positively to prior premiums paid by foreign acquirers in that host country. This imitation behavior is influenced by both organization- and offering-level characteristics.     

Do market information processes improve new venture performance?

Does market information improve new venture performance? While some researchers argue that entrepreneurs do not need formal processes to collect and use market information, others suggest that the use of formal market information processes is positively related to firm performance. In this paper, we hypothesize that new venture performance is an increasing function of (1) the firm's level of customer interaction and (2) the use of formal processes for collecting and utilizing market information. We also hypothesize that these linkages will be stronger among new ventures serving emerging markets (i.e., markets in which customer needs and segments are evolving). We test these hypotheses using data collected from 224 new ventures located in the United States. Our findings indicate that, regardless of market condition, formal processes for the collection of market information are positively associated with the use of formal processes for market information utilization and this relationship is stronger among firms serving established markets. In addition, new venture performance is positively associated with the use of formal processes for utilizing market information and this relationship is also stronger in established markets. We also find that, in emerging markets, new venture performance is a positive function of the use of formal processes for collecting market information. Contrary to expectations, we find that, regardless of market condition, the level of customer interaction has a negative relationship with the use of formal processes for market information utilization and no significant relationship with performance.     

Do board directors affect the export propensity and export performance of Korean firms? A resource dependence perspective

Using the Heckman two-stage method, this study empirically investigates whether board directors’ work experience in government and multinational corporations (MNCs), as well as the proportion of outside directors affects export propensity and export performance based on a sample of Korean firms. We find that the Korean firms with former government officials on the board are more likely to engage in exporting, although there is no empirical evidence supporting export performance. The findings also show that firms with former MNC employees on the board demonstrate higher levels of export propensity and export performance. Similarly, firms with a higher proportion of outside directors exhibit a higher level of export propensity and export performance. These findings highlight the importance of the board of directors in Korean firms’ first stage of internationalization and provide new insights into which type of board members can benefit their firms in terms of export propensity and export performance.     

Rapid internationalization of emerging market firms—The role of geographic diversity and added cultural distance

In this study, we examine drivers of internationalization speed of emerging market multinational enterprises who have been known to internationalize rapidly, even to culturally distant countries. Drawing on the organizational learning theory, we argue that, devoid of a pre-existing knowledge base before they begin their international expansion, these firms are unencumbered by the pathologies and traps that are likely to slow a firm with pre-existing knowledge. We posit inverted U-shaped relationships between geographic scope and added cultural distance on the one hand, and internationalization speed of Indian software multinationals, on the other hand. We also hypothesize a moderating effect of the regularity of added cultural distance on the relationship between added cultural distance and internationalization speed. Our analyses of 650 internationalization expansions of 32 largest Indian software firms over a ten-year period support our hypotheses.     

Do innovative emerging market cross-border acquirers create more shareholder value? Evidence from India

This study attempts to investigate the role of absorptive capacity of emerging market firms in creating shareholder value from developed market acquisitions. It analyzes the cumulative abnormal return of cross border acquisitions of listed Indian firms in Europe focusing on acquirers’ research intensity. The study discovers a U-shaped relationship between research intensity of Indian acquirers and their cumulative abnormal return following acquisitions in Europe. As such, firms with no research capacity can benefit from the acquisition by accessing advanced targets, although firms with extensive research capacity outperform any of their Indian competitors as these firms have the absorptive capacity to not only exploit but also explore the knowledge base of the acquired target. Furthermore, we found a positive effect of the acquisition of a high-tech target company, regardless of the absorptive capacity of the acquirer. We also found that business group membership has a positive impact on shareholder value, although horizontal acquisitions as compared to vertical and unrelated deals have a significantly negative impact for these companies. This result is again linked to the more explorative nature of vertical and unrelated acquisitions in comparison with horizontal deals that are more based on the exploitation of existing resources and capabilities.     

Do as the large enterprises do?: Expatriate selection and overseas performance in emerging markets: The case of Taiwan SMEs

This study investigated the less explored expatriation practices of small- and medium-sized enterprises (SMEs) in emerging markets. Data for 133 Taiwan SMEs operating in Malaysia and Vietnam revealed that four personality traits of expatriates, i.e., control ability, independence, openness and social ability exert significant influences on overseas performance given that different types of performance require different of expatriate competency. Analytical results also indicated that the widely perceived influence of the favorable evaluation of the expatriate by top managers does not impact the overseas performance of expatriates. Further, the expatriate practices of Taiwan SMEs vary depending on cultural differences between the home country and host countries. Taken together, the findings of this study have valuable implications for both academicians and practitioners in international management.     

The role of social networks and institutions in the internationalization of Russian entrepreneurial firms: Do they matter?

Drawing upon network theory and institutional theory, this paper examines the influence of networks on the internationalization of Russian entrepreneurial firms. Our case analysis suggests that within the context of the Russian environment, networks play a much less important role in the internationalization process than it is usually assumed in the literature. For the Russian entrepreneurial firms examined in our study, the most important factor in their internationalization was their engagement in honest business practices that established trust and commitment in their relationships with international business partners. This study underscores the importance of the institutional context of an entrepreneurial firm’s country.     

Learning process and capability formation in cross-border buyer–supplier relationships: A qualitative case study of Taiwanese technological firms

This paper examines the alliance learning process from the perspective of local suppliers in a Global Production Network (GPN). After reviewing critical literature in the field, we employed a qualitative case research method to explore alliance learning antecedents, process and outcomes. Six Taiwanese technological firms with different positions in a GPN were examined and we found that these well-performing firms integrate both inter- and intra-organizational learning, as well as a bi-directional learning process. A framework of cross-level knowledge flow is proposed with refined alliance learning antecedents and outcomes. We also extend the typology of GPN positioning level. Propositions are suggested with results discussed for future research.     

Emerging-market firms’ dynamic capabilities and international performance: The moderating role of institutional development and distance

While extant research has examined the separate influences of dynamic capabilities and institutions on international performance, their interactive role has received limited attention. Therefore, we examine the role of host-country institutional conditions in the relationships between emerging-market firms’ (EMFs) innovation-related dynamic capabilities and their international performance. We use multi-source secondary data and primary data from multiple informants from 254 Turkish international firms to test our framework. The study finds that the linkages between three innovation-related dynamic capabilities (innovativeness, supply-chain agility, and adaptability) and international performance are positively and negatively moderated by institutional development and institutional distance, but that their influences are opposite. These influences demonstrate that host-country institutional conditions shape the link between dynamic capabilities and EMFs’ international performance in a multifaceted and paradoxical fashion.     

Which green matters for whom? Greening and firm performance across age and size distribution of firms

Small Business Economics - A growing body of literature links firm performance with sustainability efforts. We contribute to this literature by developing a novel framework for contextualising...     

Employee-owned and capitalist firms: is performance linked to ownership?

This paper does a comparative analysis of the economic performance between employee-owned firms (EOFs) and conventional capitalist companies (non-employee-owned firms, NEOFs). EOFs show good economic performance if the different objectives that distinguish them from NEOFs are considered. These differences stem precisely from the different capital-ownership structures. Nevertheless, the results deteriorate if profitability and productiveness are analysed. The results for productivity differ from theoretical thought which considers that the main differences between these two types of structures should be explained by the double condition people have as both partners and workers in the EOF; this link between company and workers should translate into increased productiveness. The results of the analysis do not empirically demonstrate the positive effects that were expected with an EOF structure. There are, however, sufficient motives for extending the study to the compared analysis of other subjects that work under specific legal regulations and even to the compared analysis of other regulative forms that exist in other Member States of the European Union.     

What drives the export performance of small and medium-sized subcontracting firms? A study of Korean manufacturers

Building on the resource-based view and network theory, we propose and test a framework of export antecedents of subcontracting small and medium-sized enterprises (SMEs). Whereas the internationalization of firms has been extensively studied in general, little is known about what drives the exports of subcontracting SMEs which play a very important role in the manufacturing sectors of East Asian economies. These subcontracting firms operate under very different conditions from other companies, resulting in specific ways they leverage their resources, capabilities and customer networks. An analysis of survey data from 1733 subcontracting SMEs in three South Korean manufacturing industries reveals that the firms’ export orientation and export intensity are related not only to their technological resources and their executives’ managerial capabilities, but also to features of their subcontracting network ties. Our study suggests that due to the specific nature of their business, subcontracting firms’ internationalization antecedents need to be analyzed in the context of their business environment which is strongly shaped by their customer relationships.     

Speed or quality? How the order of market entry influences the relationship between market orientation and new product performance

The role of market orientation as an antecedent of new product performance has been extensively documented in the literature. What is less clear, however, is how firms should make use of their market orientation under different market conditions. This study addresses this question by investigating how market orientation leads to superior new product performance for products that enter the market at different times. In particular, the study examines the moderating effect of order of market entry on the mediated relationship between market orientation and new product performance via product quality and innovation speed. Data from a sample of 244 new product development projects show that a firm's market orientation can improve the performance of first-to-market products and late entrants by facilitating the development of quality products, whereas it can improve the performance of early entrants by facilitating greater innovation speed.     

New firms and labor market entrants: Is there a wage penalty for employment in new firms?

In this paper, we explore the role of new firms as an entry point to the labor market. Because the vast majority of new firms are short-lived, it is a risky decision to accept employment in a new venture. It can be argued that individuals with little (or no) labor market experience are more willing to accept the high risks associated with employment in new firms. Hence, new firms may work as an entry point to the labor market. Nevertheless, some research concludes that one disadvantage of employment in a new firm is that new firms pay less (Shane in Small Bus Econ 33:141–149, 2009). However, this empirical conclusion is primarily based on literature on the wage penalty of small firms. In this paper, we study whether the wage penalty of employment in a new firm persists if we focus solely on labor market entrants. In the empirical analysis, we employ an employer-employee matched dataset that covers the Swedish population during the period from 1998 to 2008. We use the propensity score matching method to study the wage differences between labor market entrants employed in new and incumbent firms. We find an average wage penalty of 2.9 % for labor market entrants employed in new firms over the studied period.     

Just about money? CEO satisfaction and firm performance in small family firms

This paper examines how family ownership and family ties influence the relative importance of economic and non-economic goals on the CEO’s satisfaction with the firm. Using a sample of small high-tech family and non-family firms, we show that the influence of past firm economic performance on CEO satisfaction is weaker in the case of CEOs leading a family firm. Our results also suggest that this influence becomes weaker as the family firm transitions into subsequent generations. However, contrary to our expectations, we were not able to find a differential effect of firm performance on CEO satisfaction between CEOs who belong to the controlling family and those who do not.