Are Friendly Acquisitions Too Bad for Shareholders and Managers? Long‐Term Value Creation and Top Management Turnover in Hostile and Friendly Acquirers

The well‐documented failure of the majority of acquisitions to create value is often identified in popular discussion with hostile acquisitions, whereas friendly acquirers seem to get a friendly press. The relative performance of friendly and hostile acquirers therefore warrants a rigorous empirical investigation. Clear evidence of superior value creation in hostile over friendly acquisitions allows us to judge the efficacy of the market for corporate control. In this article we examine the long‐term shareholder wealth performance of four types of acquirers – friendly bidder, hostile bidder, white knight and hostile bidder facing a white knight or another hostile bidder. For a sample of 519 acquisitions of UK target firms during 1983–1995, we estimated the three‐year post‐acquisition gains to acquirer shareholders and found that hostile acquirers deliver significantly higher shareholder value than friendly acquirers. We found that friendly acquirers with high stock‐market ratings destroyed more value than hostile acquirers with a similar rating. Friendly acquirer top managers suffered greater job losses than those of hostile acquirers, perhaps paying the price for their inferior value‐creation performance. Our study provides evidence of the superior value‐creation performance of hostile acquirers and makes the case against takeover regulatory rules that may impede hostile takeovers.     

International acquisition performance and experience: A resource-based view. Evidence from French acquisitions in the United States (1988–2004)

Does an acquirer with extensive acquisition experience outperform an acquirer with little or no acquisition experience? Does an acquirer with varied growth mode experience (i.e. a company undertaking not only acquisitions but also joint ventures) outperform a company that has very homogeneous experience (i.e. a company growing exclusively through acquisitions)? The main purpose of our article is to examine these two questions in-depth and to attempt to provide some answers. The questions led us to analyze the valuation effect of the acquirer's experience for 291 French acquisitions in the United States. The results were mixed with regard to the relationship between acquisition performance, acquisition experience and heterogeneous experience. On the one hand we found no relationship between the acquisition performance and heterogeneous experience of French acquirers, which is not consistent with the literature on stock market valuation of homogeneous “experience trajectories” [Singh, H., Zollo, M., 1998. The impact of knowledge codification, experience trajectories and integration strategies on the performance of corporate acquisitions. Working Paper INSEAD, 98,62,SM.]. On the other hand, our findings indicate that the relationship between the acquisition performance and acquisition experience of French acquirers follows a curvilinear (inverted U-shaped) distribution.     

The impact of distance on acquisition performance

A challenge in interpreting research is that the construct of ‘distance’ has multiple dimensions that influence acquisition performance. We expand Ghemawat's (2001) typology of distance with its dimensions of cultural, administrative, geographic, and economic distance (CAGE) from a review of 61 empirical research studies of how distance affects acquisition performance. We identify different impacts of distance dimensions on acquisition performance to find that distance dimensions are interdependent. As a result, context matters, when considering the impact of distance on acquisition performance. Supporting institutional theory, the direction of distance may matter, as the results may be different for acquirers in developed and emerging economies. Additional implications for research and management practice are identified.     

Cross-border acquisition performance of emerging market multinational enterprises: The moderating role of state-ownership and acquisition experience

This paper draws on the resource-based view and organizational learning theory to analyse the moderating role played by state ownership and acquisition experience in the performance of emerging market multinational enterprises (EMNEs). We contribute to the evolving literature on state-owned EMNEs by identifying various post cross-border acquisition (CBA) strategies, which have an impact on the performance of such firms that differs for the one they have on privately owned EMNEs. We test our hypotheses by performing a panel regression analysis on a large firm-level dataset spanning 43 emerging markets over the 2006–2015 period. Overall, our findings point at an inverted U-shape relationship between diversification through CBAs and firm performance. More specifically, this concave relationship is greater when the diversification occurs in developed countries, as opposed to emerging ones. Furthermore, there is evidence that state-ownership and EMNE acquisition experience moderate these relationships both in domestic and foreign markets, albeit with different intensities.     

How does acquisition experience create value? Evidence from a regulatory change affecting the information environment

We argue that acquisition experience translates more readily into learning to select than into learning to restructure. The acquisition selection stage is less causally ambiguous than the subsequent restructuring stage—because its web of activities is less complex and its outcome less delayed—and causal ambiguity undermines learning from experience. Therefore, we hypothesize that more-experienced acquirers will perform particularly well when the information environment is less transparent and thus the ability to select targets (versus to restructure them) is more important. Relying on a unique database of 1388 acquisitions realized by private equity firms in the United States between 1975 and 2005, and exploiting a regulatory change affecting the information environment faced by acquirers when selecting their targets, we find results largely consistent with our theory.     

网络能力、资源获取与新企业绩效关系实证研究

网络能力是在网络导向驱动下,利用关系技巧和合作技巧进行一系列网络构建和网络管理活动,以实现资源获取目标的能力.在中国转型经济时期,网络能力对于新企业克服资源约束,实现生存和成长具有重要作用.拓展了网络能力的理论内涵,将网络能力划分为网络导向、网络构建和网络管理三个维度,建立了网络能力、资源获取与新创企业绩效关系模型,以322家新企业为样本进行实证分析.研究结果表明,网络导向对网络构建和网络管理具有显著正影响,网络构建和网络管理对知识资源获取和运营资源获取具有正影响,知识资源与新企业绩效显著正相关,知识资源获取对运营资源获取具有正影响.研究结论还表明运营资源对新企业绩效无显著影响,但知识资源可以加强两者之间关系,说明新企业只有具备很强的资源管理能力才能将运营资源转化为企业绩效.     

Navigating challenging contexts: Costs and benefits of codified acquisition experience

Despite its intuitive appeal, acquisition experience has not shown a clear benefit to acquirers, and we argue the applicability of acquisition experience depends on goals and context. Using survey data, we consider the effects of applying codified experience for two common acquisition goals involving knowledge transfer and market expansion. Our findings reveal a ‘double-edged sword’ effect, where on one hand, codification mitigates negative effects of industry rivalry on knowledge transfer. However, on the other hand, codification amplifies negative effects of industry rivalry on market expansion and internal turmoil on knowledge transfer. Beyond demonstrating the importance of goals and context contingencies for determining acquisition experience effect, our results reconcile conflicting research findings to identify when codified experience is beneficial in acquisitions.     

Success Traps,Dynamic Capabilities and Firm Performance

Dynamic capabilities (DCs) are fundamental to the understanding of differential firm performance. However, the question remains why some firms are better at developing and applying DCs than others. In particular, successful firms have been warned against the tendency to fall into a success or competence trap, where success reinforces exploitation of existing competences and crowds out exploration of new competences, hindering the development of DCs. Therefore, this study examines the effects of success traps on DCs and consequently firm performance, taking into account firm strategy and market dynamism. To facilitate this, our study also identifies the commonalities of DCs across firms. Drawing on survey data from 113 UK high‐tech small and medium‐sized firms, we find that success traps have a significant, strong negative effect on DCs, which in turn have a weak positive effect on firm performance; DCs are manifested through absorptive and transformative capabilities as two common features across firms. We also find that the development and application of DCs is related to internal factors (such as success traps) rather than external factors (such as market dynamism).     

Pre-merger acquisition capabilities: A study of two successful serial acquirers

The aim of this paper is to provide new insights into the pre-merger phase of M&A. It examines capabilities of serial acquirers, that is, expertise and routines. This is done by conducting a study of two successful serial acquirers. The study identifies and describes what elements expertise and routines consist of and how they are related, explaining how both are needed for a successful pre-merger phase. Moreover, it consolidates present knowledge on expertise and routines in the pre-merger phase and adds new empirical and theoretical insights. The result is the pre-merger capability typology showing in a fine-grained manner which capabilities and elements are important. Arguably, the study provides a holistic view of acquisition capabilities of successful serial acquirers in the pre-merger phase.     

The Market for Non‐Executive Directors: Does Acquisition Performance Influence Future Board Seats?

This paper investigates whether non‐executive directors associated with good (bad) board decisions are subsequently rewarded (penalized) in the market for directors. This question is addressed by assessing whether the post‐acquisition performance of acquiring companies influences the number of non‐executive directorships that non‐executives involved in these acquisitions hold subsequent to the acquisition. We find that non‐executives on the boards of acquirers that increase (omit or cut) their dividend subsequently hold more (fewer) non‐executive directorships in listed companies. Our findings suggest that the non‐executive labour market is efficient and rewards (penalizes) non‐executives for good (bad) acquisitions.     

Effect of R&D expenditures and funding strategies on the market value of biotech firms

Market value of biotech firms is important to investors and venture capitalists who keep this industry alive and dynamic. It is a particularly valuable index of investors' estimate of current and future success of the firms in this industry because other conventional indices of performance and success are inappropriate. Our hypothesis is that market value in this industry can be explained in terms of funding strategies and R&D expenditures. Using all sixty publicly-held biotech firms, that are included in a national directory for such firms engaged in the research of biotech products for human use, we estimate multiple regression models that explain most of the variance in market value using funding strategies and R&D expenditures (R-squared = 0.93). Our models also demonstrated that small biotech firms (< $10 million in total revenue) are substantially different from larger ones.     

New Service Development Competence and Performance: An Empirical Investigation in Retail Banking

What can service firms do to improve their ability to offer new services? In this paper we argue that new service development success results from building a competence in the management of service development resources and routines. We conceptualize new service development competence as a multidimensional, second‐order latent construct that is represented by a system of four interrelated and complementary dimensions: (1) formalized new service development processes, (2) market acuity, (3) new service development strategy, and (4) information technology use and experience. We hypothesize that the growth of new service development competence is related to improved new service development performance. Using structural equations modeling, we analyze survey data from 166 retail banks and report three key empirical findings. First, we show that the four hypothesized dimensions are statistically significant in defining new service development competence. Second, contrary to conventional wisdom in new product development, we find that formalized processes play a lesser role in the success of new service development compared with the other three dimensions. Instead, market acuity—which captures the firm's ability to see the competitive environment clearly and to anticipate and respond to customers' evolving needs and wants—was the most important new service development competence indicator. Finally, we demonstrate the positive effect of new service development competence on new service development performance and show that new service development competence is also significantly related to business‐level performance. Together, our empirical results suggest that complementary benefits arise from the adoption of a more holistic approach to the management of new service development at the program level.     

Technology acquisition strategy in an internationally competitive environment

This research empirically examines the technology strategies of multinational firms operating in the US market. The findings suggest that external reliance on product and process technologies has a negative impact on firm success. Furthermore, geographic distance between key activities moderates the role of technology strategy on international firm success. Also, the complementary assets, dominance of the product design, and the degree of appropriability have a direct impact on firm performance.     

Production Competence and Business Strategy: Do They Affect Business Performance?

The purpose of this article is threefold. First, a comprehensive measure of production competence that assesses the level of support that manufacturing provides for the strategic objectives of a firm is developed. Second, hypotheses relating production competence to several financial measures of business performance are tested using data from a large sample of firms (n=65) in the furniture industry. Third, the impact of business strategy both directly on performance and as a moderating variable in relation to production competence is analyzed. The results of the study suggest that production competence may have more of an effect on business performance for certain strategies than for others.     

竞争驱动战略转型的人力资本视线研究——以天津中小制造业企业为例

转型升级阵痛中的中国制造业企业，唯有基于人力资本"视线"实施差异化战略、推进激进式创新，才能变革成功，进而在激烈市场竞争中存活下来并形成核心竞争力。以天津市各大工业园区154家中小制造业企业的问卷调查数据为样本，采用结构方程模型对制造业企业创新逆驱战略转型的人力资本"视线"进行统计检验。结果显示，战略层面的"视线"有一个：外部环境竞争性、差异化战略、激进式创新与企业绩效。资源层面"视线"有两个：差异化战略、HRM系统、人力资本、渐进式创新、激进式创新与企业绩效；差异化战略、HRM系统、知识共享与企业绩效。这三条"视线"为中国制造业企业指明了战略转型、创新变革的具体方向。     

Relationship multiplexity,multiple resource acquisition,and export performance of emerging-market firms

Drawing on the relational view and absorptive capacity theoretical lens, we examine the relationship between relationship multiplexity, multiple resource acquisition and export performance of emerging-market (EM) firms participating in buyer-supplier relationships with developed-country multinational companies (DC MNCs). Based on a sample of 128 firms in aviation, furniture, steelworks, automobile, and electronic sectors, we find that relationship multiplexity is positively related to the capacity of EM firms participating in these inter-firm exchanges to acquire technological, marketing, and managerial resources from their DC MNC counterparts, with the most benefit occurring in the acquisition of technological and marketing resources. Furthermore, our study shows that as EM firms seek to enhance their export performance while supplying DC MNCs, it is their successful acquisition of technological and marketing resources, but not managerial resources, that are significantly associated with their superior export performance. Our study contributes to the extant literature by providing important insights into the specific sources of internationalization advantages and/or disadvantages for EM exporters by being suppliers to DC MNCs in multiplex relationships.     

Strategically valuable resources and capabilities and successful M&A: a dyadic perspective

Mergers and acquisitions (M&A) are most popular external growth strategies. While the number of M&A has been increasing during the past decades, on average, only the shareholders of target firms gain value during the acquisition process, while acquirers do not receive abnormal positive returns. This paper analyses the impact of strategically valuable resources and capabilities on the success of M&A decisions. We test complementary resource-based hypotheses regarding the value of M&A for the shareholders of both transaction partners. Our sample consists of transactions in the pharmaceutical and biotechnological industry. The results of our study show that the shareholders of both transaction partners will gain above average positive returns only when the acquirer and the target own and combine strategically valuable resources and capabilities.     

The Implementation of an International Market Servicing Strategy in UK Manufacturing Firms

This paper presents results from an empirical investigation into the impact of foreign market servicing strategies on the competitiveness of UK manufacturing firms in five industry sectors. Competitiveness is defined by performance, competitive potential and management process. Although the choice of foreign market servicing mode is highly constrained, there is a range of choice available to firms, although this choice is often reactive rather than proactive. The impact of market servicing switches on competitiveness is often profound, although it is not always positive. Moreover, these effects may be in different directions on the three components of competitiveness. Attention to foreign market servicing policies is crucial for achieving international competitiveness.     

AN EMPIRICAL EXAMINATION OF THE UNDERLYING DIMENSIONS OF PURCHASING COMPETENCE

The importance of evaluating the effectiveness of the purchasing function in firms along multiple criteria has attracted considerable attention. However, few studies have identified the defining elements that constitute purchasing competence. This paper introduces the construct of purchasing competence using a second‐order factor structure derived from purchasing practices identified from the literature. The validity of the construct (purchasing competence) is tested using data from a sample of 179 firms. The results indicate (1) the construct validity of purchasing competence and (2) the predictive validity of purchasing competence, which has a significant positive influence on total quality management performance and customer satisfaction. The implications of these findings for additional research are discussed.     

Initial resource heterogeneity differences between family and non-family firms: Implications for resource acquisition and resource generation

A fundamental, but overlooked stream of resource-based theory (RBT) is the analysis of combinations of initial heterogeneous resource endowments with homogeneous resources that are acquired in the market. These combinations can generate heterogeneous, specific non-tradable resources, which are a potential source of superior competitive advantage and, hence, performance. In order to operationalize this idea empirically, we analyse the development of internationalization resources (considered a specific category of non-tradable resources) within family and non-family firms. Compared to non-family firms, we argue that family firms are able to combine a particular type of heterogeneous initial resource (i.e. familiness) with homogeneous tradable resources acquired in the market. This question is tested using a panel of family and non-family Spanish manufacturing firms for the period 1990 to 2010. As a result, this study contributes to the literature on RBT, extending previous theoretical and empirical research in this stream.