Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future

Cross-border mergers and acquisitions (M&As) have gained in popularity over the last decade. However, research on this type of diversification strategy has not kept pace with this trend. While there is considerable research in the area, it is unfortunately fragmented, leaving gaps that need to be addressed. Herein, we examine the theoretical perspectives and research findings on cross-border M&As from three perspectives: cross-border M&As as a (1) mode of entry in a foreign market, (2) dynamic learning process from a foreign culture, and (3) value-creating strategy. Current empirical research on this topic is also tabulated and grouped by theoretical stream to indicate major findings. Most importantly, we identify gaps in the literature and highlight five important research issues that provide directions for future research.     

Managing emotions in mergers and acquisitions

Motivation in HRD has traditionally been conceptualized as motivation to learn or motivation to train. This paper argues that this concept of motivation is too limited because it does not incorporate motivation to use learning to improve performance. Instead, a higher-order construct called motivation to improve work through learning proposed. The theoretical rationale for this higher-order construct is presented along with proposed measures. A confirmatory factor analysis is reported which provides initial evidence of validity. Implications for HRD research and practice are discussed.     

Trust in management and knowledge sharing: The mediating effects of fear and knowledge documentation

Knowledge sharing within and between teams is of vital importance for organizations. The influence of interpersonal trust in general and trust in management in particular on knowledge sharing is evident. However, it is not clear how the relationship between interpersonal trust and knowledge sharing works. This study provides a better understanding of that relationship by demonstrating that fear of losing one's unique value and knowledge documentation have a mediating effect on the relationship between trust in management and knowledge sharing. Specifically, trust in management increases knowledge sharing through reducing fear of losing one's unique value and improving willingness to document knowledge. These findings have important implications at both a managerial and theoretical level. For managers, this paper emphasizes the individual's central role in the knowledge sharing process in terms of knowledge documentation and fear of losing one's unique value. On the theoretical level, this study provides empirical evidence for two mechanisms that help explain the effect of trust in management on knowledge sharing. In future research, this study could be extended to include other psychosocial phenomena that enable knowledge sharing in organizations.     

The role of emotions during mergers and acquisitions: A review of the past and a glimpse into the future

Research on emotions during different phases of the merger and acquisition (M&A) process (i.e., pre-M&A, during M&A and post-M&A) has increased exponentially over the past three decades. However, few attempts have been made to integrate the findings. By systematically reviewing research on emotions during M&As published over the past 30 years, this paper aims to contribute to filling this gap. We organized our findings using a process framework, addressing emotional triggers, the nature of emotions and their dynamics, effects and management. Our review reveals several oversights in research on emotions during M&As, such as the emotional dynamics between the different M&A phases and the role of positive emotions. To address these oversights, future research is encouraged to (a) study emotions following a process-oriented perspective on M&As and include the (interrelationships between) different M&A phases, (b) address the emergence of emotional heterogeneity and homogeneity among organizational members during these phases, (c) investigate the widespread effects of positive emotions and take into account various levels of emotion and (d) explore how emotions can be successfully managed. The paper concludes with a discussion of how these research directions can advance research on emotions during the M&A process.     

The effect of mergers and acquisitions on productivity: An empirical application to Spanish banking

Mergers and acquisitions are frequently justified in terms of value creation or efficiency improvements. Nevertheless, the evidence is not consistent with the existence of benefits in terms of the costs, productivity, profitability or market value of the firms involved. A distinguishing feature of extant research is that it focuses on the assessment of the consequences of mergers around the time in which the operation takes place, limiting the possibility of observing a complete integration between the merged firms. In this context, the objective of this paper is to evaluate the effects of mergers and acquisitions on the long-run productivity of Spanish savings banks. Our results show that productivity improvements can be found in only half of the mergers that take place during the period analyzed.     

The effect of board size on shareholder value: Evidence from bank mergers and acquisitions

This study examines the effect of board size on the economic impact of bank mergers and acquisitions (M&A) in the US. Using a hand-collected dataset of 508 M&A between 2012 and 2018, we find that board size is negatively related to acquirer excess returns. In an additional analysis, we show that large boards have positive value implications for banks that combine the CEO and chairman roles as well as for large banks. Our findings indicate that a “one-size-fits-all” approach to board size is not necessarily in the interests of shareholders; instead, a more flexible and proactive formulation is needed.     

Alternative forms of charismatic leadership in the integration of mergers and acquisitions

It is becoming increasingly clear that post-merger and acquisition (M&A) performance, especially in terms of achieving the integration of merging firms, is strongly affected by organizational factors, such as leadership. This paper presents a theoretical model showing how alternative forms of charismatic leadership can be relevant to the implementation of M&As. A unique aspect of our conceptualization is that we recognize the distinction between charismatic leaders with more of a personalized versus socialized power motive, the behaviors emanating from each respective type, and likelihood of resulting effects on the post-combination organization of an M&A. We also propose that personalized charisma will result in an absorption strategy and accompanying stress, resistance to change, and turnover that vary in degree between acquiring and acquired firms. Conversely, socialized charisma will result in collaborative vision-formation and decision-making processes that will ultimately achieve transformation in both of the combining firms. We further argue that absorption strategies can result in effective integration of the target firm into the acquiring firm when the pre-merger condition of the former is unfavorable.     

Board attributes and shareholder wealth in mergers and acquisitions: a survey of the literature

The question of whether a “good” corporate board structure can optimize performance and minimize conflicts between managers and shareholders has been widely debated. Because mergers and acquisitions represent major managerial investment decisions that are subject to board scrutiny, the effectiveness of a board’s structure is especially visible in the context of corporate acquisitions. With that in mind, in this paper, we examine the abundant literature in the fields of strategic management, economics, and finance in order to identify which board attributes contribute to the ability of corporate boards to create value through mergers and acquisitions. In particular, we discuss the impact of four board attributes: (1) board independence, (2) board size and director-specific attributes, (3) board ownership and compensation, (4) multiple directorships. As a result of our analysis, we conclude that the impact of board attributes on shareholder wealth in mergers and acquisitions is specific to each firm. Therefore, board regulations that do not reflect a firm’s specific needs may in fact hinder the creation of a board that is capable of responding effectively to the firm’s unique needs and circumstances.     

Cross-border mergers and the cross-border effect: the case of the automotive supply industry

In this paper we examine stock price reactions to cross-border mergers and acquisitions in a particular industry, the automotive supply industry. We show that cross-border transactions entail a pronounced value creation for the acquiring shareholders and that this value creation also holds for transcontinental transactions, which to our knowledge have not been investigated so far. Splitting the sample by different types of targets indicates that the value creation mainly stems from takeovers of subsidiaries. By examining differences between national and international takeovers in cross-section, we sustain the recent evidence of a negative cross-border effect (i.e., cross-border mergers and acquisitions entail lower announcement returns than national ones).

The role of marketing in evaluating acquisitions

This paper studies a series of acquisitions made between February 1969 and November 1972 by United Builders Merchants Limited (UBM), a public company based in Bristol. The authors have highlighted the dangers of giving insufficient attention to marketing aspects of acquisitions and, in this study, test some of the contentions previously accepted as to the contribution which market analysis can make towards acquisition policy. As the authors state likely future performance can only be gauged in many sectors, from a thorough understanding of the acquisition candidates' marketing prospects. The authors conclude by making some interesting and potentially useful observations on the utilization of formal marketing inputs in this particular case and on the possible future utilization of such inputs.     

Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions

We examine the relationship between national cultural distance and equity participation using an analysis of a sample of more than 100,000 cross-border acquisitions from 1976 to 2008. We find that cultural distance has a curvilinear (U shaped) relationship with equity participation: Acquiring firms make large equity acquisitions at both low and high cultural distances and small equity acquisitions at moderate cultural distances. In addition, we find that industry relatedness of acquisitions positively moderates the relationship between cultural distance and equity participation: Acquiring firms take a higher equity stake for a given cultural distance if the acquisitions are in a related industry. Our findings offer important insights into firms' market entry behavior and provide guidelines for managers about entry strategies.     

To share or not to share: The role of affect in knowledge sharing by individuals in a diaspora

The diaspora is often credited with helping its homeland, especially when the country is less developed. Yet diasporans are also known to have complex feelings about the homeland. In a study of the South African diaspora, we find that positive affect about both the homeland and the migration experience is positively correlated with the willingness of diasporans to share knowledge with the homeland. But for negative affect there are inflection points, and different intensities of feelings such as guilt and a sense of loss have differing effects. Our findings suggest that an ongoing, beneficial engagement by a diaspora cannot be assumed. Given how individuals are increasingly shaping crossborder economic activity, our findings also suggest that international business research needs to pay greater attention to individuals and individual-level variables such as emotions.     

Organizational identity in acculturation in cross-border acquisitions: Implications for HRD practitioners in global M&A

The purpose of this study is to explore the role of organizational identity in acculturation, or organizational culture development, between the acquired and the acquiring organizations during a cross-border acquisition. The goal is to identify how long-term and short-term employees identify with the acquired organization, and the implications for acculturation for both groups. It is also to help identify implications for Human Resource Development Practitioners in this process. The long-term employees (more than seven years) of the acquired organization identified more strongly with the organization than the short-term (three or less years) employees in this study. The short-term employees seemed to welcome the acquiring Multinational Company (MNC), and readily adapted to their multicultural identity, while long-term employees were more concerned with maintaining the reputation of the original organization. The study provides Human Resource Development (HRD) practitioners with a better understanding of how and why organizational identity is an important aspect to consider in the acculturation process in cross-border mergers and acquisitions. It also provides insight into how to work with organizational identity with acquired organizations in integration and adaptation to the new organization by understanding the differences in organizational identity of long-term and short-term employees in India.     

Internal networking and innovation ambidexterity: The mediating role of knowledge management processes in university research

This article focuses on public organizations to contribute to research on knowledge management processes, a field that until recently has focused primarily on private entities. Specifically, we analyse the mediating role of knowledge transfer and knowledge absorption in the relationship between the internal networking created in university research groups and innovation ambidexterity. Based on six hypotheses, the conceptual model is tested through a structural equations model with mediation effects. The data analysed come from 249 directors of Spanish public university research groups. The results show that the internal networking formed in university research groups has a positive and significant relationship to knowledge transfer and knowledge absorption, but we obtain different results for the relationship between knowledge transfer and knowledge absorption in the presence of innovation ambidexterity. Only knowledge absorption has a positive and significant influence on innovation ambidexterity. The most interesting results involve the mediating role of knowledge absorption in the relationship between internal networking and innovation ambidexterity. These results support the conclusion that directors of university research groups should promote development of knowledge absorption processes in order to stimulate innovation ambidexterity and thus to achieve ambidextrous innovative performance.     

Transferring knowledge in MNCs: The role of sources of subsidiary knowledge and organizational context

We link up with the recent literature on the differentiated MNC and in particular with its stress on intra-MNC knowledge flows. However, rather than focusing on the characteristics of knowledge as determinants of knowledge transfer within MNCs, we focus instead on levels of knowledge in subsidiaries, the sources of transferable subsidiary knowledge and on the organizational means and conditions that realize knowledge transfer as the relevant determinants. We find largely positive support for the relevant hypotheses. These are tested on a unique dataset on knowledge development in subsidiary firms [the Centre of Excellence (CoE) project].     

The micro-foundations of industrial diversification through foreign acquisitions: The multifaceted role of CEO experience

This paper examines the micro-foundations of cross-border industrial diversification strategies. We study the impact of observable CEO experience attributes on the propensity to acquire foreign target firms in unrelated (versus related) industries. Our findings, based on a sample of UK-based firms that engaged in cross-border acquisitions between 2010 and 2016, support an inverted U-shaped relationship between life experience of the CEO and the likelihood of engaging in unrelated foreign acquisitions. Further, we find that CEOs' broad-based work experience, across countries or industries, is associated with a higher propensity to engage in unrelated foreign acquisitions. Finally, CEOs’ education experience in MBA-type qualifications is associated with a preference for related foreign acquisitions. We discuss the theoretical implications of these findings and outline directions for future research in the context of micro-foundations in international business, strategic leadership, and upper echelons theory.     

Decision knowledge sharing: flexible supply chains in KM context

Supply chain excellence has a real impact on business strategy. Building supply chains as flexible systems represents one of the most exciting opportunities to create value and one of the most challenging tasks for the policy makers. It requires integrated decision making amongst autonomous chain partners with effective decision knowledge sharing between them. The key to success lies in knowing which decision has more impact on the overall performance and this can be achieved by appropriate knowledge sharing. In this context, knowledge management (KM) can be used as an effective approach to achieve knowledge sharing and decision synchronisation in supply chains. Flexible supply chains (FSC_s) are more complex and involve multiple autonomous players with varying technical cultures (affects knowledge mindsets), managerial background (affects decision knowledge) and supply chain management (SCM) exposures (affects knowledge sharing attitudes). Thus there is a need to develop demo models that can encourage chain managers towards collaborative knowledge sharing in the supply chains. This paper presents the application of one such model based on decision knowledge sharing (DKS) for improved supply chain management. A simulation model of a flexible supply chain based on DKS framework is developed for demo purposes. The key results are highlighted along with industry implications. The cost based performance of DKS at different levels of flexibility is studied. Thus a careful analysis of the chain with a focus on collaborative decisions is useful to ensure success. This paper addresses this interesting and challenging domain.     

Differentiated transformational leadership and knowledge sharing: A cross-level investigation

Building on theories of differentiated leadership and knowledge sharing, this study investigated the influence of dual-level transformational leadership on three group climates, leader–member exchange (LMX), and knowledge sharing. Using data from 275 employees of 71 work groups in five companies, we found that group-focused leadership and individual-focused leadership both facilitated knowledge sharing while the three group climates and LMX acted as mediators at the group level and individual level, respectively. In addition, our analysis showed an interesting finding in Chinese organizations: an innovativeness climate and a fairness climate contributed to an affiliation climate, which in turn promoted knowledge sharing.