Michael A. Hitt and Vincenzo Pisano
Cross‐border mergers and acquisitions present significant opportunities for firms wishing to diversify their activities geographically, learn new knowledge, and gain access to…
Abstract
Cross‐border mergers and acquisitions present significant opportunities for firms wishing to diversify their activities geographically, learn new knowledge, and gain access to valuable resources. Cross‐border mergers and acquisitions present multiple challenges as well. These include the difficulty of evaluating target firms, cultural and institutional differences, and the liabilities of foreignness among others. We compare acquisitions to enter new markets with other market entry mechanisms (strategic alliances and greenfield ventures), and conclude with suggestions for future research to advance our knowledge of this strategy of increasing importance globally.
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Tim R. Holcomb, R. Michael Holmes and Michael A. Hitt
Research on diversification has produced insights into possible linkages between organizational scale and scope and firm performance. However, the paucity of research on strategy…
Abstract
Research on diversification has produced insights into possible linkages between organizational scale and scope and firm performance. However, the paucity of research on strategy implementation has hindered our understanding of the broader performance implications of diversification. We extend the resource-based view and diversification research by examining how firms can exploit diversifying investments designed to achieve scale and scope economies. Successful firms more effectively structure their resource portfolio, bundle resources into capabilities, and leverage these capabilities when implementing a diversification strategy. We develop a model linking strategies by which firms expand product and geographic market scope to the actions they take to manage resources. We examine three actions – internal development, acquisitions, and strategic alliances – and discuss the implications of these actions using the resource management framework.
Katsuhiko Shimizu and Daisuke Uchida
In the rapidly changing and globalizing environment, mergers and acquisitions (M&As) have become increasingly important. In this study, we paid specific attention to the voluntary…
Abstract
In the rapidly changing and globalizing environment, mergers and acquisitions (M&As) have become increasingly important. In this study, we paid specific attention to the voluntary announcements of M&A budgets by Japanese firms. We discussed the antecedents and consequences of such announcements by incorporating the context of Japan, which has experienced an enduring economic downturn since 1990 and is in the process of adopting a Western style of governance. Drawing on signaling theory and impression management theory, this exploratory study intended to contribute to the literature by incorporating the influence of the social context and by arguing for the possibility that announcements of M&A budgets may be used not only for strategic purposes but also for impression management and to reduce information asymmetry.
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Michael A Hitt, Barbara W Keats and Emre Yucel
To function effectively in both the near and distant future, leaders in global organizations must understand, develop and exercise trust and social capital. The competitive…
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To function effectively in both the near and distant future, leaders in global organizations must understand, develop and exercise trust and social capital. The competitive landscape in the new millennium necessitates that firms develop strategic flexibility. To do so, they must continuously renew their knowledge stock and produce innovations. To implement these strategies, leaders must build effective relationships among members and units in the organization. This relational capital is based on trust and eventually leads to the development of internal social capital. Leaders must also build effective relationships with external constituencies. This is often accomplished through strategic alliances. Similarly, leaders must build mutual trust among alliance partners that over time leads to the development of external social capital. When employees trust leaders, they are more likely to be committed to the organization’s goals, willing to develop firm-specific knowledge and likely to exercise creativity. Likewise, partners in trusting alliances are more likely to transfer knowledge, and contribute to a firm’s innovation. These actions are important in global organizations, but difficult to achieve.
Justin L. Davis, R. Greg Bell, G. Tyge Payne and Patrick M. Kreiser
Organizational researchers have long recognized the important role that top managers play within entrepreneurial firms (Ireland, Hitt and Sirmon 2003). Utilizing Covin and…
Abstract
Organizational researchers have long recognized the important role that top managers play within entrepreneurial firms (Ireland, Hitt and Sirmon 2003). Utilizing Covin and Slevin’s (1989) conceptual framework, the current study explores three key entrepreneurial characteristics of top managers and the impact these characteristics have on firm performance. Specifically, we argue that top managers with a high tolerance of risk, those who favor innovative activities and those who display a high degree of proactiveness will positively impact firm performance. In addition, this study examines the influence of top managers’ prestige, structural and expert power on the relationship between entrepreneurial orientation and firm performance. We conclude the study with a discussion of theoretical and practical implications of our findings and suggestions for future research in this area of study.
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Ralph McKinney, Lawrence Shao, Dale Shao and Marjorie McInerney
The success of mergers and acquisitions are contingent upon organizational operations, legal structures, and fiscal responsibilities. Each of these areas requires a proper mix of…
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The success of mergers and acquisitions are contingent upon organizational operations, legal structures, and fiscal responsibilities. Each of these areas requires a proper mix of human capital – people – assigned to carry out the objectives and goals of the emerging entity. Within the general knowledge of Mergers and acquisitions (M&As), research focusing upon these aspects of human capital have been lacking. This chapter adds to the current knowledge of M&A human resources by establishing a framework that can direct future research.
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Giovanni Valentini and Maria Chiara Di Guardo
The paper explores the impact of mergers and acquisitions (M&As) on technological performance. We posit that the post‐acquisition technological performance is positively related…
Abstract
The paper explores the impact of mergers and acquisitions (M&As) on technological performance. We posit that the post‐acquisition technological performance is positively related to the technological combination potential of the merging firms and to their ability to realize this potential. In turn, the combination potential depends on M&As motives aimed at complementing firms’ technological resources, whereas firms’ ability to realize their potential is significantly influenced by their prior experience in M&As and technology integration.
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Dong Wu, Xiao‐bo Wu and Hao‐jun Zhou
The purpose of this paper is to investigate the relationship between international expansion and firm performance in an emerging market.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between international expansion and firm performance in an emerging market.
Design/methodology/approach
The paper firstly explores the relationship between internationalization and firm performance, then investigates the roles of diversification, and examines how diversification moderates the relationship between internationalization and firm performance. For this purpose, panel data on 318 Chinese listed manufacturing firms during the period 1999‐2008 were utilized. Three groups of samples of high, medium and low levels of diversified manufacturing firms were obtained. Statistical techniques of fixed‐effects panel data model yielded an interesting pattern of findings. On the basis of these results, the paper then discusses the implications for the international expansion of Chinese firms.
Findings
At high and low levels of internationalization, internationalization is negatively associated with firm performance, but at medium levels of internationalization, greater internationalization is accompanied by higher performance. Product diversification negatively moderates the relationship between internationalization and performance. As product diversification increases, the relationship between internationalization and performance changes from a horizontal S‐curve in firms with low levels of diversification to a U‐curve in moderately diversified firms and eventually to an equilibrium level in highly diversified firms. The initial stage of the horizontal S‐curve of internationalization and performance declines markedly in Chinese manufacturing firms as a whole, therefore it is by no means easy for Chinese firms to undertake internationalization.
Research limitations/implications
These findings do suggest that managers need to take a long‐term view of internationalization and make a commitment to internationalization.
Originality/value
This is the first paper of its kind to empirically validate the relationship between internationalization, firm performance and diversification in China. It is intended to make a contribution to theoretical research on international business in an emerging market.
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Raffaele Fiorentino and Stefano Garzella
The purpose of this paper is to advance a conceptual comprehensive framework to analyze synergy management pitfalls in mergers and acquisitions (M & As). The framework…
Abstract
Purpose
The purpose of this paper is to advance a conceptual comprehensive framework to analyze synergy management pitfalls in mergers and acquisitions (M & As). The framework highlights the main dimensions of synergy management, the most relevant synergy pitfalls and the ways to overcome them.
Design/methodology/approach
A greater recognition of synergy management literature in M & As is developed. A framework is provided integrating the compatible elements of previous broad areas of research and the main findings of studies on several topics related to synergy.
Findings
Prior literature has suggested that synergy is an important motivation of M & As, has tended to be overestimated and has been difficult to achieve. Specifically, there are three relevant synergy pitfalls: the “mirage,” a tendency to overestimate synergy potential, the “gravity hill,” the underestimation of the difficulties in synergy realization and “amnesia,” a dangerous lack of attention to the realization of synergy. An effective synergy management requires an analysis of five dimensions: the steps of the M & A process, the several values of synergy, the forbidding effects of poor synergy management, the potential causes of synergy inflation and the selection of solutions to synergy pitfalls.
Practical implications
The comprehensive framework suggests insights and guidelines to help managers to overcome pitfalls in synergy management. Managers will learn the following lessons: “when” pitfalls should embrace synergy management; “where” pitfalls may occur; “why” pitfalls may occur; “what” consequences can result in a value of “realized synergy” lower than the “expected synergy”; and “how” actions, tools and behaviors can overcome hidden dangers in synergy management.
Originality/value
The study changes the focus from a single, generic synergy trap to three more analytical, useful synergy pitfalls: the mirage, the gravity hill and the amnesia. By shedding light on synergy management pitfalls, this paper enriches M & A literature and enhance practical solutions to reduce pitfalls in synergy decision making.
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This study tests for the relationship between internationalization and performance in the emerging market context using a sample of 719 firms from 12 emerging markets. This study…
Abstract
This study tests for the relationship between internationalization and performance in the emerging market context using a sample of 719 firms from 12 emerging markets. This study also incorporates the quality of governance in the emerging market studied to test for the interactive influence of the environmental context on the internationalization performance relationship. Findings indicate support for an inverted U‐shaped relationship between internationalization and performance for manufacturing firms and a positive linear relationship for service firms. In explaining the relationship between internationalization and performance, the quality of governance of the home country of the firm was found to interact with internationalization.