Session 225
Acquisitions and Corporate Strategy
Track F |
Date: Wednesday, October 14, 2009 |
Time: 11:30 – 12:45 |
|
Paper |
Room: Meeting Room 15 |
- Session Chair:
- Ravi Madhavan, University of Pittsburgh
Abstract: Organizational boundary decisions are an important facet of strategic management research. While a great deal of extant literature has been dedicated to expansionary boundary practices such as mergers and acquisitions, comparatively little investigation has focused on the process of reducing an organization’s boundaries through divestiture. The current study seeks to address the paucity of research on divestment, including antecendents and outcomes for both the firm divesting (parent company) and the divested entity (the subsidiary or spin-off). We make three important contributions to the literature: first, we utilize a multi-paradigmatic assessment process; second, we investigate potential antecedents of divestiture; and third, we explore the processes involved in implementation of a divestment and the characteristics of successful divestment processes.
Abstract: Environmental uncertainty is a known driver of diversification. However, existing studies support this relationship indirectly by examining sets of firms and observing the correlation between changes in environmental uncertainty and rates of merger and acquisition (M&A) activity. In contrast, we analyzed directly how acquirer and target industries’ relative uncertainty levels elicit diversified M&A. Using quadratic assignment procedure bootstrapping in conjunction with logistic regression on data from 1995 containing 1,722 observations from 42 2-digit SIC codes for 2,566 inter-industry M&As, we find that the likelihood of M&A between uncertain acquirer and less uncertain target industries increases in a curvilinear fashion as the difference in their uncertainty levels increases. Our study confirms that M&As are uncertainty-reduction mechanisms for diversified firms managing their corporate portfolios.
Abstract: We study how top management teams (TMTs) influence the effectiveness with which their firms engage in acquisitive and organic growth over extended periods of time. First, we argue that acquisitive and organic growth contrast sharply in terms of the TMT composition that is conducive to their success. Subsequently, by integrating the upper-echelons and organizational learning literatures, we posit that the potential benefits of TMT heterogeneity (creativity and distant search) and homogeneity (efficiency and local search) may only be unlocked if the TMT has experience with the specific task at hand (i.e., with acquisitions or start-ups). We test our theory using panel data on firms undertaking almost 1600 acquisitions and 500 startups over a period of four decades (1966-2005).
Abstract: Research reports that acquisitions in industry merger ‘waves’ on average both create value and lead to value appropriation for the acquiring firm – especially when they occur in the beginning of the wave – and more so than acquisitions out of waves. However, this research has ignored the simultaneous potential for value destroying motivations within waves. Adopting a novel conceptual approach to measuring returns to acquisitions, we show that the relative incidence of value destroying acquisitions is in fact higher in waves than out of waves, and that value destroying acquisitions destroy more value than their out-of-wave counterparts. However, in-wave acquisitions which are synergistically motivated create more value than their out-of-wave counterparts. The timing of acquisition strategies within industry merger waves has no effect on these relationships.
All Sessions in Track F...
- Sun: 10:00 – 11:30
- Session 260: Writing Workshop for Doctoral Students and Junior Faculty
- Sun: 13:00 – 14:30
- Session 261: Shareholder Primacy and Corporate Policy
- Sun: 15:00 – 16:30
- Session 262: The Role of Government in M&A Activity
- Sun: 16:30 – 17:30
- Session 310: Corporate Strategy & Governance, IG Meeting
- Mon: 12:45 – 14:00
- Session 198: Perspectives on CEO Succession
- Session 228: Business Groups, Alliances, and Contracts
- Mon: 15:45 – 17:00
- Session 229: Alliances and Corporate Strategy
- Session 230: Ownership Determinants and Consequences
- Mon: 17:15 – 18:30
- Session 194: CEOs and Top Management Teams
- Session 197: Diversity, Identity, and Corporate Governance
- Session 233: Top Executives and Directors in Organizational Dynamics
- Tue: 10:00 – 11:15
- Session 199: Executive Compensation
- Session 200: Social Psychological Perspectives of CEOs
- Tue: 11:30 – 12:45
- Session 195: Competitive Dynamics of Business Groups
- Session 234: Constraints and Catalysts on Corporate Growth
- Tue: 14:30 – 15:45
- Session 226: Relatedness, Dominant Logics, and Other Diversification Logics
- Session 231: Institutions and Agents
- Wed: 10:00 – 11:15
- Session 227: Corporate Strategy & Diversification
- Session 232: Stakeholders in the Corporate Governance Equation
- Wed: 11:30 – 12:45
- Session 196: Behavioral Perspectives on Boards of Directors
- Session 225: Acquisitions and Corporate Strategy