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

Title: Divestment: The Other Part of “What Businesses a Firm Should Be In”

Authors

  • Jason Ridge, University of Arkansas
  • Margaret White, Oklahoma State University
  • Aaron Hill, Oklahoma State University

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.

Title: Do Opposites Attract? An Industry-dyad Perspective of the Effect of Environmental Uncertainty on Diversification

Authors

  • Jason Park, City University of Hong Kong
  • Ravi Madhavan, University of Pittsburgh

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.

Title: The Contrasting Demands of Acquisitive and Organic Growth: Top Management Team Composition and Experiential Learning

Authors

  • Mario Schijven, University of Illinois at Urbana-Champaign
  • Anna Nadolska, Erasmus University Rotterdam
  • Harry Barkema, Erasmus University-Rotterdam

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).

Title: Value Creation, Appropriation and Destruction in M&A: An Industry Merger Wave Perspective

Authors

  • Benjamin W. Blunck, Aarhus University

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


Strategic Management Society

Washington DC