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.