Does a Prior Alliance with the Target Affect Acquisition Performance? The Dangers of a Honeymoon before Marriage

Abstract

Drawing from organizational learning theory, extant literature argues that a pre‐acquisition alliance between an acquirer and its target is usually expected to have a positive impact on subsequent acquisition performance. Yet, since alliances and acquisitions are partially dissimilar events, negative transfer effects can bias inter‐partner learning and negatively affect acquisition performance. To fill this gap, our paper explores pre‐acquisition alliance duration and examines its effects on acquisition outcomes. We argue that a pre‐acquisition alliance can have either beneficial or detrimental effects on subsequent acquisition performance, depending on the duration of the pre‐acquisition alliance. We examine our hypotheses using a (1988–2008) panel database covering acquisitions by French firms in the US. We show an inverted U‐shaped relationship between the duration of a pre‐acquisition alliance and the probability of acquisition failure. Our results also indicate that this non‐monotonic relationship is partially moderated by the degree of partner commitment to the alliance.

The bright and dark sides of CEO hubris: Assessing cultural distance in international business

“…Consequently, the entry timing has a direct influence on the entry mode selection (Shimizu et al, 2004). Furthermore, as concerns the selection of the right international entry mode, it is crucial to understand the differences among entry modes to grasp the effectiveness of an international decision-making process (Newburry & Zeira, 1997) or the combined/sequential use of different modes (Meschi, Metais, & Shimizu, 2018).…”

Creating Value in International Expansion: Understanding Institutional Constraints and Leveraging Organizational Resources

“…Most strategic alliances only focus on short-term advantages, instead of future economic advantages (Liu, 2009). The concept of the "honeymoon" period, or the idea that time must pass before the results of a partnership are realized, must be considered (Meschi, Metais, & Shimuzu, 2017). As the length of the partnership is extended, the honeymoon period subsides, allowing for a more accurate assessment of the effects of the partnership (Meschi, Metais, & Shimuzu, 2017).…”

“…The concept of the "honeymoon" period, or the idea that time must pass before the results of a partnership are realized, must be considered [27]. As the length of the partnership is extended, the honeymoon period subsides, allowing for a more accurate assessment of the effects of the partnership [27]. The beginning stages of an inter-organization relationship involve a "psychological commitment," and for this reason, negative information in addition to negative outcomes are ignored, set aside, or disregarded entirely [27].…”

“…As the length of the partnership is extended, the honeymoon period subsides, allowing for a more accurate assessment of the effects of the partnership [27]. The beginning stages of an inter-organization relationship involve a "psychological commitment," and for this reason, negative information in addition to negative outcomes are ignored, set aside, or disregarded entirely [27]. This certainly limits value creation, as decisions to acquire an organization using short-term assessments may involve skewed, biased, and inflated evaluations of the partnership-increasing the risk of failure [27].…”