Performance Implications of Firm Resource Interactions in the Acquisition of R&D-Intensive Firms

Abstract

W e explore the role of resource interactions in explaining firm performance in the context of acquisitions. Although we confirm that acquisitions do not lead to higher performance on average, we do find that complementary resource profiles in target and acquiring firms are associated with abnormal returns. Specifically, we find that acquiring firm marketing resources and target firm technology resources positively reinforce (complement) each other; meanwhile, acquiring and target firm technology resources negatively reinforce (substitute) one another. Implications for management theory and practice are identified.Key words: merger and acquisition; resource-based view; high technology History: Published online in Articles in Advance January 7, 2008. IntroductionThe value of worldwide merger and acquisition (M&A) activity set a new record in 2006 with $3.79 trillion worth of transactions-a 38% increase over 2005 (Berman 2007a). 1 The dominant rationale used to explain acquisition activity is that acquiring firms seek higher performance (Bergh 1997, Sirower 1997. However, existing M&A research has not consistently identified variables that impact acquisition performance (King et al. 2004). These mixed signals represent an apparent inconsistency or unsolved puzzle (Agrawal and Jaffe 2000), because firms continue to use acquisitions as a strategic tool with no evidence establishing that acquisitions improve firm performance. Consequently, there is a recognized need for research to identify a theoretical framework that helps to explain acquisition performance (Hitt et al. 1998, Hoskisson et al. 1994, Sirower 1997.Research on resource interdependence may offer such a framework (Barney 1988, Capron and Pistre 2002, King et al. 2004). Using resource-based theory (RBT) as a theoretical lens, research in this area suggests that, in general, acquisition performance will be higher when acquiring and target firm resources complement one another (Capron and Pistre 2002;Hitt et al. 1998Hitt et al. , 2001Puranam et al. 2006). Most extant research on resource interconnectedness (Dierickx and Cool 1989) has focused on positive reinforcement (Milgrom and Roberts 1995, Tanriverdi and Venkatraman 2005, Teece 1986) or on complements, where the marginal benefit from higher levels of one resource increases from the level of another resource (Sigglekow 2002). However, firm resource transfers may also serve as substitutes , Miller 2003 or display negative interactions (Sigglekow 2002). We examine resource interactions involving both substitutes and complements between acquiring and target firm resources.Although an acquiring firm's ability to achieve improved performance is likely to depend on interdependence between its resources and those of the target firm, there is limited research that empirically examines target and acquiring firm resource interactions on firm performance (Song et al. 2005). For example, in three different studies, Capron and her colleagues use a methodology largely reliant on survey data, showing that substantial...

Getting post-M&A integration mechanisms tuned in to technological relatedness and innovation synergy realisation

“…By this research, we tried to contribute to the research on PMAI strategies (mechanisms and instruments) and practices that impact the performance of M&As (Capron, Dussauge, and Mitchell 1998;King, Slotegraaf, and Kesner 2008). The study explored a two-step conceptual framework in a nonreductionist manner, benefitting from the case study method (Larsson and Finkelstein 1999).…”

“…Research in the first stream explores the consequences of antecedents for M&A outcomes (Haleblian et al 2009) Authors take resource complements, knowledge similarity, technological relatedness, cultural, and/or organisational (mis-) fit as indicators of the combination potential of an M&A, with performance implications on accounting and stock-market valuation in general, and patents in particular (Datta, Pinches, and Narayanan 1992;Ahuja and Katila 2001;Prabhu, Chandy, and Ellis 2005;King, Slotegraaf, and Kesner 2008;Stahl and Voigt 2008;Makri, Hitt, and Lane 2010;Malik 2011;Hussinger 2012;Bauer and Matzler 2014). However, such research typically considers PMAI as a black box, disregarding intermediate variables and relevant learnings on integration strategies, and frequently oversimplifies performance (Haleblian et al 2009), let alone innovation performance, to allow for quantitative analysis (Ahuja and Katila 2001;Cloodt, Hagedoorn, and van Kranenburg 2006;Keil et al 2008).…”

La fusión de las cooperativas: las expectativas de gestión relacionados con los indicadores financieros

“…According to King, Slotegraf and Kesner (2008), the complementarity of resources of the acquired companies are associated with abnormal paybacks. The study in technology companies reveals that operational resources such as marketing positively reinforce the technological resources.…”

“…In the other set of questions the corporate benefits under many aspects were listed, as well as the tax economies, and the use of surplus funds, inefficiencies and diversification were related, as stated by King, Slotegraf and Kesner (2008). In order to check this hypothesis the questions in Table 7 were elaborated.…”

Analyzing the Effects of Knowledge Resource Complementarity Structures on the Choice between Strategic Alliances and Merge and Acquisitions (M&As) in Information Technology Industries

“…기존 전략적 동맹이나 인수합병 관 련 연구는 i) 두 지배구조가 상이함에도 불구 하고 이를 호환적(interchangeable)으로 일반 화하여 사용하는 연구 [16,25], ii) 둘 가운데 하나의 지배구조에만 초점을 둔 연구 [20,22] 률은 다음과 같이 계산하였다 [21,37]. [4,37].…”