Abstract
In this study, we underline the importance of the relationship between absorptive capacity and an acquiring firm’s post-merger performance following the acquisition of a target firm’s knowledge through cross-border mergers and acquisitions (CBMAs). We analyzed CBMAs between developed countries to highlight how realized absorptive capacity plays a crucial part in a firm’s achievement of CBMA sustainability. Using United States CBMA transactions with other developed countries during 2000–2014, our findings suggest that an acquiring firm’s greater absorptive capacity leads to better post-merger performance. More interestingly, compared to for domestic M&As, the direct effect between absorptive capacity and post-merger performance was found to be more positively related in CBMA transactions, even when we applied propensity-score matching (PSM) and Heckman’s selection model to the same estimation. In addition, we introduce four moderating variables that could either intensify or lessen a firm’s effort to seek external knowledge for organizational growth. In terms of an acquiring firm’s strategic behavior, we find that paying in cash and past CBMA experiences positively influence a firm’s post-merger performance. For a target firm’s knowledge assets, we show that when a target firm possesses more strategic assets, they reinforce the acquiring firm’s post-merger performance, and when the target firm is in a high-tech industry, the acquiring firm’s post-merger performance is weakened. Our study contributes to the CBMA literature by incorporating the concept of a knowledge-based view and by empirically testing the different effects of absorptive capacity between domestic M&A and CBMA and how both strategic behavior and a target firm’s knowledge assets affect a firm’s post-merger performance related to CBMA sustainability.
Highlights
From the era of the fifth merger wave, and especially since the late 1990s, the booming of international trade and fortifications of different geographic locations has encouraged firms to widen their views to carry out cross-border mergers and acquisitions (CBMAs) and accelerate at a rapid pace [1]
It is quite challenging to pinpoint the success factors pertaining to CBMAs, we argue that an acquiring firm’s absorptive capacity can be a crucial aspect when clarifying the possibility of achievements via CBMA and a firm’s sustainable performance
Our study contributes to current M&A literature by highlighting the importance of a firm’s absorptive capacity for post-merger performance in terms of CBMAs [65,66,67,68] and how firms could achieve CBMA sustainability via better outcomes [10]
Summary
From the era of the fifth merger wave, and especially since the late 1990s, the booming of international trade and fortifications of different geographic locations has encouraged firms to widen their views to carry out cross-border mergers and acquisitions (CBMAs) and accelerate at a rapid pace [1] Such a shift in a firm’s action illustrates the significance that the nature of M&A has on a firm’s fate and its sustainable competitive advantage [2,3,4]. Mentioned that growth limitations within the current market can be weakened by acquiring firms that are headquartered in foreign countries and that CBMAs allow firms to better contend with competitors that operate in diverse international markets Along these lines, CBMAs enable firms to obtain privileged information and opportunities to increase the odds of favorable circumstances for future growth [7] and to explore novel strategic assets [8,9]. Enlarged globalization and intensified global competition spontaneously lead firms to explore new markets that are not based in their current operating country [11]
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