Entrepreneurial orientation and the fate of corporate acquisitions

Abstract

Does a firm’s entrepreneurial orientation (EO) play a role in creating or destroying value through corporate acquisitions? Extant research has sought to assess the influence of EO across a multitude of strategic contexts, but to-date has not addressed business venturing through acquisitions. Given that worldwide deal values since 2000 total more than $57 trillion, the omission has become conspicuous. In response, this study investigates the relationship between EO and acquisitions through an analysis of 500 randomly selected deals consummated by U.S. firms between 2001 and 2012. The findings suggest EO’s impact on acquisition-related outcomes is ultimately a matter of degree, with curvilinear effects driven by interactions between EO and three key contingencies: relatedness, method of payment, and acquisition premiums. For each of these moderators, high and low levels of EO are associated with value destruction, while moderate levels, on average, generate positive returns for acquiring firms. However, the relationship is not symmetrical. Firms exhibiting high levels of EO experience significantly worse acquisition-related returns than firms with low EO. The study contributes conceptual, empirical, and methodological insights for both scholars and practitioners by viewing acquisitions through the lens of EO.