Entry mode decisions in cross-border acquisitions: the role of strategic consistency and flexibility

Abstract

This paper is aimed at relating size and strategy of cross-border acquirers to their acquisition behaviour by investigating the choices made by acquirers to take over their targets partially or fully. We divided a sample of Japanese cross-border acquirers into firms with consistent or flexible strategies. Based on various arguments from strategy literature and international business literature, we hypothesised and empirically validated that there was an interaction effect between the size and strategy of the acquirer vis-à-vis its decision to attain full or partial acquisition. Our findings indicated that large acquirers preferred full acquisitions while small firms preferred partial acquisitions. Besides size, business strategy mattered too. For small acquirers that subscribed to a consistent strategy, full acquisitions were preferable, while those with a flexible strategy chose partial acquisitions. Nevertheless, the effect of strategy on acquisition behaviour was weak for large acquirers.