Abstract
We investigate the market’s reactions to serial acquirers that switch strategy. We collect data on 204 serial acquirers in four high tech industries, and use March’s explore-exploit framework, to classify these firms’ 1,415 acquisitions. We then distinguish, for example, exploration-based acquisitions, conducted after a series of exploitation-based acquisitions. Our results suggest that the market takes a portfolio perspective when reacting to an acquisition. In support of the ambidexterity literature, we show that the market responds positively to a switch from one type of strategy to another. Zooming in on the direction of the shift, we find that the market responds more positively to a switch towards exploration after exploitation, compared with the alternative. In so doing, we contribute to the literature on acquisition motives, by showing that prior announcements matter in explaining market reactions, and we contribute to the literature on ambidexterity, by showing that the market favours firms that oscillate between exploration and exploitation.
Highlights
Research often considers the performance of a single acquisition, or the effects of a single acquisition on the performance of the acquiring firm (e.g., [1])
We argue that this is the case because in an innovation context, for example, the switch to exploration signals that the firm is ready to engage in high-quality innovation aimed at long term performance [14] and, after a series of exploitative acquisitions, it has the slack resources necessary to fund these innovations too [15]
Our results suggest that the market takes a portfolio perspective when reacting to an acquisition
Summary
Research often considers the performance of a single acquisition, or the effects of a single acquisition on the performance of the acquiring firm (e.g., [1]). This shows that the acquisition motive matters. [2] finds that acquisitions aimed at exploitation outperform acquisitions aimed at exploration. Research recognizes that firms must both explore and exploit to sustain their competitiveness [5]. There is evidence too to suggest that firms use some acquisitions to explore and others to exploit. In 2020, Alphabet, the mother company of Google, bought Dataform, to exploit its data analytics capabilities, and in 2021, it bought Fitbit, to explore the wearables market
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
