Organization Capital and Firm Internationalization

Abstract

As a critical source of sustainable competitive advantage, organization capital constitutes an orchestrating mechanism for tangible and intangible resources and is of particular value in complex strategic endeavors. Our research examines the role of organization capital in firm internationalization through cross-border M&As (CBM&A) and value creation. We draw on longitudinal data from listed US firms spanning 20 years of mergers and acquisitions (M&As) activity between 1996 and 2015 and find that firms with higher organization capital are more likely to internationalize through CBM&As because of freed up resources to recognize opportunities. We further find that firms with higher organization capital sustain performance and significantly create value for investors in the short and long run because of a better understanding of capturing value from rare strategic events. Our results offer novel and robust insights on value creation in international markets through organization capital.