Path-Breaking: Changes in Path Dependence of the Acquiring Firms after Mergers and Acquisitions

Abstract

This paper attempted to answer the following question: How do firm-specific resources work through mergers and acquisitions (M&A) as a strategic mode for path breaking? Previous studies on M&A have paid little attention to the attributes of acquired firms. Thus, this paper suggests that distinctive knowledge of acquired firms has a huge impact on acquiring firms, breaking their paths. Furthermore, we associate environmental munificence as antecedent of path dependence through positive feedback. This contingency perspective provides a sophisticated explanation of the path breaking phenomenon beyond the internal perspective of the knowledge-based view. This research tested 181 M&A cases in 121 firms in the U.S. manufacturing industry from 1993 to 2002. We found that the acquired firms' knowledge impact and concentration affects the acquiring firms' change of path dependence after M&A. Additionally, environmental munificence negatively moderates the effect of the knowledge impact of the target firms on the path breaking of the parent firms.