Abstract
The effects of cross-border acquisitions on the survival of target firms is attracting increasing academic interest. Specifically, whether cross-border acquisitions may hamper target firms’ performance or enhance their sustainable competitiveness represents a highly debated research question. Building on the knowledge-based perspective of mergers and acquisitions, this paper directs attention to absorptive capacity and investigates the likelihood of survival of target firms acquired by foreign investors. In particular, it examines the role played by three potential antecedent conditions of an acquiring firm’s absorptive capacity on the probability of the target firm’s survival: (a) The business relatedness between acquirer and target, (b) previous experience of the acquirer in the host country, and (c) the cultural distance between the countries of the acquiring and acquired firms. Based on a sample of 396 Italian firms acquired by foreign multinationals, results suggest that target firms are more likely to survive in case the acquirer benefits from previous country-level experience and in case of business relatedness, while the cultural distance between the home country of the acquiring firm and Italy does not prove to be a significant determinant of survival versus mortality of acquired subsidiaries. Overall, our analysis confirms that context familiarity, in terms of both country and business contexts, plays a fundamental role in determining the sustainable competitiveness of acquired firms.
Highlights
The effect of foreign investments on the sustainable development of subsidiaries is a central theme in the international business literature, e.g., [1,2,3], where several studies have examined the survival [1,3,4] and longevity [5] of foreign subsidiaries
Based on a sample of 396 Italian firms acquired by foreign multinationals, results suggest that target firms are more likely to survive in case the acquirer benefits from previous country-level experience and in case of business relatedness, while the cultural distance between the home country of the acquiring firm and Italy does not prove to be a significant determinant of survival versus mortality of acquired subsidiaries
With absorptive capacity being acknowledged as a critical dynamic capability affecting the success of acquisitions [25], this paper examines the effect played by three potential antecedent conditions that may shape firms’ ability to transfer and absorb new knowledge and the destiny of acquired firms: (a) The business relatedness between acquirer and target, (b) the acquiring firm’s previous host country experience, and (c) the cultural distance between home and host country
Summary
The effect of foreign investments on the sustainable development of subsidiaries is a central theme in the international business literature, e.g., [1,2,3], where several studies have examined the survival [1,3,4] and longevity [5] of foreign subsidiaries. The role of knowledge transfer has represented a topical research theme in the literature on acquisitions, especially in the context of cross-border acquisitions, where uncertainty, information asymmetry [21], and liability of foreignness [22] may jeopardize the realization of expected synergies and the ability of acquiring firms to exploit and extend their knowledge and competence bases abroad [23,24]. The knowledge-based view of mergers and acquisitions is in tight connection with the capabilities-based view [31] and with the increasingly flourishing literature on dynamic capabilities [32] Within this framework, absorptive capacity represents a key capability that enables firms to assimilate and reconfigure knowledge and capabilities [30,33]
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 callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
