Understanding Cross-form Transfer Effects: Alliance Experience and Acquisition Performance

Abstract

We study the cross-form transfer effects between the alliance and acquisition governance forms. One particular case of the cross-form (transfer) effect is how previous alliance experiences of acquirers and targets affect acquisition performance. We extend the literature by providing a more integrated and nuanced explanation of the cross-form effect using two theoretical mechanisms. The first is the more familiar process similarities mechanism which explains the cross-form effect as the extent to which alliance processes in the same firm are transferred to acquisitions because of similarities between the processes involved in the two governance forms. We extend the literature by enriching the explanation of the cross-form effect with a second mechanism. The experience interactions mechanism explains the effect as the extent to which alliance processes from different firms have mutual influences on each other in the focal acquisition. By taking inter-firm and intra-firm perspectives, the two mechanisms provide complementary explanations of the overall cross-form effect and together form one integrated cross-form mechanism. Hypotheses derived from the theoretical mechanisms are tested on a sample of 505 US acquisitions between 1988 and 1997 in the manufacturing sector. We find strong empirical support for our main hypotheses on the cross-form mechanisms.