Faculty of Economics and Business Administration Publications Database

How allicance portfolio diversity affects cross-border acquisition likelihood: The moderating role of geographic distance and business relatedness

Authors:
Wang, Le
Source:
Link External Source: Online Version
Year: 2016
Keywords: Alliance capabilities; Cross-border acquisition; Geographic distance
Abstract:

Our study investigates how alliance capabilities influence a firm’s propensity to use acquisitions for their international expansion strategy in the context of cross-border acquisitions by emerging market firms in developed countries. We argue that a firm’s alliance capabilities increase with its alliance portfolio diversity level, and are expected to influence the firm’s acquisition decision. In addition, we identify factors that might have impacts on the degree to which alliance capabilities matter for the acquisition occurrence by considering relevant issues associated with information and integration costs. Specifically, we argue that the effects of alliance capabilities depend on the extent to which they are transferrable and applicable in the focal cross-border acquisitions as well as the degree to which resources and capabilities between the acquiring and target firms need to be redeployed. Empirical evidence from recent acquisition activities in developed economies involving Chinese strategic investors indicates that the likelihood of acquisition occurrence is positively related to acquiring firms’ alliance capabilities. We also find that this positive relationship is diminished with the increase of geographic distance or the decrease of business relatedness between the two firms. Finally, we find that the moderating effect of business relatedness is contingent on the level of geographic distance.

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