Acquirer-to-target relatedness and target country unfamiliarity in acquisitions: The role of product diversification and international experience

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5 Citations (Scopus)

Abstract

Purpose – The purpose of this paper is to analyze corporate scope decisions in acquisitions with a focus on the relationship between target country unfamiliarity and acquirer-to-target relatedness and on the moderating effects played by product diversification and international experience. Design/methodology/approach – Using a dataset of 689 acquisitions completed in the period 2007-2013 by acquirers located in 60 countries, this paper utilizes an ordered logistic regression analysis. Findings – With greater target country unfamiliarity, acquirers are encouraged to pursue greater acquirer-to-target relatedness. This finding suggests that acquirers tend to seek a balance between product and international diversification to reduce the sources of uncertainty in their acquisition moves. While past international experience strengthens this relationship, diversification experience has a negative moderating effect and hence encourages acquirers to reduce relatedness at increasing market unfamiliarity. Originality/value – The originality of this paper is twofold. First, the authors extend the traditional internationalization-diversification framework to an unfamiliarity-relatedness relationship in the context of acquisitions. Second, the authors propose a construct of target country unfamiliarity in acquisitions that goes beyond the traditional domestic vs cross-border dichotomy by including previous experience in the target country.
Original languageEnglish
Pages (from-to)892-914
Number of pages23
JournalManagement Decision
Volume55
DOIs
Publication statusPublished - 2017

Keywords

  • Mergers and acquisitions, Relatedness, International experience, Country unfamiliarity, Diversification experience

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