The Joint Effect of Experience Accumulation and Prior Performance Feedbacks on Focal Acquisition Performance

Building on previous studies suggesting that the effect of experience on acquisition performance may be driven by additional factors, this paper investigates the experience-performance relationship in the context of acquisitions positing that the impact of experience accumulation on focal acquisition performance is contingent upon prior performance. Because extreme prior performances, i.e. success and failure, can lead, respectively, to behavioral stability or change, the paper hypothesizes that the relationship between prior performance and current performance may not be linear. Using a dataset of 497 acquisitions completed between 2007 and 2013 in a multi-industry setting, evidence is found of an inverted U-shaped relationship between prior performance and current performance, thus suggesting that extreme performance experiences are detrimental to current performance outcomes. In addition, prior performance moderates the experience effect: greatest benefits from experience accumulation are found at intermediate levels of prior performance.