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How Do High-Technology Firms Create Value in International M&A? Integration, Autonomy and Cross-border Contingencies

by Hong Zhu, Jun Xia, Shige Makino

ARTICLE | Journal of World Business | Vol. 50, 2015


Abstract


Managing acquired foreign firms often proves to be a challenging task for the acquiring firms. We propose that industry characteristics are very important to an acquiring firm's actions, suggesting the existence of systematic differences in post-acquisition value creation in different industries. Moreover, the effect of these distinct approaches to value creation is also contingent on the bilateral national relationships of institutional distance, language differences, and diplomatic relationships between the home and host countries of the acquiring and acquired firms. Our study of 847 related cross-border acquisitions in the information technology industry in 27 home countries and 38 host countries provide support for these arguments. Specifically, we found that acquiring firms in service information technology industries where post-acquisition autonomy is more important in value creation outperform those in manufacturing industries where post-acquisition integration is preferred. Results also show institutional distance and language differences strengthen this relationship; in contrast, diplomatic relationships weaken the relationship.