Exploration and exploitation in mergers and acquisitions: An empirical study of the electronics industry in Taiwan

Abstract

Purpose

The central concern of organizational learning and corporate strategy has, in recent decades, focused on the rational choice and appropriate balance between exploration and exploitation. Dividing mergers and acquisitions (M&As) into related and unrelated M&As, this study applies the exploration vs exploitation construct to examine how different M&A strategies affect exploration and exploitation of the combined firm, how post-acquisition integration affects exploration and exploitation of the combined firm, and how organizational ambidexterity affects post-acquisition performance. The paper aims to discuss these issues.

Design/methodology/approach

Organizational and industry level data were drawn from the top 1,000 Taiwanese electronic and computer firms reported by 2009 China Credit Information Service, an authorized credit-rating company in Taiwan. The companies are classified into four industries: computer and associated equipments manufacturing (SICs 271x, 274x, 276x); integrated circuits (SIC 261x), opto-electronics and telecommunication (SICs 264x, 272x, 277x) and electronic components (SICs 262x, 263x, 264x, 269x, 275x). Questionnaires were distributed to general managers of the top 1,000 electronics companies.

Findings

This investigation of Taiwanese electronic and computer firms revealed that related acquisitions with high degrees of acquisition integration positively affect the combined firm's exploitation; unrelated acquisitions with high degrees of R&D expenditure and acquisition experience positively affect the combined firm's exploration. The firm's ability of simultaneously pursuing exploitation and exploration positively affects its post-acquisition performance.

Originality/value

The contribution of this study is to understand how acquisitions influence exploitation and exploration. With regard to the relationship between acquisition and exploitation/exploration, this study finds that unrelated acquisitions enhance exploration, whereas related acquisitions enhance exploitation.

Citation

Lin, L.-H. (2014), "Exploration and exploitation in mergers and acquisitions: An empirical study of the electronics industry in Taiwan", International Journal of Organizational Analysis, Vol. 22 No. 1, pp. 30-47. https://doi.org/10.1108/IJOA-06-2011-0493