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.
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.
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.
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.
The author would like to thank Laura Barbieri for her valuable methodological advice and Andrea Galavotti for his support in data analysis.
Galavotti, I., Depperu, D. and Cerrato, D. (2017), "Acquirer-to-target relatedness and target country unfamiliarity in acquisitions: The role of product diversification and international experience", Management Decision, Vol. 55 No. 5, pp. 892-914. https://doi.org/10.1108/MD-12-2015-0607Download as .RIS
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