Critical success factors determining performance of cross‐border acquisition: Evidence from the African telecom market

• Author: Zafar U. Ahmed,Richard Afriyie Owusu,Viput Ongsakul,Sanjay Dhir,Rishabh Rajan
• Published date: 01 January 2021
• Date: 01 January 2021
• DOI: http://doi.org/10.1002/tie.22156

RESEARCH ARTICLE

Critical success factors determining performance

of cross-border acquisition: Evidence from

the African telecom market

Sanjay Dhir

1

| Rishabh Rajan

1

| Viput Ongsakul

2

| Richard Afriyie Owusu

3

|

Zafar U. Ahmed

4

1

Department of Management Studies, Indian

Institute of Technology Delhi, New Delhi, India

2

NIDA Business School, National Institute of

Development Administration, Bangkok,

Thailand

3

Department of Marketing, Faculty of

Business and Economics, Linnaeus University,

Kalmar and Vaxjo, Sweden

4

School of Business, International University,

Vietnam National University, Ho Chi Minh

City, Vietnam

Correspondence

Sanjay Dhir, Professor of Strategic

Management, Department of Management

Studies, Indian Institute of Technology Delhi,

New Delhi, India.

Email: sanjaydhir.iitd@gmail.com

Abstract

This study investigates the factors affecting Bharti Airtel's cross-border

postacquisition performance in an African market. This study describes the relation-

ships among various factors such as technical capability, affiliated firm's absorptive

capacity, and organizational learning capabilities, which determine the successful

operations of the Zain acquisition deal in South Africa. This paper adopts a qualitative

approach to identify factors that influence the postacquisition performance. Seven

factors are identified based on the literature. Consequently, it has become a necessity

to encapsulate these factors in suitable proportions. In this study, we have developed

a total interpretive structural modeling (TISM) to analyze the postacquisition perfor-

mance of Bharti Airtel in South Africa. Our research has highlighted six dynamic fac-

tors (organizational learning capability, knowledge management, technology

capability, technology relatedness, acquirer's absorptive capacity, and national culture

difference) that affect the firm's postacquisition performance. The interpretive struc-

tural model (ISM) and total interpretive structural model for postacquisition perfor-

mance are built-up. The developed TISM will support academics and practitioners to

develop their understanding of acquisition performance of parent companies in the

context of telecom business in the South African market.

KEYWORDS

case study, knowledge, performance, postacquisition, technology, TISM

1|INTRODUCTION

Mergers and acquisitions (M&A) are corporate strategy and tactical

business activities between two organizations, which helps companies to

enter new emerging markets (Birkinshaw, Bresman, & Håkanson, 2000),

achieve higher revenue goals, and gain a competitive advantage (Koza &

Lewin, 2000). The organizations also improve the product development

process, innovation (Hitt, Hoskisson, & Ireland, 1990), and competitive-

ness (Dhir, Ongsakul, Ahmed, & Rajan, 2019) through M&A. An acquisi-

tion is the primary takeover of one organization by another to achieve

the scope of economies and improve the organization's capabilities

(Ranft & Lord, 2002). An acquisition can help the acquirer to fill a

technical gap, develop skills, build knowled ge (Barkema &

Schijven, 2008; Lei & Hitt, 1995), and gain market access (Harrison,

Hitt, Hoskisson, & Ireland, 1991). In addition, holding companies can

enhance their performan ce and improve technol ogical synergies in

the changing business environment. The primary purpose of any

M&A is to globalize a firm's business (Norbäck & Persson, 2008),

improve the firm's performance (Dhir et al., 2019), and gain market

access (Harrison et al., 1991). The acquisition process is an important

corporate and business strategy (Elias, 2019) for entering new cross-

border markets, product development (Grimpe, 2007), enhancing

DOI: 10.1002/tie.22156

Thunderbird Int. Bus. Rev. 2021;63:43–61. wileyonlinelibrary.com/journal/tie © 2020 Wiley Periodicals LLC. 43

business performance , and gaining competiti ve advantage (Cloodt,

Hagedoorn, & Van Kranenburg, 2006; Kongpichayanond, 2009). Knowl-

edge, experience, and learning (Ahammad, Tarba, Liu, & Glaister, 2016)

can help a firm to become more successful in a competitive environment

(Zaheer, Hernandez, & Banerjee, 2010). Some scholars have found that

experience, prior knowledge of acquisition, technical capabilities (Han,

Jo, & Kang, 2018), and relatedness of technology affect the efficiency of

affiliated companies after M&A (Ranft & Lord, 2002; Zaheer et al., 2010).

There has been rare scholarly work in the area of performance after

cross-border acquisition and competitive advantage. Previous works

have focused on the process of M&A (Pichlak, 2016), business strategy

(Bindra, Parameswar, & Dhir, 2019; Melin, 1992), and the M&A perfor-

mance (Graebner, Heimeriks, Huy, & Vaara, 2017) in terms of wealth cre-

ation, innovation, value creation, product development, and learning

(Singh, Chauhan, & Dhir, 2019; Singh & Dhir, 2019). However, in those

studies, less attention was paid to factors affecting the postacquisition

value creation and performance of its affiliated companies (Cartwright &

Schoenberg, 2006; Dhir et al., 2019).

This paper tries to identify the variables that can affect the perfor-

mance of the parent company after an acquisition to gain emerging new

markets and competitive advantage. What are the relationships between

identified factors? The principal goal of this study is to identify and summa-

rize the factors affecting postacquisition performance and to build up total

interpretive structural modeling (TISM). The TISM methodology (Euchi,

Bouzidi, & Bouzid, 2019; Parameswar, Dhir, & Sushil, 2019; Srivastava &

Sushil, 2013; Sushil, 2012; Sushil, 2017) provides a hierarchical model

(Dhir, 2017; Sandeepa & Chand, 2018) of the identified factors and the

mutual dependence between those identified factors (Hasan, Dhir, &

Dhir, 2019; Yeravdekar & Behl, 2018). In this study, we have highlighted

the importance of the TISM method because of its ability to provide a

complete explanation and interpretation (Bamel, Dhir, & Sushil, 2019;

Patri & Suresh, 2017; Singh & Sushil, 2013) of a specific topic. TISM

method provides diagraphs that reflect the relationship between the identi-

fied factors (Khatwani, Singh, Trivedi, & Chauhan, 2015; Singh &

Sushil, 2013). Finally, we developed a hierarchical structure of the identi-

fied factors and validated it using the Zain acquisition case in South Africa.

This study is conducted as follows. First, the authors discussed a

brief background of literature to clarify the definitions and under-

standing of the study. Next, in Section 3, we focused on the various

steps of TISM methodology and Zain acquisition case study. The

results of this research are presented in Section 4. The conclusion and

various implications for academicians and practitioners are presented

in Section 5. Finally, this study is completed by the limitations and

scope of future studies.

2|RELATED THEORETICAL

BACKGROUND

2.1 |Cross-border M&A and business performance

M&A can be viewed as a popular organizational business strategy to

reach new markets (Harrison et al., 1991; Oguji & Owusu, 2017;

Weber & Tarba, 2013) through consolidation of assets or organization

(Datta, 1991; Gomes, Angwin, Weber, & Yedidia Tarba, 2013). This

strategic process helps companies to increase market share and com-

petitive advantage without creating another business unit

(Trautwein, 1990). In the globalization age, organizations are using

strategic arrangements such as alliance (Etemad, Wright, &

Dana, 2001; Holtbrügge, 2004), joint ventures (Parameswar &

Dhir, 2019), and acquisitions to sustain in the changing competitive

market (Dyer & Singh, 1998; Holtbrügge & Baron, 2013; Ireland,

Hitt, & Vaidyanath, 2002). The cross-border acquisition process has

been widely used to gain access to new markets (Dhir & Sushil, 2017;

Neary, 2007). Some scholars have suggested that technological acqui-

sitions outperform nontechnical acquisitions in the global market.

Technological acquisitions may lead to greater value creation, organi-

zational innovation (Puranam, Singh, & Zollo, 2006), and successive

performance of its affiliated organizations in cross-border deals

(Ahuja & Katila, 2001). The performance after M&A is often seen as a

symbol of synergy benefits (Collins, Holcomb, Certo, Hitt, &

Lester, 2009; Harrison et al., 1991) that involve technology innova-

tion, value creation, and product development (Agarwal, Jain, Sinha, &

Dhir, 2020; Parameswar, Hasan, Dhir, & Ongsakul, 2019). The main

expectation of any acquisition is to gain a new market, gain a cus-

tomer base (Mandal, Love, & Irani, 2003), develop skills, and innova-

tive performance (Crook, Ketchen Jr, Combs, & Todd, 2008).

According to Hurley and Hult (1998), the absorption capacity of any

organization, management of knowledge, learning, and specialized

abilities of employees can positively affect the cross-border perfor-

mance after an acquisition (Alon & Rottig, 2013; Halawi, Aronson, &

McCarthy, 2005; Irwin, Hoffman, & Lamont, 1998; Meschi &

Metais, 2006). Some scholars have examined that all M&A have

occurred not just to learn and acquire knowledge (Barkema &

Schijven, 2008; Lei & Hitt, 1995), but also to gain a market edge and

expand the existing firm's product range globally (Grimpe, 2007;

Norbäck & Persson, 2008). Postacquisition performance depends on

many factors. Managerial attention, employee commitment, motivation

(Alon & Rottig, 2013; Gomes et al., 2013), and learning ability (Dhir

et al., 2019; Lavie, Stettner, & Tushman, 2010) supports the perfor-

mance of the affiliated firm after acquisition (Lavie et al., 2010). The

expansion of technology, skill, and knowledge-base can enhance the

firm's innovative performance during M&A (Ahuja & Katila, 2001;

Colombo & Rabbiosi, 2014). According to Ahuja and Katila (2001), if

affiliated organizations are related in terms of technology and knowl-

edge, M&A has a superior performance. Several scholars have argued

that technical knowledge of the affiliated firm(Ranft & Lord, 2000) can

enhance performance in cross-border deals. Firm performance in the

global market is influenced by corporate governance (Martin &

McConnell, 1991; Parrino & Harris, 1999; Shalender & Yadav, 2019),

prior experience (Han et al., 2018), cultural differences, investment

decisions, and information disclosure (Ahammad et al., 2016;

Inkpen, 2000; (Morosini, Shane, & Singh, 1998). For example, organiza-

tions may face disputes between employees because of inequality in

corporate culture (Gupta & Gupta, 2019) and national culture (Appiah-

Adu & Blankson,1998; Ojala & Tyrväinen, 2007; Weber,1996).

44 DHIR ET AL.