Disentangling the Value Creation Mechanism in Cross‐Border Acquisitions: A Process‐Oriented Approach

• Date: 01 May 2018
• Published date: 01 May 2018
• Author: Daojuan Wang,Hamid Moini,Olav Jull Sørensen
• DOI: http://doi.org/10.1002/tie.21848

387

Correspondence to: Daojuan Wang, International Business Center, Aalborg University, Fibigerstraede 4, 9220 Aalborg University, Denmark, +45 9940 2716

(phone), djwang1616@gmail.com

Published online in Wiley Online Library (wileyonlinelibrary.com)

© 2016 Wiley Periodicals, Inc., A Wiley Company. • DOI: 10.1002/tie.21848

Disentangling the Value

Creation Mechanism

in Cross-Border

Acquisitions: A Process-

Oriented Approach

By

Daojuan Wang

Olav Jull Sørensen

Hamid Moini

This study investigates the value creation mechanism in cross-border acquisitions ( CBAs ) by employ-

ing a structural equation modeling technique and surveying 103 CBAs performed by Nordic  rms. The

results reveal that resource possession, resource picking, and resource utilization are three impor-

tant strategic dimensions for realizing synergy and creating value in CBAs . Furthermore, mediation

analysis shows that the two acquisition-based dynamic capabilities—value identi cation and resource

recon guration—act as important mediators in how the joining  rms’ resource base impacts acqui-

sition outcomes. The results shed light on the mechanisms through which the constructs in uence

value creation in CBAs and highlight the procedural and dynamic character of these determinants.

The results also indicate that an integrative and process perspective, such as the “input-process-

output” model proposed in this study, is an important step forward in merger and acquisition (M&A)

research. Moreover, numerous research  ndings offer tactical implications for international acquirers.

© 2016 Wiley Periodicals, Inc.

RESEARCH ARTICLE

388

RESEARCH ARTICLE

Thunderbird International Business Review Vol. 60, No. 3 May/June 2018 DOI: 10.1002/tie

Introduction

C ross-border acquisition is an important strategic

tool involving trillions of US dollars every year,

which can significantly impact both domestic

and global economies. However, evidence shows that

most acquirers are under attack because of their poor

performance. After reviewing 128 empirical studies on

merger and acquisition (M&A) performance, Bruner

( 2002 , p. 15) concludes that “most transactions are associ-

ated with results that are hardly consistent with optimistic

expectations. Synergies, efficiencies, and value-creating

growth seem hard to obtain.” Some argue that such poor

performance or a high failure rate “suggests that neither

the scholars nor practitioners have a thorough under-

standing of the variables involved in the M&A process

and their complex interrelationships” (Gomes, Angwin,

Weber, & Tarba, 2013 , p. 30). Cartwright and Schoenberg

( 2006 ) stress that current research on M&As and their

outcomes is incomplete or inaccurate in some way.

We performed two sets of literature reviews in 2013.

The first focused on 30 recent review articles and several

books on M&As (e.g., Angwin, 2007 ; Child, Faulkner,

& Pitkethly, 2001 ; Weber, 2012 ). The 30 journal articles

were located through Google Scholar and other data-

bases available at the Aalborg University library (e.g.,

ProQuest) by searching for these keywords in the articles’

titles: merger(s) or acquisition(s) and review (or summary or

overview or past or recent or future or meta-analysis ). The

second round focused on the empirical results of M&A

performance and its impacting factors. We searched

for the relevant articles in ProQuest with the keywords

merger (or acquisition or bidding ), performance (or perform

or outcome or success or failure ), but not bank (or banking )

included in the title and limited the search to the publica-

tion period from January 1, 1990, to March 15, 2013. We

chose 1990 as our starting point since this is when a sig-

nificant increase in M&A activities appears to have begun.

The bulk of published acquisition research appeared

in management, business, and finance fields after 1992

(Haleblian, Devers, McNamara, Carpenter, & Davison,

2009 ). The search resulted in 3,525 articles. We screened

for articles relevant to the review purpose, resulting in

387 that form the basis of this review. Additionally, articles

or books referenced in an article were also incorporated

in the literature review.

This systematic literature review identifies some

research gaps. First, previous research results uncover

a number of variables that tend to impact acquisi-

tion results but lack consistent conclusions (e.g., King,

Dalton, Daily, & Covin, 2004 ). Second, despite previ-

ous calls for a process perspective (Jemison & Sitkin,

1986 ; Haspeslagh & Jemison, 1991 ), there has been a

separation of research on pre- and post-M&A issues and

a neglect of the interdependence between these stages

(Bauer & Matzler, 2014 ; Gomes et al., 2013 ). Besides,

as stressed by Reus, Ellis, Lamont, and Ranft ( 2012 ),

there is a critical need to research the interrelationships

between contextual and process factors and their interac-

tive effect on acquisition outcomes. Third, the past 30

years have witnessed a growth in companies involved in

cross-border acquisitions (CBAs). However, CBAs remain

largely underexplored compared to domestic cases

(Bertrand & Betschinger, 2012 ) and M&As from the Nor-

dic region have received little research attention (Larimo

& Pynnönen, 2008 ). Finally, the effects of firms’ unique

and heterogeneous resources and capabilities have not

received adequate attention in the research on determi-

nants of CBA performance (Shimizu, Hitt, Vaidyanath, &

Pisano, 2004 ). As a result, how CBAs create value remains

an unsolved puzzle.

Therefore, this study seeks to examine the vital fac-

tors and their coherent interrelationships in determin-

ing synergy realization and value creation in CBAs by

combining theoretical perspectives of the resource-based

view, dynamic capabilities, process, and synergy theory.

We consider both pre- and post-acquisition issues and

contextual and implementation factors and combine

these into a hierarchical structural model. Their inter-

relationships and joining roles on value creation in CBAs

are systematically tested using the partial least squares

structural equation modeling (PLS-SEM) on a sample

of 103 CBAs performed by Nordic firms. Since most of

the participating firms are privately owned, value cre-

ated in CBAs in this study does not refer to shareholder

value but is reflected by two aspects: project-level synergy

realization and overall firm-level performance weighted

by CBA motives in terms of innovation, marketing, and

accounting.

Theory and Hypotheses

Impacting Factors from the Resource-Based View

The resource-based view (RBV) emphasizes the impor-

tance of a firm ’ s resource endowments (especially valu-

able, rare, imperfectly imitable, nonsubstitutable [VRIN]

features) in creating sustained competitive advantages

and aims to examine the link between a firm ’ s inter-

nal resource characteristics and performance (Barney,

1991 ). Confronted with a contemporar y dynamic busi-

ness environment and the need to upgrade resources,