Session 253

New Insights into Relatedness and Performance

Track F

Date: Tuesday, October 9, 2012

 

Time: 15:45 – 17:00

Paper

Room: Club B


Session Chair:

  • Taco Reus, Erasmus University-Rotterdam

Title: Implementation Implications for the Strategic Fit Hypothesis in Related M&As

Authors

  • Kimberly Ellis, Florida Atlantic University
  • Taco Reus, Erasmus University-Rotterdam

Abstract: Prior research has emphasized the roles of strategy content and strategy process in M&As. However, theorizing and empirical analysis on how these two areas are linked is limited. This paper argues that, in the context of related acquisitions, central strategy content factors – pre-deal product and geographic market differences – influence central strategy process dimensions of post-deal top management retention and integration speed. Moreover, we argue that fairness in making decisions affecting the acquired unit is important particularly when acquired units serve distinct markets. Procedural justice, by providing a voice, enhances retention, while informational justice, by reducing uncertainty, accelerates integration speed. Results from a sample of 233 large, related acquisitions provides overall support for hypothesized effects, and implications for post-acquisition performance.

Title: Relatedness and Firm Performance: Strategic Interaction along the Value Chain

Authors

  • Harry Bowen, Queens University of Charlotte
  • Elisabeth Nocker, University of Innsbruck
  • Christian Stadler, University of Warwick
  • Kurt Matzler, Free University of Bozen-Bolzano

Abstract: This study extends the literature on relatedness and firm performance to consider both customer and technological side relatedness. Recent studies indicate the importance of each source of relatedness but yield ambiguous findings regarding their impact on performance. Conjecturing this ambiguity reflects methodological limitations related to prior studies’ use of survey data to develop measures of relatedness, we instead develop a method to measure relatedness using secondary data and then use this to measure sources of relatedness for a large sample of U.S. firms from 1984 to 2004. Estimating a model in which relatedness and performance are simultaneously determined we find, unlike prior studies, each source of relatedness has a positive direct effect on performance and a positive indirect effect on performance indicating strategic complementary.

Title: Unique Synergies in Technology Acquisitions: The Role of Patent Portfolio Relatedness

Authors

  • George Chondrakis, Pompeu Fabra University

Abstract: In this paper we operationalize and test Barney’s (1988) unique synergy hypothesis, suggesting that acquisitions will create value to the acquirer when the resulting synergy cannot be replicated by other bidding firms. We focus on technology acquisitions and find that patent portfolio relatedness has a positive effect on abnormal returns, but only in industries using complex technologies. These results emphasize the need to observe relatedness at a much finer level of analysis, taking the specific nature of resource complementarity into account. We also explore the determinants of patent acquisitions through corporate takeovers. We find that firms are more likely to buy targets with patents when patent litigation threat is high, when they operate across multiple complex technology areas and when their patent productivity is low.

Title: When Does Related Diversification Destroy Value?

Authors

  • Luis Diestre, IE Business School
  • Juan Santalo, IE Business School

Abstract: Based on a Resource Base View logic and recent literature that analyzes strategic weaknesses and liabilities we identify the contingencies under which related diversification may destroy rather than create firm value. Related diversification is associated with lower performance when sharing a common factor that has become a strategic weakness rather than a strategic resource. This destruction of value gets aggravated when firms have already mastered the capabilities needed to put the shared factors efficiently into use. We test and find empirical support for our hypotheses in the context of chemical relatedness where we are able to identify variations in the legitimacy of the distinct chemicals used across industries as an example of strategic weakness as well as firm capabilities to utilize those chemicals efficiently.

All Sessions in Track F...

Sun: 08:00 – 09:15
Session 123: Capabilities and Corporate Strategy
Sun: 09:30 – 10:45
Session 124: Corporate Strategy and the Role of the Manager
Sun: 11:15 – 12:30
Session 125: Publishing Strategic Management Research
Mon: 08:00 – 09:15
Session 256: Resource Sources and Corporate Strategy: Location, Funding and Advisors
Mon: 09:30 – 10:45
Session 79: Diversification Strategy and Firm Performance
Mon: 13:30 – 14:45
Session 88: Managing Firm Boundaries: Growth, Divestitures and Networks
Mon: 16:30 – 17:45
Session 77: Transformation, Renewal and Corporate Strategy
Tue: 08:00 – 09:15
Session 80: Acquisition Experience, Intensity and Performance
Tue: 11:00 – 12:15
Session 257: Acquisition Performance
Tue: 14:15 – 15:30
Session 86: Corporate Strategy: Expanding Understanding and Knowledge
Tue: 15:45 – 17:00
Session 253: New Insights into Relatedness and Performance


Strategic Management Society

Prague