Experience and Cross‐Border Acquisitions: An Organizational Learning Perspective

• Published date: 01 June 2017
• Author: Daniele Cerrato,Ilaria Galavotti,Donatella Depperu
• DOI: http://doi.org/10.1111/emre.12094
• Date: 01 June 2017

Experience and Cross-Border Acquisitions:

An Organizational Learning Perspective

ILARIA GALAVOTTI,

1

DANIELE CERRATO

1

*andDONATELLA DEPPERU

2

1

Dipartimento di Scienze Economiche e Sociali, Università Cattolica del Sacro Cuore, Piacenza, Italy

2

Dipartimento di Scienze dell’Economia e dellaGestione Aziendale, Università Cattolica del Sacro Cuore, Milan, Italy

Building on organizational learning theory, and notably on the notion of strategic momentum, we examine the

antecedents of cross-borderacquisitions, with a specific focus on the effectof experience. In particular, we unbundle

firm experience intodomestic and cross-borderacquisition experience. Using data on 763acquisitions in the period

2007–2013, our results show the existence of a U-shaped relationship between domestic acquisition experience and

the likelihood of cross-border acquisitions: acquisition experience in the domestic market is negatively related to

subsequent international M&A activityup to a certain level, afterwhich accumulation of experience in the domestic

market generates process-related capabilities that encourage subsequent cross-border acquisitions. Empirical

support is provided for an inverted U-shaped relationship between prior cross-border acquisition experience and

the likelihood of subsequent cross-border acquisitions: such experience encourages further acquisitions up to the

point at which the coordination costs discourage further international expansion.

Keywords: cross-border acquisitions; domestic acquisitions; organizational learning; acquisition experience

Introduction

Mergers and acquisitions (M&A) are strategically

relevant and discrete events (Haleblian et al., 2009),

which have been attracting an enduring academic interest

for decades (Cartwright and Schoenberg, 2006). Indeed,

the exponentialincrease of acquisition activity as a means

to instantlyincrease marketshares, acquire new knowledge

and competencies,eliminate rivals,exploit scale and scope

economies, and enter new products and geographic

markets has paved the way to an escalating production

of contributions (e.g., Barkema and Vermeulen, 1998;

Haleblian and Finkelstein, 1999; Finkelstein and

Haleblian, 2002; Harzing, 2002; Zollo and Singh, 2004;

Ahsan and Musteen, 2011). Despite this proliferation of

studies, little attention has been specifically devoted to

cross-border acquisitions if compared to domestic

acquisitions (C ollins et al., 2009).

One of the main reasons underpinning this paucity of

studies is that cross-border M&A has traditionally been

considered as a subcategory of domestic M&A, rather

than receiving separate scholarly attention as a distinctive

research area within the general topic of M&A (Shimizu

et al., 2004). International acquisitions may, however, be

subject to different behavioral mechanisms as they are

characterized by unique dynamics and risks, such as

liability of foreignness (Zaheer, 1995)and double-layered

acculturation (Bar kema et al., 1996), which pose

additional challenges to the management of the entire

acquisition process. The peculiarities of cross-border

acquisitions thus raise the need for more theoretical and

empirical research on this topic (Shimizu et al., 2004),

especially in view of the remarkably growing rate of

cross-border acquisition activity (Very and Schweiger,

2001).

To address this gap, in line with few recent studies

(Collins et al., 2009; Kling et al., 2014), we explore the

factors affecting the choice between cross-border and

domestic acquisitions. From a theoretical point of view,

we build on organizational learning theory, for long

acknowledged as a valuable theoretical framework to

understand the behavioral mechanisms underlying

acquisitions (Haleblian et al., 2009). Indeed, over the

years several studies have examined the impact of

organizational routines, experiential knowledge, and

knowledge transfer mechanisms on both acquisition

behavior (Amburgey and Miner, 1992;Yang and Hyland,

2006; Collinset al., 2009) and performance (Barkemaand

Correspondence: Daniele Cerrato, Dipartimentodi Scienze Economiche e

Sociali, Università Cattolica del Sacro Cuore, Via Emilia Parmense 84,

29122 Piacenza, Italy. Tel: +39 0523 599 315; Fax: +39 0523 599 303.

E-mail daniele.cerrato@unicatt.it

European Management Review, Vol. 14, 119–131, (2017)

DOI: 10.1111/emre.12094

©2016 European Academy of Management