The Effects of Cross‐border and Cross‐industry Mergers and Acquisitions on Home‐region and Global Multinational Enterprises. (17th June 2013)

• Record Type: Journal Article
• Authors: Kling, Gerhard; Ghobadian, Abby; Hitt, Michael A.; Weitzel, Utz; O'Regan, Nicholas
• Is Part Of: British journal of management. Volume 25(2014)Supplement 1
• Page Start: S116
• Page End: S132
• Publication Date: 2013-06-17
• Subjects: Management -- Periodicals; 658.00941
• DOI: 10.1111/1467-8551.12023
• Languages: English
• ISSNs: 1045-3172

Abstract

Abstract : We examine the effects of international and product diversification through mergers and acquisitions (M&As) on the firm's risk–return profile. We identify the rewards from different types of M&As and investigate whether becoming a global firm is a value‐enhancing strategy. Drawing on the theoretical work of Vachani ( Journal of International Business Studies, 22 (1991), pp. 307−222) and on Rugman and Verbeke's ( Journal of International Business Studies, 35 (2004), pp. 3−18) metrics, we classify firms according to their degree of international and product diversification. To account for the endogeneity of M&As, we develop a panel vector autoregression. We find that global and host‐region multinational enterprises benefit from cross‐border M&As that reinforce their geographical footprint. Cross‐industry M&As enhance the risk–return profile of home‐region firms. This effect depends on the degree of product diversification. Hence there is no value‐enhancing M&A strategy for home‐region and bi‐regional firms to become 'truly global'.