The Effects of Cross-border and Cross-industry Mergers and Acquisitions on Home-region and Global Multinational Enterprises

Kling, Gerhard; Ghobadian, Abby; Hitt, Michael A.; Weitzel, Utz; O'Regan, Nicholas

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'. © 2013 British Academy of Management.

• Journal Article Type: Article
• Online Publication Date: Jun 17, 2013
• Publication Date: Jan 2, 2014
• Journal: British Journal of Management
• Print ISSN: 1045-3172
• Electronic ISSN: 1467-8551
• Publisher: Wiley
• Peer Reviewed: Not Peer Reviewed
• Volume: 25
• Issue: SUPPL.1
• Pages: S116-S132
• DOI: https://doi.org/10.1111/1467-8551.12023
• Keywords: effects, cross-border, cross-industry, home-region, global, multinational entreprises
• Public URL: https://uwe-repository.worktribe.com/output/822451
• Publisher URL: http://dx.doi.org/10.1111/1467-8551.12023
• Additional Information: Additional Information : Article first published online: 17 June 2013