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The Effect of Mergers and Acquisitions on Firm Resource Environment

  • Author(s): Yang, Rui;
  • Advisor(s): Haleblian, Jerayr;
  • et al.
Abstract

This dissertation is comprised of two essays examining the effect of mergers and acquisitions on firm resource environment. In the first study, I draw from optimal distinctiveness theory to examine how an acquisition has the potential to create a superior industry position. Specifically, optimal distinctiveness theory argues that firms can accrue the benefits of differentiation and legitimacy through an optimal industry position, which is neither too close to (over-conforming) nor too distant from (over-deviating) industry norms. I argue that investors will see greater potential value in a position-enhancing acquisition, especially when they observe a greater acquirer-to-target fit to facilitate the resource realignment and coordination between the two firms. Thus, I predict that position-enhancing acquisitions will receive positive market reactions, which will strengthen under conditions in which the deal characteristic reflects a stronger resource fit between acquirer and target based on asset similarity, market similarity, and superior target positioning. Using data from the U.S. commercial banking industry, I find support for my hypotheses. In the second study, I draw on Lavie’s (2006) framework on inter-firm relationships to examine the influence of an acquisition on the acquirer’s alliance partners. Specifically, under conditions in which an acquisition increases inter-firm connections for the acquirer alliance partner, I posit that spillover rents should flow from the acquirer to the focal partner. Moreover, I also posit that the relative bargaining power within an existing alliance relationship will determine relational rents,

which flow from the relatively weaker partner to the stronger partner. In addition, under conditions in which an acquirer and target share common alliance partners, the acquirer’s alliance partner will receive less spillover rents due to reduced inter-firm connections after the acquisition. Whereas more common partners shared between acquirer and target will increase relational rents as the acquirer consolidates relational rents from the target. Using data from the pharmaceutical industry, I find support for my hypotheses.

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