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’.

Citation

Kling, G., Ghobadian, A., Hitt, M. A., Weitzel, U., & O'Regan, N. The Effects of Cross-border and Cross-industry Mergers and Acquisitions on Home-region and Global Multinational Enterprises. British Journal of Management, 25(1), 116-132. https://doi.org/10.1111/1467-8551.12023

• Journal Article Type: Article
• Online Publication Date: Jun 17, 2013
• Deposit Date: Dec 5, 2013
• Publicly Available Date: Dec 14, 2018
• Journal: British Journal of Management
• Print ISSN: 1045-3172
• Electronic ISSN: 1467-8551
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 25
• Issue: 1
• Pages: 116-132
• DOI: https://doi.org/10.1111/1467-8551.12023