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

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

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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'.

Original languageEnglish
Pages (from-to)S116-S132
JournalBritish Journal of Management
Volume25
Issue numberSUPPL.1
DOIs
Publication statusPublished - 1 Jan 2014
Externally publishedYes

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