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

Research output: Contribution to journalArticle

21 Citations (Scopus)

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
Number of pages17
JournalBritish Journal of Management
Volume25
Issue numberS1
Early online date17 Jun 2013
DOIs
Publication statusPublished - Jan 2014

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