Build, Buy, or Partner? The Relative Performance of an Acquisitive Strategy
49 Pages Posted: 4 Jan 2018 Last revised: 29 Jun 2023
Date Written: June 29, 2023
Abstract
We conceptualize mergers as one of several strategies for creating value and study merger performance by evaluating the performance of firms employing an acquisitive strategy. Relative to other firms, acquisitive firms are valued lower, exhibit lower employee and total factor productivity, and innovate less. These effects are concentrated among firms whose workforce is vulnerable to acquisition-related personnel disruptions and/or those that are more dependent on employee relationship-specific investments. We therefore propose that an acquisitive strategy diminishes firm value and performance by fostering disruptive conditions that undermine employee effectiveness and weaken their incentives.
Keywords: mergers and acquisitions; corporate strategies; firm value; employee incentives
JEL Classification: G34
Suggested Citation: Suggested Citation