Disentangling Embeddedness.
An Empirical Analysis of Global Acquisitions in the 1990s

Ruth V. Aguilera
John C. Dencker
Xavier Escandell


Ciber Abstract

Mergers and acquisitions (M&As) have become the dominant mode of growth in advanced industrialized countries.  However, over half of all mergers fail to produce the intended results. Despite a wealth of research on the financial returns of M&As, and a burgeoning interest in the impact of social relationships on economic outcomes, we know little about the factors influencing the pre-merger stage before announced deals become completed or withdrawn.  We develop the notion of embeddedness through the lenses of the French rgulation theory to examine the outcomes of announced mergers.  Specifically, we consider the embeddedness of M&A decision-making in three key institutional contexts (country, industry and firm) to predict the likelihood that announced M&As will be brought to completion.  We assess the validity of our concepts by analyzing a sample of the largest domestic and cross-border announced M&As in the world in the 1990s.  Our findings indicate that announced M&As are significantly more likely to be completed if the acquiring and target firms (1) are located in different countries, and (2) possess a high relative status difference.  By contrast, announced M&As are significantly less likely to complete if the acquiring and target firms (1) have high national culture differences, (2) share a legal tradition, (3) belong to the same industry, and (4) possess different attitudes towards the M&A.  We discuss these findings in light of precautionary actions taken by firms prior to M&A announcements.


KEYWORDS:  Domestic and Cross-Border Mergers and Acquisitions; Merger Announcements; Embeddedness



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