Effects of Acquisitions on R&D Inputs and Outputs

Making acquisitions, although a popular strategy, may not always lead to positive firm performance. Researchers have offered several explanations for this relationship. One is that acquisitions lead to lower investments in R&D and curtail the championing process whereby organization members internally promote new products and processes in firms. The current research found that acquisitions had negative effects on R&D intensity and patent intensity

Are Acquisitions a Poison Pill for Innovation?

The recent wave of acquisition activity may be damaging the innovative capabilities of American firms, thus making them less competitive in the global marketplace. In fact, acquisitions often serve as a substitute for innovation, which may cause further neglect of internal research and development (R&D) programs. Additionally, acquisitions often lead to increases in leverage, diversification, and absorb significant amounts of executive time, which may lead to reduced managerial commitment to innovation. In this article, evidence is presented suggesting that acquisition activity may result in reductions in R&D inputs and outputs. On average, the 191 firms in the sample reduced their allocations to R&D relative to their competitors following acquisitions. Furthermore, the firms also experienced reductions in the number of patents. Implications from this evidence are offered for executives and acquisition strategies. Specifically, based on our results, we propose that firms can compensate for the negative effects of acquisitions. Moreover, acquisitions, when properly planned and targeted, may enhance or complement a firm\u27s innovation processes. Firms should search for acquisitions that complement R&D projects, facilitate product commercialization and/or enhance their core competences

Do the type and number of blockholders influence R&D investments? : new evidence from Spain

Using data from 3,638 Spanish firms between 1996 and 2000, this article studies the relationship between the presence of large shareholders in the ownership structure of firms and R&D investment. Consistent with our theoretical contention, our results indicate that the impact of large shareholders on the R&D investment is (1) negative when blockholders are banks, (2) positive when blockholders are non-financial corporations and (3) null when blockholders are individuals. In addition, we find a systematic negative relationship between the number of blockholders and R&D investment. Finally, we extend our study by analysing the influence that the combined effect between blockholder type and R&D investment has on the firm’s economic performance. Results of this work provide relevant implications for policy makers and academic research.Publicad

Corporate governance and financial constraints on strategic turnarounds

The paper extends the Robbins and Pearce (1992) two-stage turnaround response model to include governance factors. In addition to the retrenchment and recovery, the paper proposes the addition of a realignment stage, referring specifically to the re-alignment of expectations of principal and agent groups. The realignment stage imposes a threshold that must be crossed before the retrenchment and hence recovery stage can be entered. Crossing this threshold is problematic to the extent that the interests of governance-stakeholder groups diverge in a crisis situation. The severity of the crisis impacts on the bases of strategy contingent asset valuation leading to the fragmentation of stakeholder interests. In some cases the consequence may be that management are prevented from carrying out turnarounds by governance constraints. The paper uses a case study to illustrate these dynamics, and like the Robbins and Pearce study, it focuses on the textile industry. A longitudinal approach is used to show the impact of the removal of governance constraints. The empirical evidence suggests that such financial constraints become less serious to the extent that there is a functioning market for corporate control. Building on governance research and turnaround literature, the paper also outlines the general case necessary and sufficient conditions for successful turnarounds

Thirty Years After Michael E. Porter: What Do We Know About Business Exit?

Although a business exit is an important corporate change initiative, the buyer’s side seems to be more appealing to management researchers than the seller’s because acquisitions imply growth, i.e., success. Yet from an optimistic viewpoint, business exit can effectively create value for the selling company. In this paper we attempt to bring the relevance of the seller’s side back into our consciousness by asking: What do we know about business exit? We start our exploration with Porter (1976), focusing on literature that investigates the antecedents of, barriers to, and outcomes of business exit. We also include studies from related fields such as finance and economics.1 Through this research we determine three clusters of findings: factors promoting business exit, exit barriers, and exit outcomes. Overall, it is the intention of this paper to highlight the importance of business exit for research and practice. Knowing what we know about business exits and their high financial value we should bear in mind that exit need not mean failure but a new beginning for a corporation

Corporate Strategy and the Theory of the Firm in the Digital Age

The purpose of this article is to reinvigorate research in the intersection of corporate strategy and the theory of the firm in light of the rapid advancement of digital technologies. Using the theory of the firm as an interpretive lens, we focus our analysis on the implications of the emerging digital age for three broad domains of corporate strategy: (1) corporate (competitive) advantage, (2) firm scale, scope, and boundaries, and (3) internal structure and design. Recognizing that digitalization exacerbates ambiguity and paradoxes, we sketch foundational strategies for future research. We suggest that there is a need to develop knowledge that accounts for the new realities of the digital age, depending on whether the corporate strategy phenomena under investigation and the theories of the firm used to explain them, are existing or new. The article serves also as introduction to the Journal of Management Studies Special Issue on the topic

A Framework for Understanding Firms’ Foreign Exit Behavior

Although research on foreign market entry and expansion behavior has attracted significant interest in the literature, there is a general lack of research (either conceptual or empirical) on the exit behavior of international companies. To address this issue, the authors develop a conceptual framework to understand firms’ foreign exit behavior. The objective is to lay the conceptual foundation for subsequent empirical research in this area. A series of research propositions have been advanced that can guide hypothesis generation for future research

Human Resources and the Resource Based View of the Firm

The resource-based view (RBV) of the firm has influenced the field of strategic human resource management (SHRM) in a number of ways. This paper explores the impact of the RBV on the theoretical and empirical development of SHRM. It explores how the fields of strategy and SHRM are beginning to converge around a number of issues, and proposes a number of implications of this convergence

Shareholder activism in the UK: types of activists, forms of activism, and their impact on a target’s performance

Considering the recent rapid expansion of shareholder activism phenomenon in the United Kingdom (UK) and the vast amount of resources committed to it by corporations, government and investors, its effectiveness has become a crucial subject for investigation. This article analyzes organizational outcomes of shareholder activism in the UK. This research is based on a unique comprehensive database of shareholder activism events during the period of 1998–2008. We provide a detailed account of different types of activists, activism strategies and shareholder demands associated with the events of activism. Our findings show that the effectiveness of shareholder activism in terms of abnormal stock-market returns varies dramatically depending on its form, type of investor and the nature of investor proposals