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Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms

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Author Info

  • Sathyajit R Gubbi

    (Indian Institute of Management Calcutta, Kolkata, India)

  • Preet S Aulakh

    (Schulich School of Business, York University, Toronto, Ontario, Canada)

  • Sougata Ray

    (Indian Institute of Management Calcutta, Kolkata, India)

  • M B Sarkar

    (Fox School of Business, Temple University, Philadelphia, PA, USA)

  • Raveendra Chittoor

    (Indian School of Business, Hyderabad, India)

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    Abstract

    While overseas acquisitions by emerging-economy firms are gaining increased attention from the business press, our understanding of whether and why this inorganic mode of international expansion creates value to acquirer firms is limited. We argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally, thus constituting an important strategic lever of value creation for emerging-economy firms. Furthermore, the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments: country markets that carry the promise of higher quality of resources, and therefore, stronger complementarity to the existing capabilities of emerging-economy firms. An event study of 425 cross-border acquisitions by Indian firms during 2000–2007 supports our predictions.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 41 (2010)
    Issue (Month): 3 (April)
    Pages: 397-418

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    Handle: RePEc:pal:jintbs:v:41:y:2010:i:3:p:397-418

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    Cited by:
    1. Sumit Majumdar & Davina Vora & Ashok Nag, 2012. "Legal form of the firm and overseas market choice in India’s software and IT industry," Asia Pacific Journal of Management, Springer, vol. 29(3), pages 659-687, September.
    2. Deshpande, Shreesh & Svetina, Marko & Zhu, PengCheng, 2012. "Analyst coverage of acquiring firms and value creation in cross-border acquisitions," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 212-229.
    3. Manuel Portugal Ferreira & Fernando A. Ribeiro Serra & Benny Kramer Costa, 2011. "The RBV in International Business Studies: A bibliometric study of Barney?s (1991) contribution to the field," Working Papers 82, globADVANTAGE, Polytechnic Institute of Leiria.
    4. Li, Dan & Miller, Stewart R. & Eden, Lorraine & Hitt, Michael A., 2012. "The Impact of Rule of Law on Market Value Creation for Local Alliance Partners in BRIC Countries," Journal of International Management, Elsevier, vol. 18(4), pages 305-321.
    5. Banerjee, Pradip & Banerjee, Prithviraj & De, Soumen & Jindra, Jan & Mukhopadhyay, Jayanta, 2014. "Acquisition pricing in India during 1995–2011: Have Indian acquirers really beaten the odds?," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 14-30.
    6. Singla, Chitra & George, Rejie, 2013. "Internationalization and performance: A contextual analysis of Indian firms," Journal of Business Research, Elsevier, vol. 66(12), pages 2500-2506.
    7. Manuel Portugal Ferreira & Nuno Rosa Reis & Fernando Ribeiro Serra & Benny Kramer Costa, 2013. "Understanding the footprint of the RBV in International Business studies: The last twenty years of research," Working Papers 96, globADVANTAGE, Polytechnic Institute of Leiria.
    8. Kohli, Reena & Mann, Bikram Jit Singh, 2013. "Analyzing the likelihood and the impact of earnout offers on acquiring company wealth gains in India," Emerging Markets Review, Elsevier, vol. 16(C), pages 203-222.
    9. Bhagat, Sanjai & Malhotra, Shavin & Zhu, PengCheng, 2011. "Emerging country cross-border acquisitions: Characteristics, acquirer returns and cross-sectional determinants," Emerging Markets Review, Elsevier, vol. 12(3), pages 250-271, September.
    10. Jaya Prakash Pradhan, 2010. "Strategic Asset-Seeking Activities of Emerging Multinationals: Perspectives of Foreign Acquisitions by Indian Pharmaceutical MNEs," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 1(2).
    11. Schmid, Stefan & Dauth, Tobias, 2014. "Does internationalization make a difference? Stock market reaction to announcements of international top executive appointments," Journal of World Business, Elsevier, vol. 49(1), pages 63-77.
    12. Cowan, Adrian & Huang, Chia-Hsing & Padmanabhan, Prasad & Wang, Chi-Hui, 2013. "The determinants of foreign giving: An exploratory empirical investigation of US manufacturing firms," International Business Review, Elsevier, vol. 22(2), pages 407-420.

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