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Do early birds get the returns? An empirical investigation of early‐mover advantages in acquisitions

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  • Kenneth Carow
  • Randall Heron
  • Todd Saxton

Abstract

We explore whether pioneering advantages exist for early‐mover acquirers in industry acquisition waves by examining both combined (target and acquirer) and acquirer stock returns. Combined abnormal returns are higher for acquisitions that occur at the beginning of acquisition waves. However, for acquirers' returns, only strategic pioneers—those acting in manners consistent with having superior information—capture significant advantages. Specifically, early‐mover acquirers who realize superior stock returns are those that conduct acquisitions in related industries, during industry expansionary phases, and finance their acquisitions as financial theory suggests they should when they possess an informational advantage—with cash. Our findings extend the first‐mover literature to corporate practices and link these practices to acquisition returns. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Kenneth Carow & Randall Heron & Todd Saxton, 2004. "Do early birds get the returns? An empirical investigation of early‐mover advantages in acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 25(6), pages 563-585, June.
    • Handle: RePEc:bla:stratm:v:25:y:2004:i:6:p:563-585
    DOI: 10.1002/smj.404
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    1. Ahsan, Faisal Mohammad & Fuad, Mohammad & Sinha, Ashutosh Kumar, 2021. "Seeking strategic assets within cross-border acquisition waves: a study of Indian firms," Journal of International Management, Elsevier, vol. 27(4).
    2. Marco Testoni, 2022. "The market value spillovers of technological acquisitions: Evidence from patent‐text analysis," Strategic Management Journal, Wiley Blackwell, vol. 43(5), pages 964-985, May.
    3. Kargas, Antonios & Argyroulis, Vasileios & Varoutas, Dimitrios, 2023. "Mergers and acquisitions in telecommunications market: a simultaneous equations approach to study Structure, Conduct and Performance," 32nd European Regional ITS Conference, Madrid 2023: Realising the digital decade in the European Union – Easier said than done? 277984, International Telecommunications Society (ITS).
    4. ter Braak, Anne & Geyskens, Inge & Dekimpe, Marnik G., 2014. "Taking private labels upmarket: Empirical generalizations on category drivers of premium private label introductions," Journal of Retailing, Elsevier, vol. 90(2), pages 125-140.
    5. Yang Zhang, 2018. "Corporate Governance Effects on Risk Management and Shareholder Wealth: The Case of Mergers and Acquisitions," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 4-2018.
    6. Philipp Meyer‐Doyle & Sunkee Lee & Constance E. Helfat, 2019. "Disentangling the microfoundations of acquisition behavior and performance," Strategic Management Journal, Wiley Blackwell, vol. 40(11), pages 1733-1756, November.
    7. Alex Coad & Sven-Olov Daunfeldt & Daniel Halvarsson, 2022. "Amundsen versus Scott: are growth paths related to firm performance?," Small Business Economics, Springer, vol. 59(2), pages 593-610, August.
    8. Arkadiy V. Sakhartov, 2018. "Stock market undervaluation of resource redeployability," Strategic Management Journal, Wiley Blackwell, vol. 39(4), pages 1059-1082, April.
    9. Naaguesh Appadu & Anna Faelten & Mario Levis, 2013. "Acquisitions, SEOs, divestitures and IPO performance," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 17, pages 347-374, Edward Elgar Publishing.
    10. Mohammad Fuad & Ashutosh Kumar Sinha, 2018. "Entry-timing, business groups and early-mover advantage within industry merger waves in emerging markets: A study of Indian firms," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 919-942, December.
    11. Stienstra, Miranda, 2020. "The determinants and performance implications of alliance partner acquisition," Other publications TiSEM 7fdee0c2-d4d2-4f5b-95e3-2, Tilburg University, School of Economics and Management.
    12. Lee, Sang-Gun & Koo, Chulmo & Nam, Kichan, 2010. "Cumulative strategic capability and performance of early movers and followers in the cyber market," International Journal of Information Management, Elsevier, vol. 30(3), pages 239-255.
    13. Fuad, Mohammad & Gaur, Ajai S., 2019. "Merger waves, entry-timing, and cross-border acquisition completion: A frictional lens perspective," Journal of World Business, Elsevier, vol. 54(2), pages 107-118.
    14. Raquel García-García & Esteban García-Canal & Mauro F. Guillén, 2019. "International Dispersion and Profitability: An Institution-Based Approach," Management International Review, Springer, vol. 59(6), pages 855-888, December.
    15. Twardawski, Torsten & Kind, Axel, 2023. "Board overconfidence in mergers and acquisitions," Journal of Business Research, Elsevier, vol. 165(C).
    16. Phebo D. Wibbens & Nicolaj Siggelkow, 2020. "Introducing LIVA to measure long‐term firm performance," Strategic Management Journal, Wiley Blackwell, vol. 41(5), pages 867-890, May.
    17. Elisa Barbieri & Manli Huang & Shenglei Pi & Mattia Tassinari, 2017. "Restructuring the Production of Medicines: An Investigation on the Pharmaceutical Sector in China and the Role of Mergers and Acquisitions," IJERPH, MDPI, vol. 14(10), pages 1-21, October.
    18. Fawad Rauf & Cosmina Lelia Voinea & Hammad Bin Azam Hashmi & Cosmin Fratostiteanu, 2020. "Moderating Effect of Political Embeddedness on the Relationship between Resources Base and Quality of CSR Disclosure in China," Sustainability, MDPI, vol. 12(8), pages 1-19, April.
    19. Dovev Lavie & Randi Lunnan & Binh Minh T. Truong, 2022. "How does a partner's acquisition affect the value of the firm's alliance with that partner?," Strategic Management Journal, Wiley Blackwell, vol. 43(9), pages 1897-1926, September.

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