IDEAS home Printed from https://ideas.repec.org/a/spr/manint/v56y2016i3d10.1007_s11575-016-0282-y.html
   My bibliography  Save this article

Resource Deepening Vs. Resource Extension: Impact on Asset-Seeking Acquisition Performance

Author

Listed:
  • Sathyajit R. Gubbi

    (University of Groningen)

  • B. Elango

    (Illinois State University)

Abstract

Seeking critical assets is known to be a key motivation for emerging economy firms to make acquisitions in foreign markets, especially those in developed economies. In this study, we probe this motivation further by identifying two categories of asset-seeking acquisitions: resource deepening and resource extension. Using a sample of 1004 cross-border acquisitions conducted by Indian firms during the period 2000–2010, we find support for the hypothesis that the type of resources sought and their intended utility impacts acquisition performance. Additionally, for resource extension acquisitions, we find that acquisition performance outcomes vary by the assimilative capacity of the firm and the extent of experience in acquisitions at the firm and business group level.

Suggested Citation

  • Sathyajit R. Gubbi & B. Elango, 2016. "Resource Deepening Vs. Resource Extension: Impact on Asset-Seeking Acquisition Performance," Management International Review, Springer, vol. 56(3), pages 353-384, June.
    • Handle: RePEc:spr:manint:v:56:y:2016:i:3:d:10.1007_s11575-016-0282-y
    DOI: 10.1007/s11575-016-0282-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11575-016-0282-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11575-016-0282-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sydney Finkelstein & Jerayr Haleblian, 2002. "Understanding Acquisition Performance: The Role of Transfer Effects," Organization Science, INFORMS, vol. 13(1), pages 36-47, February.
    2. Tarun Khanna & Jan W. Rivkin, 2001. "Estimating the performance effects of business groups in emerging markets," Strategic Management Journal, Wiley Blackwell, vol. 22(1), pages 45-74, January.
    3. Bruce Kogut & Udo Zander, 1992. "Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology," Organization Science, INFORMS, vol. 3(3), pages 383-397, August.
    4. John A Mathews & Ivo Zander, 2007. "The international entrepreneurial dynamics of accelerated internationalisation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(3), pages 387-403, May.
    5. Ishtiaq P. Mahmood & Will Mitchell, 2004. "Two Faces: Effects of Business Groups on Innovation in Emerging Economies," Management Science, INFORMS, vol. 50(10), pages 1348-1365, October.
    6. Bülent Aybar & Aysun Ficici, 2009. "Cross-border acquisitions and firm value: An analysis of emerging-market multinationals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(8), pages 1317-1338, October.
    7. David J. Teece, 2008. "Technology Transfer By Multinational Firms: The Resource Cost Of Transferring Technological Know-How," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 1, pages 1-22, World Scientific Publishing Co. Pte. Ltd..
    8. Gwendolyn K. Lee & Marvin B. Lieberman, 2010. "Acquisition vs. internal development as modes of market entry," Strategic Management Journal, Wiley Blackwell, vol. 31(2), pages 140-158, February.
    9. Deng, Ping, 2009. "Why do Chinese firms tend to acquire strategic assets in international expansion?," Journal of World Business, Elsevier, vol. 44(1), pages 74-84, January.
    10. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 45-66, March.
    11. Yadong Luo & Rosalie L Tung, 2007. "International expansion of emerging market enterprises: A springboard perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 481-498, July.
    12. Buckley, Peter J. & Elia, Stefano & Kafouros, Mario, 2014. "Acquisitions by emerging market multinationals: Implications for firm performance," Journal of World Business, Elsevier, vol. 49(4), pages 611-632.
    13. George P. Huber, 1991. "Organizational Learning: The Contributing Processes and the Literatures," Organization Science, INFORMS, vol. 2(1), pages 88-115, February.
    14. Russell W. Coff, 1999. "How Buyers Cope with Uncertainty when Acquiring Firms in Knowledge-Intensive Industries: Caveat Emptor," Organization Science, INFORMS, vol. 10(2), pages 144-161, April.
    15. Arun Kumaraswamy & Ram Mudambi & Haritha Saranga & Arindam Tripathy, 2012. "Catch-up strategies in the Indian auto components industry: Domestic firms’ responses to market liberalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(4), pages 368-395, May.
    16. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
    17. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    18. Rui, Huaichuan & Yip, George S., 2008. "Foreign acquisitions by Chinese firms: A strategic intent perspective," Journal of World Business, Elsevier, vol. 43(2), pages 213-226, March.
    19. Hüseyin Tanriverdi & N. Venkatraman, 2005. "Knowledge relatedness and the performance of multibusiness firms," Strategic Management Journal, Wiley Blackwell, vol. 26(2), pages 97-119, February.
    20. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    21. Ji‐Yub (Jay) Kim & Sydney Finkelstein, 2009. "The effects of strategic and market complementarity on acquisition performance: evidence from the U.S. commercial banking industry, 1989–2001," Strategic Management Journal, Wiley Blackwell, vol. 30(6), pages 617-646, June.
    22. Shige Makino & Chung-Ming Lau & Rhy-Song Yeh, 2002. "Asset-Exploitation Versus Asset-Seeking: Implications for Location Choice of Foreign Direct Investment from Newly Industrialized Economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(3), pages 403-421, September.
    23. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    24. Alvaro Cuervo-Cazurra & Mehmet Genc, 2008. "Transforming disadvantages into advantages: developing-country MNEs in the least developed countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(6), pages 957-979, September.
    25. Phanish Puranam & Kannan Srikanth, 2007. "What they know vs. what they do: how acquirers leverage technology acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 28(8), pages 805-825, August.
    26. Shimizu, Katsuhiko & Hitt, Michael A. & Vaidyanath, Deepa & Pisano, Vincenzo, 2004. "Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future," Journal of International Management, Elsevier, vol. 10(3), pages 307-353.
    27. Klaus Uhlenbruck & Klaus E. Meyer & Michael A. Hitt, 2003. "Organizational Transformation in Transition Economies: Resource‐based and Organizational Learning Perspectives," Journal of Management Studies, Wiley Blackwell, vol. 40(2), pages 257-282, March.
    28. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources, and entry strategies in emerging economies," Strategic Management Journal, Wiley Blackwell, vol. 30(1), pages 61-80, January.
    29. Mike Wright & Igor Filatotchev & Robert E. Hoskisson & Mike W. Peng, 2005. "Strategy Research in Emerging Economies: Challenging the Conventional Wisdom," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 1-33, January.
    30. S.A. Lippman & R.P. Rumelt, 1982. "Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 418-438, Autumn.
    31. J. Myles Shaver, 1998. "Accounting for Endogeneity When Assessing Strategy Performance: Does Entry Mode Choice Affect FDI Survival?," Management Science, INFORMS, vol. 44(4), pages 571-585, April.
    32. Wilbur Chung & Stephen Yeaple, 2008. "International knowledge sourcing: evidence from U.S. firms expanding abroad," Strategic Management Journal, Wiley Blackwell, vol. 29(11), pages 1207-1224, November.
    33. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
    34. Johny K Johansson & Ilkka A Ronkainen & Michael R Czinkota, 1994. "Negative Country-of-Origin Effects: The Case of the New Russia," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(1), pages 157-176, March.
    35. Sathyajit R Gubbi & Preet S Aulakh & Sougata Ray & M B Sarkar & Raveendra Chittoor, 2010. "Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(3), pages 397-418, April.
    36. B Elango & Chinmay Pattnaik, 2007. "Building capabilities for international operations through networks: a study of Indian firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 541-555, July.
    37. B. Elango & Chinmay Pattnaik, 2011. "Learning Before Making the Big Leap," Management International Review, Springer, vol. 51(4), pages 461-481, August.
    38. Lebedev, Sergey & Peng, Mike W. & Xie, En & Stevens, Charles E., 2015. "Mergers and acquisitions in and out of emerging economies," Journal of World Business, Elsevier, vol. 50(4), pages 651-662.
    39. Peter J. Lane & Jane E. Salk & Marjorie A. Lyles, 2001. "Absorptive capacity, learning, and performance in international joint ventures," Strategic Management Journal, Wiley Blackwell, vol. 22(12), pages 1139-1161, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alessia Amighini & Claudio Cozza & Elisa Giuliani & Roberta Rabellotti & Vittoria Scalera, 2015. "Multinational enterprises from emerging economies: what theories suggest, what evidence shows. A literature review," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(3), pages 343-370, September.
    2. Klaus Meyer & Ornjira Thaijongrak, 2013. "The dynamics of emerging economy MNEs: How the internationalization process model can guide future research," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1125-1153, December.
    3. De Beule, Filip & Sels, Annabel, 2016. "Do innovative emerging market cross-border acquirers create more shareholder value? Evidence from India," International Business Review, Elsevier, vol. 25(2), pages 604-617.
    4. Buckley, Peter J. & Munjal, Surender & Enderwick, Peter & Forsans, Nicolas, 2016. "Cross-border acquisitions by Indian multinationals: Asset exploitation or asset augmentation?," International Business Review, Elsevier, vol. 25(4), pages 986-996.
    5. Buckley, Peter J. & Munjal, Surender & Enderwick, Peter & Forsans, Nicolas, 2016. "Do foreign resources assist or impede internationalisation? Evidence from internationalisation of Indian multinational enterprises," International Business Review, Elsevier, vol. 25(1), pages 130-140.
    6. Vikas Kumar & Deeksha Singh & Anish Purkayastha & Manish Popli & Ajai Gaur, 2020. "Springboard internationalization by emerging market firms: Speed of first cross-border acquisition," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(2), pages 172-193, March.
    7. Mike W. Peng & Sergey Lebedev & Cristina O. Vlas & Joyce C. Wang & Jason S. Shay, 2018. "The growth of the firm in (and out of) emerging economies," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 829-857, December.
    8. Chabowski, Brian R. & Samiee, Saeed, 2023. "A bibliometric examination of the literature on emerging market MNEs as the basis for future research," Journal of Business Research, Elsevier, vol. 155(PB).
    9. Gaur, Ajai S. & Kumar, Vikas & Singh, Deeksha, 2014. "Institutions, resources, and internationalization of emerging economy firms," Journal of World Business, Elsevier, vol. 49(1), pages 12-20.
    10. Estrin, Saul & Meyer, Klaus E. & Pelletier, Adeline, 2018. "Emerging Economy MNEs: How does home country munificence matter?," Journal of World Business, Elsevier, vol. 53(4), pages 514-528.
    11. Stefano Elia & Surender Munjal & Vittoria G. Scalera, 2020. "Sourcing Technological Knowledge Through Foreign Inward Licensing to Boost the Performance of Indian Firms: The Contingent Effects of Internal R&D and Business Group Affiliation," Management International Review, Springer, vol. 60(5), pages 695-721, October.
    12. Li, Jiatao & Li, Peixin & Wang, Baolian, 2016. "Do cross-border acquisitions create value? Evidence from overseas acquisitions by Chinese firms," International Business Review, Elsevier, vol. 25(2), pages 471-483.
    13. Yadong Luo & Rosalie L Tung, 2018. "A general theory of springboard MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 129-152, February.
    14. Foroudi, Pantea & Gupta, Suraksha & Patel, Parth & Batsakis, Georgios & Vaatanen, Juha & Czinkota, Michael, 2023. "The effect of home country characteristics on the internationalization of EMNEs: The moderating role of knowledge stock," International Business Review, Elsevier, vol. 32(2).
    15. Chidambaran, N.K. & Krishnakumar, Dipali & Sethi, Madhvi, 2018. "Cross-border vs. domestic acquisitions: Evidence from India," Journal of Economics and Business, Elsevier, vol. 95(C), pages 3-25.
    16. Yoo, Dasun & Reimann, Felix, 2017. "Internationalization of Developing Country Firms into Developed Countries: The Role of Host Country Knowledge-Based Assets and IPR Protection in FDI Location Choice," Journal of International Management, Elsevier, vol. 23(3), pages 242-254.
    17. Buckley, Peter J & Cui, Lin & Chen, Liang & Li, Yi & Choi, Yoona, 2023. "Following their predecessors’ journey? A review of EMNE studies and avenues for interdisciplinary inquiry," Journal of World Business, Elsevier, vol. 58(2).
    18. Luo, Yadong & Bu, Juan, 2018. "Contextualizing international strategy by emerging market firms: A composition-based approach," Journal of World Business, Elsevier, vol. 53(3), pages 337-355.
    19. Ajai S Gaur & Xufei Ma & Zhujun Ding, 2018. "Home country supportiveness/unfavorableness and outward foreign direct investment from China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(3), pages 324-345, April.
    20. Bilgili, Tsvetomira V. & Kedia, Ben L. & Bilgili, Hansin, 2016. "Exploring the influence of resource environments on absorptive capacity development: The case of emerging market firms," Journal of World Business, Elsevier, vol. 51(5), pages 700-712.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:manint:v:56:y:2016:i:3:d:10.1007_s11575-016-0282-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.