Resource Redeployment and Acquisition Performance in Domestic and Cross-border Acquisitions

Research in the strategy and international business literatures shows that firms often undertake acquisitions in order to exchange firm-specific resources. The core arguments arise from theories of market failures, where market failures can stem from potential opportunism or from coordination difficulties. However, empirical research on cross-border and domestic acquisitions has not been able to reach a consensus regarding post-acquisition strategy and performance in the two types of cases. We show that the post-acquisition performance of an acquisition in both domestic and cross-border contexts varies with the extent of post-acquisition redeployment, which in turn depends on two factors, including the degree of asymmetry in the resource profiles of the firms and the extent of context-specificity of these resources. We discuss differences in research emphases that have traditionally marked research concerning acquisitions in international business literature, which has emphasized cross-border acquisitions, and the strategy literature, which has focused on domestic acquisitions, and then identify opportunities for conceptual cross-fertilization between the literatures. The data draw from a detailed multinational survey with 251 acquisitions during the 1988-1992 period. The results generally support our predictions for domestic and cross-border acquisitions.