Effects of Geographical Scope on Post-acquisition Resource Redeployment and Performance

Research in the strategy and international business literatures shows that firms often undertake acquisitions 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 acquisitions has not been able to reach a consensus regarding their level of performance relative to domestic acquisitions. We show that the post-acquisition performance of an acquisition varies with the extent of postacquisition 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 reinterpret previous results that suggest differences between domestic and crossborder acquisitions by showing a similar relationship between resource redeployment and performance, as well as a similar relationship between resource redeployment and its antecedents. In our framework, differences between cross-border and domestic acquisitions arise due to greater differences between the resource endowments and competitive environments in the cross-border case. We discuss differences in research emphases that have traditionally marked research concerning acquisitions in international business literature, which has emphasized crossborder 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.