Influencing Acquisition Performance in High-Technology Industries: The Role of Innovation and Relational Overlap

Alok R. Saboo, Amalesh Sharma, Anindita Chakravarty, and V. Kumar
Article Snapshot
Current average rating    
Key Takeaways
  • ​In addition to the levels of innovation and relational resources, the degree of overlap between the acquirer and target across these two resources should influence acquisitions.
  • The synergies realized due to innovation and relational overlap are influenced by the quality of target's resources as well as factors that influence acquirer's ability to absorb these resources.
  • Overlap across innovation resources between the acquirer and target helps, whereas overlap across relational resources hurts acquisition performance.

​Article Snapshots: Executive Summaries from the Journal of Marketing Research

We highlight the value of relational overlap (RO) in the acquisition context and highlight that, unlike IO, which helps acquisitions, RO hurts acquisition performance, suggesting that firms should consider overlaps across both resources in their acquisition decisions.
 
Managers should carefully evaluate their acquisition decisions in light of both innovation and relational ovarlap along with the moderators that may influence value created through acqusition.
We highlight contingent roles of innovation and relational overlap in influencing acquisition performance, and propose that managers should account for such contructs to assess possible means of achieving acquirer-target synergy.
 
Research Question
Acquisitions continue to be a dominant strategy for firms seeking growth avenues, yet almost 90% of acquisitions fail to create value. The importance of synergy or relatedness in organizational resources (as measured by overlap) in driving acquisition outcomes is well established. However, extant research has only examined the value of innovation overlap and largely overlooked the importance of overlap across relational resources, which is one of the primary sources of organizational advantage. Thus, our primary objective is to highlight the importance of relational overlap in acquisitions.

Theory
We draw on the absorptive capacity literature to argue for the importance of quality of target's
resources along with factors influencing acquirer's absorptive capacity as variables that influence the relationship between resource overlap and acquisition performance. We use a large sample of 319 biopharmaceutical acquisitions between 1995 and 2013 and data collected from multiple sources to examine our framework. Further, we use robust panel-data econometric techniques to ensure the robustness of our results.

Findings
We find that IO has a postive effect, whereas RO has a negative effect on acquisition performance due to the integration issues resulting from increase in relationship multiplexity. Further, we find that the positive effect of IO increases with quality of target's innovation resources and acquirer's marketing intensity, whereas it decreases with acquirer's acquisition experience and when the acquirer CEO does not have a marketing background. The negative effects of RO decrease with the increase in target's relational resource quality and when the acquirer CEO has marketing background.

Implications
Our study highlights that our current understanding of synergy due to resource relatedness was incomplete as we largely overlooked the overlap in relational resources, which is an important source of organizational resources. Based on our results, we hope that scholars include both dimensions of organizational resources in their future studies. Further, we hope that firms, especially in the high-tech space, carefully evaluate their targets along both innovation and relational overlap to avoid challenges related to relational multiplexities and enhance their chances of acquisition success. 
 
Questions for the Classroom
  • What are the different dimensions of organizational resource bases? Identify the consequences of high overlap across these resources.
  • If relatedness or overlap refer to familiarity, should firms always look for high overlap in acquisitions? Why or why not?
  • Why should overlap across innovation and relational resources between two firms have differential effects?
 
Article Citation
Alok R. Saboo, Amalesh Sharma, Anindita Chakravarty, and V. Kumar (2017) Influencing Acquisition
Performance in High-Technology Industries: The Role of Innovation and Relational Overlap. Journal
of Marketing Research: April 2017, Vol. 54, No. 2, pp. 219-238.
 
 



Author Bio:

 
Alok R. Saboo, Amalesh Sharma, Anindita Chakravarty, and V. Kumar
Alok R. Saboo is Assistant Professor of Marketing and Assistant Director, Center for Excellence in Brand & Customer Management, J. Mack Robinson College of Business, Georgia State University (e-mail: asaboo@gsu.edu). Amalesh Sharma is Assistant Professor of Marketing, Mays Business School, Texas A&M University (e-mail: asharma@mays.tamu.edu). Anindita Chakravarty is Assistant Professor, Department of Marketing, Terry College of Business, University of Georgia (e-mail: achakra@uga.edu). V. Kumar (VK) is the Regents' Professor, Richard and Susan Lenny Distinguished Chair, & Professor of Marketing, and Executive Director, Center for Excellence in Brand & Customer Management, J. Mack Robinson College of Business, Georgia State University (e-mail: vk@gsu.edu). VK has also been honored as the Chang Jiang Scholar, HUST, China; Faculty Fellow, Texas A&M University Institute for Advanced Study; and Senior Fellow, Indian School of Business.
Add A Comment :
 

Become a Member
Access our innovative members-only resources and tools to further your marketing practice.