Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms

While overseas acquisitions by emerging-economy firms are gaining increased attention from the business press, our understanding of whether and why this inorganic mode of international expansion creates value to acquirer firms is limited. We argue that international acquisitions facilitate internali...

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Published inJournal of international business studies Vol. 41; no. 3; pp. 397 - 418
Main Authors Gubbi, Sathyajit R, Aulakh, Preet S, Ray, Sougata, Sarkar, MB, Chittoor, Raveendra
Format Journal Article
LanguageEnglish
Published London Palgrave Macmillan 01.04.2010
Palgrave Macmillan UK
SeriesJournal of International Business Studies
Subjects
Acquisitions & mergers
Boundaries
Business and Management
Business Strategy/Leadership
Business structures
Corporate strategies
Cross border transactions
Developing countries
Economic development
Economic growth
Economic growth rate
Economic reform
Economic resources
Economic value
Emerging markets
Exploitation
Global economy
Globalization
Hypotheses
International Business
International economics
LDCs
Liberalization
Management
Multinational corporations
Organization
Shareholders
Shareholders equity
Stockholders
Studies
Target acquisitions
Value creation
India
institutions
international acquisitions
complementary resources
emerging markets
value creation
India
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Summary:While overseas acquisitions by emerging-economy firms are gaining increased attention from the business press, our understanding of whether and why this inorganic mode of international expansion creates value to acquirer firms is limited. We argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally, thus constituting an important strategic lever of value creation for emerging-economy firms. Furthermore, the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments: country markets that carry the promise of higher quality of resources, and therefore, stronger complementarity to the existing capabilities of emergingeconomy firms. An event study of 425 cross-border acquisitions by Indian firms during 2000-2007 supports our predictions.
ISSN:0047-2506
1478-6990
DOI:10.1057/jibs.2009.47