Targets with presence in multiple locations are often acquired. In such acquisitions, when do acquirers value their whole geographic configuration versus parts? This is the question addressed by this dissertation. By invoking industry variation in the distance manufactured products travel and knowledge intensity, two key determinants of firm location, I examine the conditions under which acquirers are likely to value collective location characteristics of potential targets versus those under which they value particular locations.
I hypothesize that because market presence is beneficial in industries with highly localized outputs, those in which manufactured products travel short distances, buyers are likely to positively value the market associated with the entire configuration of multi-location targets in such settings. I also predict that in acquisitions in knowledge intensive industries, because of access to valuable localized knowledge spillovers, acquirers are likely to positively value the knowledge intensity in single locations of multi-location targets. Finally, I predict that the geographic overlap of multi-location targets is likely to be positively valued in acquisitions in knowledge intensive industries because it facilitates internal knowledge transfer in the combined firm.
Using a conditional logit model I test this theory on a sample of 75 acquisitions from 2002 to 2004 of multi-location targets in manufacturing industries located in the U.S. I find that acquirers do not positively value the total market of multi-location targets in industries with highly localized outputs. I find support for the positive valuation by acquirers of the knowledge intensity in single locations of multi-location targets in knowledge intensive industries. I also found support for the positive valuation of their geographic overlap in these industries.
This research contributes to the fields of strategy and economic geography. It contributes to strategy research by increasing our understanding of the motivations for acquisitions, examining in depth the geographic characteristics of targets that acquirers value when purchasing them. It contributes to economic geography research by examining the determinants of geographic patterns of an important mode of expansion using theoretical insights from strategy research on the motivations driving firms to pursue this mode of growth.
|Advisor:||Shaver, J. Myles|
|School:||University of Minnesota|
|School Location:||United States -- Minnesota|
|Source:||DAI-A 68/12, Dissertation Abstracts International|
|Keywords:||Acquisitions, Economic geography, Multi-location firms, Multi-unit firms, Strategy, Target selection|
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