Emmanuel Metais

Do Firms Forget About Their Past Acquisitions? Evidence From French Acquisitions in the United States (1988–2006)

Empirical studies of the relationship between acquisition experience and acquisition performance have had mixed results. Interestingly, these studies have found that acquisition experience does not necessarily increase acquisition performance. In particular, the extent to which the recency of the acquisition experience affects the performance of the focal acquisition remains equivocal. To investigate this issue, the authors adopt a perspective based on the concept of organizational forgetting. In the context of operations management, organizational forgetting explains the decrease in productivity that firms experience as a result of knowledge depreciation over time and interruptions to production. Cognitive psychology scholars find that the forgetting process follows specific laws. On the organizational level, these laws indicate that the organizational memory may deteriorate over time for three reasons: inefficient encoding, decay, and disuse. In the context of acquisitions, the authors examine how forgetting depreciates acquisition experience and, therefore, increases the likelihood of failure in subsequent acquisitions. They carry out a survival analysis on a population of 731 U.S. firms acquired by French firms between 1988 and 2006. The research shows that acquisition experience that is old or recent has no significant impact on acquisition performance. However, medium-term acquisition experience reduces the likelihood that the focal acquisition will fail. These findings are consistent with the laws on forgetting. This research also provides evidence of the existence of reinforcement mechanisms as well as a paradoxical influence of past alliances with the target.

Too Big to Learn: The Effects of Major Acquisition Failures on Subsequent Acquisition Divestment

We examine whether firms learn from their major acquisition failures. Drawing from a threat-rigidity theoretical framework, we suggest that firms do not learn from their major acquisition failures. Furthermore, we hypothesize that host-country experience reinforces the negative effects of major acquisition failures. Our research hypotheses are tested using an event history analysis of 741 acquisitions undertaken by French listed and non-listed firms in the USA between January 1988 and December 2008. We use failure divestment (divestment resulting from acquisition failure) as a proxy for acquisition performance. Consistent with our theoretical framework, we find that major acquisition failures have a negative impact on future acquisition performance. Furthermore, we find that such negative effects are reinforced by firms’ host-country experience.

Can We Predict M&A Activity?

Anticipating mergers and acquisitions (M&A) helps executives and investors to design their firms’ strategies and decide on their investments. However, a review of the literature shows that we know relatively little about the determinants of M&A activity, and that former research often falls short of theoretical foundations. Hence the question: in what conditions can we make accurate practical predictions of M&A activity? Relying on neo-institutional theory, we suggest that M&A activity gains from being predicted at national level and that its determinants tend to depend on the country under scrutiny. We also draw on economic contagion theory pertaining to linkages between national economies to identify possible foreign institutional influences on a countrys M&A activity. We tested our framework in three countries, the United States, the UK, and Japan, with a prediction model based on the Kalman filter that is rarely used in the field of international business. Our findings broadly corroborate our hypotheses, show the relevance of neo-institutional theory for studying the topic, and confirm that accurate practical predictions of M&A activity can be made at national level.

COMPETENCE-BASED MANAGEMENT AND STRATEGIC FLEXIBILITY: THE CASE OF AIR LIQUIDE

During the 1990s, new theories emerged in the field of strategy. In particular, the resource-based and competence-based views of the firm developed in reaction to Porter and the entire current derived from the industrial economy. However, these approaches have their own limitations: they are difficult to put into practice and are partially similar to the industrial approach. This article has two aims: (a) to make a clearer distinction between the classical approach on the one hand, and the resource- and competence-based approach on the other hand; and (b) to overcome the opposition between these two models in order to grasp their complementarities. First of all, a critical analysis of the literature is presented, in order to understand how these two approaches fit into thinking. This theoretical framework is then illustrated by a case study of Air Liquide, which, in some of its activities, adopted a competence-based strategy and structure. The case study clearly identifies the points of divergence such as the complementarities between the two approaches, thereby showing how one can overcome their oppositions as well as their respective limitations.

Does a Prior Alliance with the Target Affect Acquisition Performance? The Dangers of a Honeymoon before Marriage

Drawing from organizational learning theory, extant literature argues that a pre-acquisition alliance between an acquirer and its target is usually expected to have a positive impact on subsequent acquisition performance. Yet, since alliances and acquisitions are partially dissimilar events, negative transfer effects can bias inter-partner learning and negatively affect acquisition performance. To fill this gap, our paper explores pre-acquisition alliance duration and examines its effects on acquisition outcomes. We argue that a pre-acquisition alliance can have either beneficial or detrimental effects on subsequent acquisition performance, depending on the duration of the pre-acquisition alliance. We examine our hypotheses using a (1988–2008) panel database covering acquisitions by French firms in the US. We show an inverted U-shaped relationship between the duration of a pre-acquisition alliance and the probability of acquisition failure. Our results also indicate that this non-monotonic relationship is partially moderated by the degree of partner commitment to the alliance.

Leader Longevity, Cognitive Inertia, and Performance in Organizations with Stretch Goals: Evidence from “La Royale” and its Ambition to Gain Naval Supremacy Between 1689 and 1783 †All three authors contributed equally and are listed in alphabetical order.

Abstract Past theorizing and empirical work suggest that long-standing strategic leaders generate harmful attention and information-processing effects in their organizations, which in turn impair organizational learning and performance. In contrast, our argument is that longevity and its attendant inertia foster useful transformational and strategic persistence for organizations pursuing stretch goals. Through attentional vigilance and restricted focus, inertia may create the cognitive profile necessary for effective learning when organizations pursue the seemingly impossible. We empirically examine our ideas in the context of the French royal navy and the naval battles it had with the British in the seventeenth and eighteenth centuries. More specifically, we focus on two distinct but related stretch periods during which the French royal navy was tasked with building a powerful naval force and using it to gain naval supremacy over Great Britain. Given its exceptionally weak starting position at the beginning of the two studied periods and its desire to displace the established and advantaged navy of the era, the French had a lofty task. Our results are supportive of the stability argument, with leader longevity and inertia being positive for outcomes.

SEB Group: Building a Subversive Strategy

To drive growth and innovation in an apparently mature market, firms need to subvert the rules of the game. The SEB Group, a French producer of small household appliances, illustrates how this can be achieved. The three characteristics of SEBs strategy were a bold, emotionally-involving vision, a stretch between reality and aspiration and efficient leverage of existing resources.