Resource Allocation as an Outcropping of Strategic Consistency: Performance Implications
TL;DR: Similarities in financial resource allocations across the lines of business of diversified firms may indicate corporate strategic consistency, which may lead to superior corporate performance as discussed by the authors. But, as discussed in Section 2.
Abstract: Similarities in financial resource allocations across the lines of business of diversified firms may indicate corporate strategic consistency, which may lead to superior corporate performance. In s...
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TL;DR: In this paper, the impact of strategic similarities between bidders and targets on post-merger financial performance was examined and it was shown that, on average, bank mergers in the European Union resulted in improved return on capital.
Abstract: An unprecedented process of financial consolidation has taken place in the European Union over the past decade. Building on earlier US evidence, we examine the impact of strategic similarities between bidders and targets on post-merger financial performance. We find that, on average, bank mergers in the European Union resulted in improved return on capital. By making the assumption that balance-sheet resource allocation is indicative of the strategic focus of banks, we also find significantly different results for domestic and cross-border mergers. For domestic deals, it could be quite costly to integrate dissimilar institutions in terms of their loan, earnings, cost, deposits and size strategies. For cross-border mergers and acquisitions (M&As), differences of merging partners in their loan and credit risk strategies are conducive to a higher performance whereas diversity in their capital, cost structure as well as technology and innovation investments strategies are counterproductive from a performance standpoint.
290 citations
TL;DR: In this article, the authors examined the impact of strategic similarities between target and bidder firms on changes in postmerger performance in the U.S. banking industry, and found that the similarity between the target and the bidder firms had a significant impact on postmergers performance.
Abstract: This study examined the impact of strategic similarities between target and bidder firms on changes in postmerger performance. Set in the U.S. banking industry, the empirical examination shows that...
249 citations
TL;DR: The concept of paradoxical integration is introduced in this paper as a means of transcending paradox and the conventional Western conceptualization of exclusive opposites, and it has been applied in both academic research and business practice to reconcile the apparent polarities of such dichotomies as competition and cooperation.
Abstract: Western thought is noted for its strengths in categorization and analysis; Eastern, or Chinese thought, is noted for its integrative and encompassing nature. This article seeks to bridge the two. Specifically, it aims to enrich Western thinking and the existing body of paradox literature by proposing the idea of paradoxical integration, a concept derived from the Chinese middle way philosophy. Paradoxical integration, the notion that two opposites (such as "self" and "other") may be interdependent in nature and together constitute a totality ("integration"), is introduced as one means of transcending paradox and the conventional Western conceptualization of exclusive opposites. It suggests how we can apply the concept of interdependent opposites in a both/and framework to foster reconciliation of the apparent polarities of such dichotomies as competition and cooperation. The article concludes with a discussion of the broad implications of the concept of paradoxical integration upon both academic research and business practice.
236 citations
TL;DR: Corporate diversification, a major strategic management research topic, has been influenced significantly by resource-based theory as mentioned in this paper, and the authors make two main contributions to this literature: 1) They discuss the historical development of corporate diversification research employing the resourcebased theory perspective and related concepts, highlighting important insights to date; and 2) They identify open issues and suggest opportunities for future contributions and describe ways that research on corporate diversifications using the resource based theory perspective could be further enriched by integration with theoretical insights culled from the organizational economics, new institutional economics, and industrial organization economics
226 citations
TL;DR: In this article, the authors investigated the effects of strategic and market complementarity on acquisition performance in the context of related horizontal acquisitions and proposed that two key attributes of acquirers (strategic focus and out-of-market acquisition experience) will moderate this relationship.
Abstract: Most traditional research on mergers and acquisitions tends to focus on the role of similarity in explaining acquisition performance. While scholars have recently begun to examine acquisition complementarity, there is still little evidence concerning how complementarity influences acquisition performance. Further, previous research has not drawn the connections between related contexts and the potential benefits from complementarity. In this article, we move the study of acquisition complementarity forward by investigating the effects of strategic and market complementarity on acquisition performance in the context of related horizontal acquisitions. We also propose that two key attributes of acquirers—strategic focus and out-of-market acquisition experience—will moderate this relationship. We investigate our research questions in the context of all 2,204 acquisitions made by publicly traded U.S. commercial banks during the 12-year period from 1989 to 2001. Our findings are generally supportive, suggesting complementarity is an important antecedent of acquisition performance, and raising important issues on the nature of acquisition research in general. Copyright © 2009 John Wiley & Sons, Ltd.
219 citations
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TL;DR: In this article, the authors examined the link between firm resources and sustained competitive advantage and analyzed the potential of several firm resources for generating sustained competitive advantages, including value, rareness, imitability, and substitutability.
46,648 citations
Additional excerpts
...Causal ambiguity exists when the relationship between the resources a firm controls and the profits they create are imperfectly understood (Barney, 1991)....
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...A Resource-based Perspective on Diversification From a resource-based view, business executives should manage diversified resources so as to achieve a sustainable competitive advantage (Barney, 1991), which should lead to short- and long-term economic profits (Mahoney & Pandian, 1992)....
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...A key issue in determining whether a resource can generate profits is whether it is idiosyncratic (Barney, 1991; Mahoney & Pandian, 1992)....
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TL;DR: In this paper, the authors explore the usefulness of analyzing firms from the resource side rather than from the product side, in analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested.
Abstract: Summary The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.
18,677 citations
Additional excerpts
...The purpose of this article is to present theory and empirical evidence that support a resource-based view of the relationship between diversification and performance (Barney, 1988; Harrison, Hitt, Hoskisson, & Ireland, 1991; Mahoney & Pandian, 1992; Wernerfelt, 1984)....
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...The findings reported herein lend some support to the viability of a resource-based approach to the study of diversity (Harrison et al., 1991; Mahoney & Pandian, 1992; Wernerfelt, 1984)....
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01 Jan 1998
TL;DR: Porter's concept of the value chain disaggregates a company into "activities", or the discrete functions or processes that represent the elemental building blocks of competitive advantage as discussed by the authors, has become an essential part of international business thinking, taking strategy from broad vision to an internally consistent configuration of activities.
Abstract: COMPETITIVE ADVANTAGE introduces a whole new way of understanding what a firm does. Porter's groundbreaking concept of the value chain disaggregates a company into 'activities', or the discrete functions or processes that represent the elemental building blocks of competitive advantage. Now an essential part of international business thinking, COMPETITIVE ADVANTAGE takes strategy from broad vision to an internally consistent configuration of activities. Its powerful framework provides the tools to understand the drivers of cost and a company's relative cost position. Porter's value chain enables managers to isolate the underlying sources of buyer value that will command a premium price, and the reasons why one product or service substitutes for another. He shows how competitive advantage lies not only in activities themselves but in the way activities relate to each other, to supplier activities, and to customer activities. That the phrases 'competitive advantage' and 'sustainable competitive advantage' have become commonplace is testimony to the power of Porter's ideas. COMPETITIVE ADVANTAGE has guided countless companies, business school students, and scholars in understanding the roots of competition. Porter's work captures the extraordinary complexity of competition in a way that makes strategy both concrete and actionable.
17,979 citations
"Resource Allocation as an Outcroppi..." refers background in this paper
...For example, it is possible for two companies to produce the same product but have very different perspectives on the usefulness of research and development in the way it is produced (Porter, 1985)....
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Book•
01 Jan 1959
TL;DR: In this article, the authors studied the role of large and small firms in a growing economy and found that large firms are more likely to acquire and merge smaller firms in order to increase their size.
Abstract: Introduction Preface 1. Introduction 2. The Firm in Theory 3. The Productive Opportunity of the Firm and the 'Entrepreneur' 4. Expansion Without Merger: The Receding Managerial Limit 5. 'Inherited' Resources and the Direction of Expansion 6. The Economies of Size and the Economies of Growth 7. The Economics of Diversification 8. Expansion Through Acquisition and Merger 9. The Rate of Growth of Firms Through Time 10. The Position of Large and Small Firms in a Growing Economy 11. Growing Firms in a Growing Economy: The Process of Industrial Concentration and the Pattern of Dominance
14,137 citations
Book•
01 Jan 1983
13,643 citations
Additional excerpts
...Barney classified firm resources into three types: physical (Williamson, 1975), human (Becker, 1964), and organizational (Tomer, 1987)....
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...From a transaction-cost-economics perspective, the question is whether the advantages related-diversified firms gain can be just as easily obtained by their competitors as they trade goods and services in an open market (Teece, 1984; Williamson, 1975)....
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