To be or not to be sustainable? Solving the dilemma during the acquisition process

  • Angeloantonio Russo
  • Vincenzo Vastola
  • Clodia Vurro
Keywords: acquisition performance, corporate sustainability, strategic orientation

Abstract

Purpose of the paper: This study aims at explaining heterogeneity in M&A performance in the light of companies’ orientation towards sustainability.

Methodology: We first make use of our main independent variables by measuring the sustainability orientation of the acquiring firms and their detailed social or
environmental orientation toward sustainability. Then, relying on a unique dataset of 174 acquisitions, we apply regression analysis to address our research questions.

Findings: Our results show how acquirers’ ability to intensively and extensively commit to sustainability in relation to large environmental concerns, fosters acquisition performance. Further, we contribute to the literature by expanding our knowledge on the effects of a sustainability-oriented strategy on acquisition performance.

Research limits: Despite building on previous research, our study is not exempt of limits, suffering precisely from common limitations associated with the use of scores as measures of strategic orientation.

Practical implications: Our findings highlight the relevance of companies’ ability to combine different strategic perspectives related to the value-generation
process of M&A. Accordingly, our study has relevant implications for companies and practitioners that are involved in acquisition processes.

Originality of the paper: This study overcomes the profit-oriented perspective of the acquisition process while offering a more extensive picture of the factors
affecting the success of M&A. Further, we disentangle the construct of sustainability orientation by distinguishing between social and environmental orientation and then investigating its effects on post-acquisition performance.

References

ABBOTT W.F., MONSEN R.J. (1979), “On the measurement of corporate social responsibility: self-reported disclosures as a method of measuring corporate social involvement”, Academy of Management Journal, vol. 22, n. 3, pp. 501-15.

ADAMS C., NEELY A. (2000), “The performance prism to boost M&A success”, Measuring Business Excellence, vol. 4, n. 3, pp. 19-23.

AHEN F., ZETTINIG P. (2015), “Critical perspectives on strategic CSR: what is sustainable value co-creation orientation?”, Critical perspectives on international business, vol. 11, n. 1, pp. 92-109.

BANERJEE S.B. (2014), “A critical perspective on corporate social responsibility: Towards a global governance framework”, Critical Perspectives on International Business, vol. 10, n. 1, pp. 84-95.

BETTINAZZI E.L., ZOLLO M. (2017), “Stakeholder Orientation and Acquisition Performance”, Strategic Management Journal, n. 38, pp. 2465-2485.

BORGLUND T. (2012), “The Growing Importance of Corporate Social Responsibility in Mergers and Acquisitions”, Mergers and acquisitions: The critical role of stakeholders, vol. 17 n. 39 pp. 27-39.

BRESMAN H., BIRKINSHAW J., NOBEL R. (1999), “Knowledge transfer in international acquisitions”, Journal of International Business Studies, vol. 30, n. 3, pp. 439-462.

CARTWRIGHT S., SCHOENBERG R. (2006), “Thirty Years of Mergers and Acquisitions Research: Recent Advances and Future Opportunities”, British Journal of Management, vol. 17, n. S1, pp. S1-S5.

CHRISTENSEN C.M., ALTON R., RISING C., WALDECK A. (2011), “The big idea: The new M&A playbook”, Harvard Business Review, vol. 89, n. 3 pp. 29-33.

CHUN R. (2009), “A corporate responsibility to employees during a merger: organizational virtue and employee loyalty”, Corporate Governance, vol. 9, n. 4, pp. 473-483.

CIAMBOTTI M., AURELI S., DEMARTINI P. (2009), “Italy: Demand for Social Responsibility in Mergers and Acquisitions”, The Journal of Corporate Accounting & Finance, vol. 20 (March/April), pp. 59-66.

CUI Y., JIAO H. (2011), “Dynamic capabilities, strategic stakeholder alliances and sustainable competitive advantage: evidence from China”, Corporate Governance, vol. 11, n. 4, pp. 386-398.

FERRELL O., GONZALEZ-PADRON T.L., HULT G.T.M., MAIGNAN I. (2010), “From Market Orientation to Stakeholder Orientation”, Journal of Public Policy and Marketing, vol. 29, n. 1, pp. 93-96.

FREEMAN R.E. (1984), Strategic management: A stakeholder approach, Freeman Edward. Available at: http://www.mendeley.com/research/strategic-management-a-stakeholder-approach-2/.

GAREGNANI G.M., MERLOTTI E. P., RUSSO A. (2015), “Scoring Firms? Codes of Ethics: An Explorative Study of Quality Drivers”, Journal of Business Ethics, vol. 126, n. 4, pp. 541-557.

GAUR A.S., MALHOTRA S., ZHU P. (2013), “Acquisition announcements and stock market valuations of acquiring firms’ rivals: A test of the growth probability hypothesis in China”, Strategic Management Journal, vol. 34, n. 2, pp. 215-232..

GOMES E., ANGWIN D., WEBER Y., TARBA S. (2013), “Critical Success Factors through the Mergers and Acquisitions Process: Revealing Pre- and Post-M&A Connections Improved Performance”, Thunderbird International Business Review, vol. 55, n. 1, pp. 13-35.

HARRISON J.S., BOSSE D.A., PHILLIPS R.A. (2010), “Managing for stakeholders, stakeholder utility functions, and competitive advantage”, Strategic Management Journal, vol. 31, n. 1, pp. 58-74.

HASPESLAGH P.C., JEMISON D. (1991), Managing acquisitions: Creating value through corporate renewal, Free Press.

HAZEN M.A. (1993), “Towards Polyphonic Organization”, Journal of Organizational Change Management, vol. 6, n. 5, pp. 15-26.

HENDRICKS J.R. (2000), “Beyond Due Diligence in Acquisitions: An EHS Life Cycle Analysis Tool”, Corporate Environmental Strategy, vol. 7, n. 4, pp. 400-405.

HUSTED B.W. (2000), “A Contingency Theory of Corporate Social Performance”, Business and Society, vol. 39, n. 1, pp. 24-48.

JAMALI D. (2008), “A stakeholder approach to corporate social responsibility: A fresh perspective into theory and practice”, Journal of Business Ethics, vol. 82, n. 1, pp. 213-231.

KARITZKI O., BRINK A. (2003), “How Can We Act Morally in a Merger Process? A Stimulation Based on Implicit Contracts”, Journal of Business Ethics, vol. 43, n. 1-2, pp. 137-152.

KING D.R., DALTON D.R., DAILY C.M., COVIN J.G. (2004), “Meta-analyses of post-acquisition performance: Indications of unidentified moderators”, Strategic Management Journal, vol. 25, n. 2, pp. 187-200.

KNECHT F., CALENBUHR V. (2007), “Using capital transaction due diligence to demonstrate CSR assessment in practice”, Corporate Governance, vol. 7, n. 4, pp. 423-433.

KONSTANTOPOULOS N., SAKAS D.P., TRIANTAFYLLOPOULOS Y. (2009), “The strategy of stakeholder briefing during merger negotiation in the bank market”, Journal of Management Development, vol. 28, n. 7, pp. 622-632.

KRISHNAN H., MILLER A., JUDGE W.Q. (1997), “Diversification and top management team complementarity: is performance improved by merging similar or dissimilar teams?”, Strategic Management Journal, vol. 18, n. 5, pp. 361-374.

LAAMANEN T., KEIL T. (2008), “Performance of serial acquirers: Toward an acquisition program perspective”, Strategic Management Journal, vol. 29, n. 6, pp. 663-672.

LIN C.Y.Y., WEI Y.C. (2006), “The Role of Business Ethics in Merger and Acquisition Success: An Empirical Study”, Journal of Business Ethics, vol. 69, n. 1, pp. 95-109.

MCCARTHY K.J., AALBERS H.L. (2016), “Technological acquisitions: The impact of geography on post-acquisition innovative performance”, Research Policy, vol. 45, n. 9, pp. 1818-1832.

MEGLIO O. (2016), “Are Mergers and Acquisitions Socially Responsible? Evidence from the Banking Industry”, Advances in Mergers and Acquisitions, vol. 15 n. 1 pp. 95-113.

NETER J., WASSERMAN W., KUTNER M.H. (1990), Applied linear statistical models, third ed. Homewood, Irwin IL.

OGDEN S., WATSON R. (1999), ‘‘Corporate performance and stakeholder management: balancing shareholders’ and customers’ interests in the UK privatized water industry”, Academy of Management Journal, vol. 42, n. 5, pp. 526-38.

PARVINEN P., TIKKANEN H. (2007), “Incentive asymmetries in the mergers and acquisitions process”, Journal of Management Studies, vol. 44, n. 5, pp. 759-787.

PATTEN D.M. (2002), “The relation between environmental performance and environmental disclosure: a research note”, Accounting, Organizations and Society, vol. 27, n. 8, pp. 763-73.

PELTOKORPI A., ALHO A., KUJALA J., AITAMURTO J., PARVINEN P. (2008), “Stakeholder approach for evaluating organizational change projects”, International journal of health care quality assurance, vol. 21(November 2016), pp. 418-434.

POST J.E., PRESTON L.E., SACHS S. (2002), Redefining the Corporation: Stakeholder Management and Organizational Wealth, Stanford University Press, Stanford, CA.

RUSSO A. (2012), “Alleanze strategiche e network di conoscenza. Centralità e multisettorialità nell’industria delle fuel cell”, Sinergie, n. 86, pp. 165-186.

RUSSO A., MARIANI M. (2013), “Drawbacks of a Delisting from a Sustainability Index: An Empirical Analysis”, International Journal of Business Administration, vol. 4, n. 6, pp. 29-40.

RUSSO A., PERRINI F. (2006), “The Real Cost of M&A Advice”, European Management Journal, vol. 24, n. 1, pp. 49-58.

RUSSO A., PERRINI F. (2010), “Investigating stakeholder theory and social capital: CSR in large firms and SMEs”, Journal of Business Ethics, vol. 91, n. 2, pp. 207-221.

SCHWEIGER D., LIPPERT R.L. (2005), “Integration: the critical link in M&A value creation”, Mergers and Acquisitions: Managing Culture and Human Resources, vol. 17, pp. 17-45.

STAHL G.K., MENDENHALL M.E., PABLO A.L., MANSOUR J. (2005), “Sociocultural integration in Mergers and Acquisitions”, Mergers and Acquisitions: Managing Culture and Human Resources, vol. 3, n. 1, pp. 3-16.

STANWICK P.A., STANWICK S.D. (2002), “Overcoming M&A Environmental Problems”, The Journal of Corporate Accounting and Finance, (Jenuary/Febraury), pp. 33-37.

TEECE D. (2007), “Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable), Enterprise Performance”, Strategic Management Journal, vol. 28, n. 13, pp. 1319-1350.

THANOS I.C., PAPADAKIS V.M. (2012), “The use of accounting-based measures for measuring M&A performance: A review of five decades of research”, Advances in Mergers and Acquisitions, vol. 10, n. 1, pp. 103-120.

YOUNG J.B. (1981), A Conclusive Investigation into the Causative Elements of Failure in Acquisitions and Mergers, Prentice-Hall, New Jersey.

ZOLLO M., SINGH H. (2004), “Deliberate learning in corporate acquisitions: Post-acquisition strategies and integration capability in U.S. bank mergers”, Strategic Management Journal, vol. 25, n. 13, pp. 1233-1256.
Published
2018-10-30