Increase in Takeover Protection and Firm Knowledge Accumulation Strategy

Strategic Management Journal, Forthcoming

46 Pages Posted: 27 Sep 2015

See all articles by Heli C. Wang

Heli C. Wang

Hong Kong University of Science & Technology (HKUST) - Department of Management & Organization

Shan Zhao

City University of Hong Kong

Jinyu He

Hong Kong University of Science & Technology (HKUST)

Date Written: August 1, 2015

Abstract

We argue that the extent to which a firm faces takeover threats affects its knowledge structure. In particular, takeover threats may lead to managers’ reluctance to adopt a strategy toward firm-specific knowledge accumulation, because implementing this strategy requires them to acquire specialized skills, which are at risk under takeover threats. Conversely, takeover protection leads to an increase in firm-specific knowledge. Further, the relationship between takeover protection and firm-specific knowledge is positively moderated by managerial ownership, which helps align managerial interests with those of shareholders. But the relationship is negatively moderated by managerial tenure, as long-tenured managers have already committed to their firms. Using a differences-in-differences method with Delaware antitakeover rulings in mid-1990s as an exogenous shock, we found results supporting these arguments.

Keywords: Takeover Threats, Knowledge Accumulation, Innovation

JEL Classification: G31, G34

Suggested Citation

Wang, Heli and Zhao, Shan and He, Jinyu, Increase in Takeover Protection and Firm Knowledge Accumulation Strategy (August 1, 2015). Strategic Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2665781

Heli Wang

Hong Kong University of Science & Technology (HKUST) - Department of Management & Organization ( email )

Clear Water Bay, Kowloon
Hong Kong

Shan Zhao (Contact Author)

City University of Hong Kong ( email )

Hong Kong

Jinyu He

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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