Multimarket Contact and Target Size: The Moderating Effect of Market Concentration and Location

Forthcoming, Strategic Organization, https://doi.org/10.1177/14761270211009745

The University of Auckland Business School Research Paper Forthcoming

28 Pages Posted: 4 May 2021

See all articles by Grigorij Ljubownikow

Grigorij Ljubownikow

University of Auckland Business School

Mirko Benischke

Erasmus University Rotterdam (EUR)

Anna Nadolska

Erasmus University Rotterdam (EUR)

Date Written: April 26, 2021

Abstract

Acquisitions are competitive moves that disrupt an industry’s competitive structure. As a result, firms are often not passive observers of their rival’s acquisitions, but actively retaliate against such competitive moves. In this study, we explore these dynamics by analyzing one way in which multimarket contact may influence acquisition strategies, namely, the type of targets acquired. We contribute to the acquisition literature by clarifying the role that pre-acquisition competitive interdependencies play in firms’ acquisition strategies. Specifically, we suggest that high multimarket contact firms do not necessarily avoid acquisition activity. Instead, these firms are more likely to acquire targets that are less likely to incur retaliation from interconnected rivals. We also explore two important boundary conditions to this relationship: (1) the market’s competitive structure and (2) the location of the target firm. Our empirical tests of a sample of 741 bank holding companies from 1995 to 2014 offer support for our hypotheses.

Keywords: acquisitions, banking industry, multimarket contact, target size

Suggested Citation

Ljubownikow, Grigorij and Benischke, Mirko and Nadolska, Anna, Multimarket Contact and Target Size: The Moderating Effect of Market Concentration and Location (April 26, 2021). Forthcoming, Strategic Organization, https://doi.org/10.1177/14761270211009745 , The University of Auckland Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3837095

Grigorij Ljubownikow (Contact Author)

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

HOME PAGE: http://https://www.business.auckland.ac.nz/people/glju001

Mirko Benischke

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Anna Nadolska

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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