Inter-firm differences in mergers and acquisitions: a study of the pharmaceutical sector in India

2017 ◽  
Vol 44 (5) ◽  
pp. 861-878 ◽  
Author(s):  
Santosh Kumar Sahu ◽  
Nitika Agarwal
Keyword(s):  
Mergers And Acquisitions ◽  
Empirical Work ◽  
Capital Intensity ◽  
Profit Margin ◽  
Pharmaceutical Sector ◽  
Export Intensity ◽  
Firm Level ◽  
Content Type ◽  
Probit Models ◽  
Matching Techniques

Purpose Mergers and acquisitions (M&A) are common strategies of firms to increase its performance. Although the motives of M&A are different, the determinants are discreet. The purpose of this paper is to determine the factors affecting M&A activities in the Indian pharmaceutical sector. Design/methodology/approach Using a balanced panel data of the pharmaceuticals sector in India, this study arrives at the determinants of M&A. The authors use regression techniques such as panel probit models, ordered probit models and matching techniques for a comparable and robust estimates for the factors related to M&A activities at firm level. Findings The empirical findings suggest that export intensity, import intensity, firm size and R&D intensity as the major determinants of M&A in the Indian pharmaceutical sector. In the context of acquisition, there is a riskiness associated with the any business strategy, for to which a firm may choose to finance the deal either via cash, stock or assets. This study further looks at the firm’s decision on the types of acquisitions and arrives at the determinants of such decisions. The factors such as capital intensity were found more important when acquisition by share was undertaken compared to others. The success of the M&A is observed by considering the financial performance of the firm measured in terms of the profit margin at firm level. Using the propensity score matching technique, this study concludes that M&A have a positive effect on the profit margin in the post-M&A scenario. Research limitations/implications The study seeks to add to the existing literature and empirical work done in the field of M&A, by not only looking at determinants that motivate a firm to merge and/or acquire but also if the decision of the firm is reflected positively in the firm’s performance. The study concludes that export intensity is an important factor for the pharmaceutical firms in India since exports are a major proportion of firm’s total sales. Technology transfers as technology imports and R&D conducted by the firm are both very important for the drug manufacturers. Any gap in the flow of drugs to the market would hamper the growth of the firm. The growth of the pharmaceutical industry depends on the close collaboration between small R&D units that lack resources to sell their work and large business houses, both domestic and foreign affiliated that will provide them the required market. However, all comprehensive work has been done in this study to cover all aspects of M&A including the financial pathway taken by the firm yet, the study has certain limitations as it does not take into account the entry and exit of firms from the industry. Practical implications Policies related to small and large firms should aim at making them export oriented and multinational affiliated to compete at the international market with corporate restructuring through M&A. This will help in firm’s growth and sharing of knowledge capital. Originality/value No such study is conducted that differentiate type of M&A and their determinants for the Indian pharma sector.

Ownership participation of cross-border mergers and acquisitions by emerging market firms

2015 ◽  
Vol 53 (1) ◽  
pp. 221-246 ◽  
Author(s):  
Monica Yang
Keyword(s):  
Mergers And Acquisitions ◽  
Cultural Distance ◽  
Emerging Market ◽  
Foreign Market ◽  
Foreign Market Entry ◽  
Firm Level ◽  
Content Type ◽  
Cross Border ◽  
Emerging Market Firms ◽  
The Relationship

Purpose – The purpose of this paper is to adopt a multi-level approach to investigate what factors shape the content of emerging market firms’ foreign market entry decisions, particularly the ownership participation in cross-border mergers and acquisitions (M&As). In addition, the author would like to know if companies from emerging markets that possess higher (or lower) ownership in cross-border M&As receive higher valuation in the market. Design/methodology/approach – Using panel data of cross-border M&As by emerging market firms from 2000 to 2012, the author tests the hypothesized effects of the independent variables on the level of ownership participation; and uses a standard event study methodology to assess the market reaction of a particular cross-border M&A deal. Findings – The author finds that a country-level factor (institutional distance), an industry-level factor (industry unrelatedness) and a firm-level factor (board concentration) have significant impact on ownership participation in cross-border M&As. The author also finds that investors do give high valuation to those emerging market firms that chose high ownership participation in cross-border M&As. However, the author did not finds the support for the relationship between ownership participation and cultural distance. Neither did the author finds the support for the relationship between ownership participation and board independence. Originality/value – This study enhances the understanding of conditions under which the level of ownership participation in cross-border M&As would increase (decrease) and how the market reacts to high (low) ownership participation of cross-border M&As by emerging market firms.

Outward FDI and productivity promotion of exporting firms: firm-level evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Song Zhang ◽  
Haoze Li ◽  
Chunlai Chen
Keyword(s):  
Learning Effect ◽  
Positive Impact ◽  
Difference In Difference ◽  
Outward Fdi ◽  
Export Intensity ◽  
Firm Level ◽  
Content Type ◽  
Exporting Firms ◽  
Chinese Firm ◽  
The Impact

PurposeThe purpose of this paper is to estimate the impact of China's outward foreign direct investment (OFDI) conducted by exporting firms on their productivity.Design/methodology/approachThis study uses two Chinese firm-level datasets. To reduce the bias when merging the two datasets, this study uses a comprehensive link approach to obtain more observations. The propensity score matching method is employed together with the difference-in-difference and difference-in-difference-in-difference approaches to identify the casual effects.FindingsThe study finds that exporting firms become more productive through learning effect via OFDI, and the positive impact of OFDI on total factor productivity materializes very quickly but subject to diminishing return. The study also finds that state-owned enterprises gain less learning effect via OFDI than private-owned enterprises, and firms with higher export intensity or larger size tend to gain less improvement in productivity via OFDI.Originality/valueThis is one of the first studies to investigate empirically the impact of OFDI conducted by exporting firms on their productivity. In particular, the study analyzes three types of firm heterogeneous factors, namely, ownership, export intensity and size, in affecting exporting firms' learning effect via OFDI.

Exploring determinants of internationalisation: the case of late starters

2017 ◽  
Vol 29 (2) ◽  
pp. 159-177 ◽  
Author(s):  
Christopher Karl Köhr ◽  
Giulio Malorgio ◽  
Maurizio Aragrande
Keyword(s):  
Small And Medium Enterprises ◽  
Wine Industry ◽  
Export Intensity ◽  
Firm Level ◽  
Content Type ◽  
Wine Sector ◽  
Medium Enterprises ◽  
Late Starters ◽  
Practical Implications ◽  
Late Starter

Purpose The purpose of this paper is to explore the determinants of internationalisation among late starters in the wine sector. Strategic implications for small and medium enterprises (SMEs) in a young wine producing region are derived based on the findings. Design/methodology/approach Data were collected through a quantitative survey among 38 wineries that are engaged in export activity in the Romagna wine producing area (Italy). Both multivariate analysis of cardinal company data through multiple and fractional regression models as well as nonparametric analysis of Likert-type survey elements were carried out. Findings The study identifies several determinants that affect the export intensity of businesses in the sample: Resources within the business turn out to be important, as well as the choice of distribution partners. Characteristics of exported goods were found to differ on comparing intra- and extra-EU exports. Practical implications Competitiveness in the international marketplace is closely linked to the product quality, distribution network and productivity of a firm. Regional networks can help businesses to develop these factors, overcome export barriers and strengthen the competitiveness of a region as a whole. Originality/value This study investigated the determinants of internationalisation in a wine producing region which is considered a late starter of internationalisation in the wine industry and it is the first one spotlighting on a regional firm-level in the Italian wine industry.

scholarly journals The implementation of supply chain management theory in practice: an empirical investigation

2015 ◽  
Vol 20 (1) ◽  
pp. 56-70 ◽  
Author(s):  
Edward Sweeney ◽  
David B. Grant ◽  
D John Mangan
Keyword(s):  
Supply Chain ◽  
Supply Chain Management ◽  
Critical Success Factors ◽  
Success Factors ◽  
Empirical Work ◽  
Theory And Practice ◽  
Firm Level ◽  
Chain Management ◽  
Content Type ◽  
Critical Success

Purpose – The purpose of the research described in this paper is to disentangle the rhetoric from the reality in relation to supply chain management (SCM) adoption in practice. There is significant evidence of a divergence between theory and practice in the field of SCM. Design/methodology/approach – Based on a review of extant theory, the authors posit a new definitional construct for SCM – the Four Fundamentals – and investigated four research questions (RQs) that emerged from the theoretical review. The empirical work comprised three main phases: focussed interviews, focus groups and a questionnaire survey. Each phase used the authors’ definitional construct as its basis. While the context of the paper’s empirical work is Ireland, the insights and results are generalisable to other geographical contexts. Findings – The data collected during the various stages of the empirical research supported the essence of the definitional construct and allowed it to be further developed and refined. In addition, the findings suggest that, while levels of SCM understanding are generally quite high, there is room for improvement in relation to how this understanding is translated into practice. Research limitations/implications – Expansion of the research design to incorporate case studies, grounded theory and action research has the potential to generate new SCM theory that builds on the Four Fundamentals construct, thus facilitating a deeper and richer understanding of SCM phenomena. The use of longitudinal studies would enable a barometer of progress to be developed over time. Practical implications – The authors’ definitional construct supports improvement in the cohesion of SCM practices, thereby promoting the effective implementation of supply chain strategies. A number of critical success factors and/or barriers to implementation of SCM theory in practice are identified, as are a number of practical measures that could be implemented at policy/supply chain/firm level to improve the level of effective SCM adoption. Originality/value – The authors’ robust definitional construct supports a more cohesive approach to the development of a unified theory of SCM. In addition to a profile of SCM understanding and adoption by firms in Ireland, the related critical success factors and/or inhibitors to success, as well as possible interventions, are identified.

scholarly journals Is workforce diversity good for efficiency? An approach based on the degree of concavity of the technology

2016 ◽  
Vol 37 (2) ◽  
pp. 253-267
Author(s):  
Vincent Vandenberghe
Keyword(s):  
Production Function ◽  
Quality Index ◽  
Design Methodology ◽  
Ad Hoc ◽  
Empirical Work ◽  
Workforce Diversity ◽  
Marginal Contribution ◽  
Skilled Workers ◽  
Firm Level ◽  
Content Type

Purpose – The purpose of this paper is to answer the question of workforce diversity and efficiency. It departs from the rather ad hoc approach used in most recent empirical papers exploiting firm-level evidence, and suggests focusing on the estimation of the degree of concavity of the production function. Design/methodology/approach – Workforce diversity is optimal when the technology displays concavity in the share of workers considered (e.g. decreasing marginal contribution of rising shares of more productive/skilled workers). What is also shown in this paper is that a generalised version of the production function à-la-Hellerstein-Neumark (HN) – where workforce diversity is captured via an index of labour shares – is suitable for estimating the concavity of the technology, and thus for assessing the case for/against workforce diversity. Findings – The paper contains an application to two panels of Belgian firms covering the 1998-2012 period. The main empirical result is that of an absence of strong evidence that age, gender or educational diversity is good or bad for efficiency. Originality/value – The key idea of the paper is that the degree of convacity/convexity in the share of workers considered of firm-level technology and the desirability/efficiency of workforce diversity are intrinsically connected. It is also that a non-linear/CES version of the HN labour-quality index can be used in empirical work to assess the degree of concavity/convexity of the technology and quantify the efficiency gains/losses of workforce diversity.

Financial performance analysis of German firms after Chinese mergers and acquisitions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Werner Fees ◽  
Thu Thi Minh Nguyen ◽  
Xia Xu-Fees
Keyword(s):  
Mergers And Acquisitions ◽  
Financial Performance ◽  
Empirical Studies ◽  
Single Point ◽  
German Society ◽  
Economic Sectors ◽  
Firm Level ◽  
Accounting Data ◽  
Content Type ◽  
Negative Results

Purpose The purpose of this study is to look at Chinese mergers and acquisitions (M&A) in Germany on a firm level. It focuses on the benefits and risks from the viewpoint of Germany. In this way, the authors want to close the research gap concerning the financial consequences of Chinese takeovers for the affected German firms. The purpose is to find out if Chinese investors show a specific behavior in terms of profitability, growth and business risks in the acquired companies. Design/methodology/approach This paper studies the financial situation of German firms two years before and two years after being bought by Chinese companies, by analyzing accounting data of 19 target companies in six economic sectors. In this empirical study, firm performance is measured by profitability, research and development cost, liquidity and financial leverage. It is using the industry adjustment method and calculation of mean and weighted mean considering company size. Findings Overall, German firms’ financial performance after Chinese M&A did not significantly improve, but they did not worsen either. The changes in financial ratios are different across economic sectors and company sizes. Obviously, the final performance of firms after M&A is quite diverse due to diverse company-specific targets. The results do not reflect common fears about deteriorating situations brought by Chinese involvement drawn in mass media. Research limitations/implications The study lacks analysis for a longer period, ideally five years before and five years after M&A. The calculated results of industry mean may differ from the real industry mean, as components are collected from the sample companies accounting for only 70% of the market. Industry means figures are calculated for only one single point in time and assumed to be unchanged over the whole time period. The study covers mostly firms which have total assets of more than €50m, so SMEs are underrepresented. Practical implications Owners of German firms that are in target but have not been purchased by Chinese investors can see the trends and anticipate which group of M&A targets their firms are categorized into. If their firms belong to the group of sectors or company sizes that shows negative results of performance after Chinese M&A, they can plan to protect their firms by implementing defending strategies against hostile takeovers. If their firms are in the groups that tend to enhance performance after Chinese M&A, they may be in a good position and able to negotiate for mutually beneficial transactions. Social implications The results are important for political and public discussion. It is shown that Chinese acquisitions of German firms do not have a deteriorating effect, at least not in the short-term. Therefore, the results are a good input to neutralize discussions in German society. Originality/value The results disagree with the few previous studies on Chinese M&A in Germany (Bollhorn, 2015; Müller, 2017; Löchel and Sächtig, 2019). While the studies of Bollhorn and Müller are based on subjective methods, the study is based on a detailed financial method. Then, in contrast to the study of Löchel and Sächtig, it is strictly focusing on Chinese/German M&A. Most existing empirical studies are focusing on cross-border M&As from developed to developing countries and there is little attention to acquisitions in the other direction (Ma et al., 2016, p. 22).

scholarly journals Social capital is not for sale: a supply network perspective on mergers and acquisitions

2018 ◽  
Vol 23 (5) ◽  
pp. 377-395 ◽  
Author(s):  
Mehmet Chakkol ◽  
Max Finne ◽  
Jawwad Z. Raja ◽  
Mark Johnson
Keyword(s):  
Social Capital ◽  
Mergers And Acquisitions ◽  
Supply Network ◽  
Firm Level ◽  
Supply Networks ◽  
Case Study Methodology ◽  
Content Type ◽  
The Social ◽  
Study Methodology

Purpose Mergers and acquisitions (M&As) often lead to significant changes in the focal supply networks, hence disrupting firm-level relationships. Little is known about the supply network implications of M&As, which can be a major issue, especially for firms acquiring competitors that share suppliers, customers and associated resources. Using social capital as a theoretical lens, this research aims to investigate the implications of an acquisition on supply network relationships. Design/methodology/approach The acquisition of a large truck manufacturer by its competitor is investigated using an exploratory case study methodology. A total of 24 interviews were conducted across ten companies in the focal supply network with an analysis of financial data. Findings The findings from the study provide evidence that firms seeking to acquire such relationships cannot directly buy the social capital embedded within those relationships. They identify pre-acquisition characteristics and post-integration factors to understand how the supply network as a whole draws on the structural, cognitive and relational dimensions of social capital to address discrepancies in the merging network. Originality/value This study depicts an empirically grounded, theory-based account of a post-acquisition supply network integration process, showing how an M&A can drastically impact customer and supplier network relationships. The main contribution of this paper lies in extending our understanding of how social capital cannot be simply transferred from one organisation to another during an M&A. Rather, this work illustrates how social capital in supply networks is transformed by considering the pre- and post-acquisition social capital dynamics of the merging networks.

Wage differentials between foreign invested and domestic enterprises in the manufacturing

2015 ◽  
Vol 42 (6) ◽  
pp. 1056-1077 ◽  
Author(s):  
Kien Trung Nguyen
Keyword(s):  
Wage Differentials ◽  
Wage Differential ◽  
Capital Intensity ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Level Data ◽  
Size Firm ◽  
Unskilled Workers ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of trade and investment liberalization on the wage skill premium between skilled and unskilled workers in Vietnam. Design/methodology/approach – An analysis is undertaken by means of descriptive statistics and econometric investigation using a firm-level data set from the Enterprise Survey of Vietnam. Findings – It is shown that there has been a positive wage differential between foreign-invested enterprises (FIEs) and domestic enterprises over the period 2000-2009. More importantly, the FIE-domestic wage differentials are found to be significantly positive after accounting for differences in capital intensity, size, firm location, and industry features. Furthermore, statistical evidence shows that these wage differentials narrowed over the period 2006-2009. Originality/value – One of the first study examines the FIE-domestic wage differentials given the outward-oriented economic reforms since 2000 in Vietnam.

The power of momentum on firm performance: a myth or a reality?

2015 ◽  
Vol 28 (3) ◽  
pp. 452-468 ◽  
Author(s):  
Chengli Tien ◽  
Chien-Nan Chen
Keyword(s):  
Firm Performance ◽  
Practical Knowledge ◽  
Capital Intensity ◽  
Time Span ◽  
Future Research ◽  
Firm Age ◽  
Momentum Effect ◽  
Firm Level ◽  
Content Type ◽  
Final Sample

Purpose – The purpose of this paper is to extend research related to a firm’s behavioural momentum and its financial performance and to further examine any moderating effect from various perspectives - how firm-level (firm age and size), industry-level, and country-level factors can interact with the power of momentum to affect a firm’s performance. Design/methodology/approach – Data were collected from the Compustat and Yahoo Finance databases for firms in the USA and the Taiwan Economic Journal (TEJ) for firms in Taiwan. The final sample of US firms is from a panel with 239 unique companies in electronics-related industries across a 22-year time span (1991-2012). The final sample of Taiwanese firms is from a panel with 184 unique companies also in electronics-related industries across a 22-year time span (1991-2012). Findings – The results show that momentum does not significantly improve firm performance, and thus the power of momentum is a myth. However, the relationship between momentum and firm performance can be moderated by firm age, size, capital intensity, and country of origin, respectively, under some circumstances. Originality/value – The originality and value are that this is a multiple-perspective study of firm behavioural momentum and firm performance to comprehensively discover each of their respective relationships. This study has further extended the debate over path-dependent perspectives with contingent perspectives across the borders to fill knowledge and theoretical gaps, while the evidence-based findings provide top management with practical knowledge for strategic planning and execution with another avenue for future research on the momentum effect.

Free lunch or vital support? Export promotion in The Netherlands

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marcel van den Berg
Keyword(s):  
Small Businesses ◽  
Export Performance ◽  
Export Promotion ◽  
Firm Level ◽  
Content Type ◽  
Level Data ◽  
Advanced Economies ◽  
Export Shares ◽  
The Impact ◽  
Matching Techniques

Purpose The purpose of this paper is to add to the debate concerning the merits of export promotion efforts by governments by investigating the effect of export promotion program (EPP) participation on the export performance of Dutch small and medium-sized enterprises (SMEs). Design/methodology/approach The authors confront participation data of an EPP targeting SMEs with rich firm-level data and use propensity score matching techniques combined with regression analysis. Findings The authors show that exports generated by participants do generally rise in the years after program entry, however, export growth does not outpace that of comparable, but unsupported firms. Nonetheless, there is some evidence suggesting that export shares in sales rise faster among program entrants, particularly in the first and second years after participation. Furthermore, the authors present evidence suggesting that the probability of becoming a permanent exporter is higher for participants relative to beginning exporters that did not receive support from the program. Originality/value The analysis contributes to the still relatively small literature dealing with the impact of government export promotion instruments on export performance using firm-level micro-data. The subject of analysis are Dutch small businesses. SMEs, particularly operating in advanced economies, are a group that is not frequently considered separately in this respect.

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