Mergers and acquisitions in emerging markets: What drives absorptive capacity in target firms?

South African Journal of Business Management

Field Value
Title Mergers and acquisitions in emerging markets: What drives absorptive capacity in target firms?
Creator Pillay, Sherilee Chiba, Manoj D. Verachia, Abdullah Mthombeni, Morris
Subject Business Management; Mergers and Acquisitions absorptive capacity, knowledge flow, productivity, target firm; emerging markets.
Description Purpose: The purpose of this study was to investigate how knowledge flow and productivity affect the absorptive capacity of target firms in emerging markets.Design/methodology/approach: We used self-administered questionnaires to measure absorptive capacity, knowledge flow and productivity constructs. The sample comprised individuals who were employees of firms that completed acquisitions between 2015 and 2017. The acquisitions were publicly announced and the target firms were all in emerging markets.Findings/results: Firstly, our results confirmed the multidimensional nature of absorptive capacity. Secondly, we found a positive correlation between a target firm’s knowledge flow and productivity and its absorptive capacity. Thirdly, our results indicated that knowledge flow and operational processes will support the introduction and integration of external knowledge into a target firm. Therefore, understanding the absorptive capacity of target firms is central to the ability of new and existing knowledge to be assimilated.Practical implications: The realisation of the strategic intent of an acquisition is dependent on effective knowledge flow, supported by efficient communication and operational processes. The target firm’s absorptive capacity is, therefore, a key consideration for acquiring firms. Understanding this will be useful for firms to consider acquisitions of target firms in emerging markets and could potentially enhance their chances of success.Originality/value: This study contributes to the limited body of research on emerging market merger and acquisition activity. It responds to the call for further research to be conducted on emerging markets and the role of absorptive capacity in realising the strategic intent of acquisitions.
Publisher AOSIS
Date 2021-05-21
Type info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion —
Format text/html application/epub+zip text/xml application/pdf
Identifier 10.4102/sajbm.v52i1.2039
Source South African Journal of Business Management; Vol 52, No 1 (2021); 13 pages 2078-5976 2078-5585
Language eng
Coverage Emerging Markets — —
Rights Copyright (c) 2021 Sherilee Pillay, Manoj D. Chiba, Abdullah Verachia, Morris Mthombeni