The performance of firms acquired by multinational companies from emerging countries: theoretical framework and empirical evidence

This paper studies the relationship between Mergers and Acquisitions (M&As) from emerging to advanced countries and the performances of target firms. An extension of the Resources Based View and Dynamic Capabilities approach is adopted to state that the performance of target firm depends not only on its own resources but also on those of the acquiring company. Furthermore, the role of network resources and experience, which arise from previous investments undertaken by the acquiring company, is also considered. An empirical analysis is employed to investigate the impact of the resources and network resources and experience of Emerging Multinational Companies (EMNCs) from Brazil, Russia, India and China (BRIC) on the performance of firms that have been acquired in Europe, North America and Japan between 2000 and 2007. The results of the GMM analysis show that EMNC’s resources have a positive effect on target firms’ profitability and labor productivity, while the impact on its sales and employment are not significant and negative, respectively. Conversely, EMNCs’ network resources and experiences, especially when cumulated through previous M&As in advanced economies and in the BRIC home country, positively affect all the performance measures but employment, which still reports a negative sign.