Cross-Border M&A: Implications for Marketing Capability: An Abstract
Firms from emerging countries have become significant players in cross-border mergers and acquisitions in recent years. The two main motivations of emerging country firms for acquiring firms from developed countries are strategic resource seeking and fast entry to foreign markets (Nicholson & Salaber, 2013; Deng & Yang, 2015). The paper investigates the impact of such acquisitions on the marketing capabilities as well as the overall firm performance of acquiring firms.
This study examined 34 M&A deals by manufacturing firms operating in various industries located in the BRICS countries, with the target firms located in developed countries. The study focused on three input variables, namely, brand equity, customer relationship expenditure, and marketing expenditure, and two output variables, namely, sales turnover and inventory turnover.
The analysis used a combination of two-stage data envelopment analysis (DEA) and DEA window analysis. The first-stage examined the input-output data to measure marketing capability, and the second-stage investigated firm performance using the first-stage outputs as inputs (Wang et al., 2010). This study combined the two-stage DEA model with DEA window analysis in order to examine the impact of marketing capability on overall firm performance over time (Kao & Liu, 2014). A CRS (constant returns to scale) model was utilized.
The DEA window analysis for the first stage showed that the mean marketing capability scores improved following the acquisition, but the paired sample t-test demonstrated that the marketing capability of the merged firms actually improved. The 2-year mean marketing capability score rose from 0.4213 in the premerger years to 0.5433 in the post-merger years, a statistically significant growth of 29%. The second stage of the DEA window analysis showed that the mean scores for overall firm performance improved following the acquisitions. Furthermore, the paired sample t-test demonstrated that the improvement in performance of the merged firms was statistically significant. The 2-year mean firm performance score rose from 0.2747 in the premerger years to 0.3766 in the post-merger years, equal to a growth of 37.1%.
In sum, the results of this study demonstrated that both the marketing capability and overall firm performance of the acquiring firms from emerging markets improved following the acquisition of firm from developed countries.