The Impact of Acquisitions on the Performance of Existing Organizational Units in the Acquiring Firm: The Case of an Agribusiness Company

Published Online:https://doi.org/10.1287/mnsc.2013.1727

Companies frequently expand their production capacity through the acquisition of new organizational units. This study analyzes how the performance of existing units is affected by the acquisition of another unit. The research focuses on three mechanisms: managerial distraction, resource transfer, and knowledge sharing. These mechanisms are studied in the context of existing units and acquired units with different levels of proximity and similarity between them. Using a detailed data set from an agribusiness company, empirical analysis shows that after an acquisition event there is a temporary decrease in the performance of existing units that are geographically proximate to the acquired unit. Data analysis also shows that after an acquisition event there is an increase in the performance of existing units that have similar characteristics to the acquired unit. In this latter case, the rate of increase in performance diminishes over time. This research demonstrates that the acquisition of an organizational unit can have differing dynamic effects on different parts of the organization.

This paper was accepted by Bruno Cassiman, business strategy.

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