Observational Learning from Acquisition Outcomes of Innovation Leaders
Journal
Financial Management
Journal Volume
46
Journal Issue
2
Pages
487-522
Date Issued
2017-06
Author(s)
Abstract
We examine how learning from observing the acquisition outcomes of innovation leaders affects the acquisition decisions and performance of followers in an industry. Followers tend to increase the probability of acquisition and the size of an acquisition when innovation leader acquisitions produce more favorable outcomes, and reduce both when innovation leader acquisitions suffer more unfavorable outcomes. Industry competition, environmental uncertainty, prior acquisition experience, geographic proximity, and managerial incentives are important mechanisms affecting observational learning in acquisitions. Follower acquisitions perform better when innovation leaders’ acquisition outcomes convey more favorable signals, and more poorly when they convey more unfavorable signals.
Subjects
RESEARCH-AND-DEVELOPMENT; MERGER WAVES; CORPORATE GOVERNANCE; INFORMATIONAL CASCADES; CONSUMPTION EVIDENCE; CEO OVERCONFIDENCE; INTERACTION TERMS; FIRM PERFORMANCE; SOCIAL-INFLUENCE; BAD BIDDERS
SDGs
Publisher
WILEY
Type
journal article