Affiliation:
1. Department of Marketing, Management and Supply Chain, Woody L. Hunt College of Business The University of Texas at El Paso El Paso Texas USA
2. Warwick Business School University of Warwick Coventry UK
3. Department of Marketing and Supply Chain Management, Rawls College of Business Texas Tech University Lubbock Texas USA
4. Department of Supply Chain & Information Systems, Smeal College of Business Penn State University University Park Pennsylvania USA
Abstract
AbstractFirms increasingly engage in mergers and acquisitions (M&As) to improve their network positions and enhance performance. Yet, how the fundamental structure of the merged supply base changes after the M&A and how the structural changes affect the performance are largely unknown. Building upon the strategy‐structure‐performance framework, this study investigates dual roles of supply base structural changes in M&A events, namely, as an outcome and as a moderator to post‐M&A performance. In particular, we examine how the size and the country diversity of the merged supply base change after M&As, as well as how these structural changes affect the merged firm's operational performance. We conduct a difference‐in‐differences analysis by comparing firms that engaged in M&A events (treatment group) with those comparable firms that did not engage in any M&A events (control group). The results show that the merged firms tend to reduce the size of their supply bases after M&As. In addition, our results demonstrate that both supply base consolidation (i.e., reducing the number of suppliers) and country diversification (i.e., spreading suppliers across multiple countries) improve the merged firms’ post‐M&A operational performance, an effect that becomes stronger for horizontal M&As. We also explore how the type of M&As (i.e., horizontal vs. nonhorizontal), industry relatedness between the two merging firms, and the purposes of M&As affect the post‐M&A structural changes to the supply bases. This study helps inform supply managers the important roles of supply base in M&As to enhance post‐M&A operational performance or to limit the synergies when not properly done.
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