The Persistent Effect of Geographic Distance in Acquisition Target Selection

Abhirup Chakrabarti () and Will Mitchell ()
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Abhirup Chakrabarti: Desautels Faculty of Management, McGill University, Montreal, Quebec H3A 1G5, Canada
Will Mitchell: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada; and Fuqua School of Business, Duke University, Durham, North Carolina 27708

Organization Science, 2013, vol. 24, issue 6, 1805-1826

Abstract: Valuable resources often exist at distant points from a firm’s current locations, with the result that strategic decisions such as growth have a spatial dimension in which firms seek information and choose between geographically distributed alternatives. Studies show that geographic proximity facilitates the flow of resources, but there is limited understanding of factors that exacerbate or ease the impact of geographic distance when firms seek new resources. This paper argues that the difficulty of search increases with distance, particularly when search involves greater information processing, but that firms can partially overcome the constraints of distance with direct, contextual, and vicarious learning. We study 2,070 domestic acquisition announcements by U.S. chemical manufacturers founded after 1979. The results demonstrate the persistent effect of spatial geography on organizational search processes.

Keywords: mergers and acquisitions; target selection; geographic distance; business relatedness (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (65)

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