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ORIGINAL ARTICLE
Investors’decisions following acquisition announcements: A
configurational analysis of the role of acquirers’resources,
capabilities, and strategic fit with the target firm
Ana Colovic
1
| Olivier Lamotte
2
| Jiachen Yang
1
1
NEOMA Business School, Mont-Saint-
Aignan, France
2
EM Normandie Business School, Metis Lab,
Paris, France
Correspondence
Olivier Lamotte, EM Normandie Business
School, Metis Lab, Paris, France.
Email: olamotte@em-normandie.fr
Abstract
This research investigates how different configurations of acquirers’resources,
capabilities, and strategic fit with the target firm influence investors’decisions fol-
lowing acquisition announcements. Drawing on signalling theory and the
resource-based view, we argue that investors closely scrutinize acquirers’bundles
of resources to evaluate holistically the future outcome of the deal. Our fuzzy-set
Qualitative Comparative Analysis (fsQCA) confirms that investors’decisions
leading to abnormal stock returns following acquisition announcements depend
on the configuration of the acquirer’s resources, capabilities, and strategic fit with
the target. It also reveals different configurations that lead to high or low short-
term stock market performance. Based on the findings, we propose five strategic
profiles of merger and acquisition (M&A) deals.
KEYWORDS
acquisitions, capabilities, investors’decisions, qualitative comparative analysis (QCA), resources,
strategic fit
INTRODUCTION
Both the rapid growth of corporate mergers and
acquisitions (M&As) over the last decades and the com-
plexity and economic impact of such strategic operations
have led researchers from different disciplines to study
the antecedents of M&A performance outcomes
(Haleblian et al., 2009). The most investigated topic
within this enormous body of research is that of inves-
tors’decisions following an operation’s announcement,
measured as abnormal stock returns around the
announcement day (Bauer & Matzler, 2014). Indeed,
investors’reactions reflect their perception of the future
profitability of the operation, namely, the acquirer’s
capacity to create value for the shareholders
(Haleblian & Finkelstein, 1999). Interestingly, empirical
evidence has shown that, on average, acquirers’returns
are small or null in the short-term (Agrawal &
Jaffe, 2000; Hitt et al., 2009) but that they vary greatly
between operations (Capron & Pistre, 2002). Researchers
have identified several factors related to the acquirer, the
target, and the characteristics of the deal that affect
investors’perceptions of the deal’s future performance
(Haleblian et al., 2009). However, as King et al. (2004,
p. 188) pointed out, “M&A research has not clearly
and repeatedly identified those variables that impact
an acquiring firm’s subsequent performance.”Thus,
these authors suggested that M&A researchers should
change their perspective and adopt new theories and
methods.
One promising approach that might enhance under-
standing of the antecedents of M&A performance out-
comes is to adopt a configurational perspective,
following the pioneering work of Campbell et al. (2016).
Drawing on a behavioural approach to stock market
reactions (Schijven & Hitt, 2012), these authors argue
that “investors are more likely to perceive and evaluate
M&As holistically—that is as complex configurations
[…] of characteristics, rather than as a list of independent
factors”(Schijven & Hitt, 2012, p. 163). Previous research
on the topic has therefore failed to capture the
complexity of the causal mechanism between firm- and
deal-related factors and investors’decisions following
M&A announcements. Using a fuzzy set qualitative com-
parative analysis—fsQCA (Ragin, 2008), Campbell and
her colleagues bring to light two principles of this
The authors contributed equally and are listed in alphabetical order.
DOI: 10.1111/emre.12481
European Management Review. 2021;1–17. wileyonlinelibrary.com/journal/emre © 2021 European Academy of Management 1
causality in the context of M&As: equifinality (several
configurations of causal factors lead to the same positive
or negative outcome) and asymmetric causality (the
causal combinations leading to an outcome are not
symmetrically opposite to the causal combinations
leading to the opposite outcome).
Our study responds to the call of Campbell
et al. (2016) to refine their analysis. It focuses on
investors’perceptions of the acquirers’resources, capa-
bilities, and strategic fit with the target firm, and its
complex influence on short-term market reactions to
acquisition announcements. Specifically, while Camp-
bell et al.’s (2016) analysis leads to identification of
the configurations of variables—most of which relate
to the strategic and organizational fit between the
acquirer and the target—our analysis focuses on the
tangible and intangible resources of the acquirer, as
well as acquirer’s capabilities, to advance understand-
ing of the combinations of variables (or factors)
leading to a positive or a negative evaluation of an
M&A deal by investors. Arguably, investors follow
deals closely, and they pay most attention to whether
acquirers have enough resources to succeed. Indeed,
the strategy literature has long recognized that
resources are the source of competitive advantage
(Barney, 1991), and need to be reconfigured to main-
tain this advantage (Teece et al., 1997). More impor-
tantly for our research, Capron and Pistre (2002) have
shown that acquisitions generate abnormal returns for
acquirers when they transfer their own resources to the
acquired firm, but that this is not the case when they
only receive resources from the target. Investors’per-
ceptions of the acquirer’s characteristics are therefore,
alongside strategic and organizational fit, crucial to
their reaction to an acquisition announcement
(Campbell et al., 2016). However, acquirers’resources
can cut both ways in terms of value added to the
deals; having more resources does not always mean
better investor evaluation. Moreover, we argue that
beyond resource type and quantity, the combination of
the acquirer’s resources influences investors’decisions
following acquisition announcements. This is the
essence of the configurational approach, which does
not consider different factors as influencing
performance individually, but is concerned with the
configurations of factors that lead to a specific perfor-
mance outcome. The objective of this research is
therefore to answer the following question: which con-
figurations of acquirer’s resources, capabilities, and stra-
tegic fit with the target firm elicit positive or negative
abnormal returns?
To answer our research question, we use a manually
compiled dataset of 1,065 acquisitions completed
between 2010 and 2015 by European and US multina-
tionals, and fsQCA to identify the bundles of resources
leading to positive and negative acquisition outcomes.
The fsQCA approach is of particular relevance for our
study as it is “intended not to isolate the net, independent
effects of single explanatory factors on a particular
outcome, but rather to identify the combinations of
factors that bring about the particular outcome”(Bell
et al., 2014, p. 303). It is therefore very useful when inves-
tigating actors’decisions from a behavioral perspective
(Misangyi et al., 2017).
Our research contributes to the M&A literature by
advancing the behavioural approach to investors’reac-
tions to acquisition announcements initiated by Campbell
et al. (2016). It also contributes to management literature
more generally by revealing the complex impact of firms’
assets on the performance of their strategic decisions.
Although previous research has long established that
the acquirer’s resources play a crucial role in post-
acquisition performance, we provide empirical evidence
that outcomes result from a combination of resources.
Our research also contributes to the neo-configurational
perspective that has recently emerged in strategic manage-
ment literature to investigate causal complexity, which is
particularly relevant “in settings where progress in a
research stream has stalled because of conflicting results
and lurking potential moderators”(Misangyi
et al., 2017, p. 275).
The rest of the paper is organized as follows. Section 2
reviews theoretical insights relative to the interplay
between resources, capabilities, strategic fit, investors’
perceptions of acquisitions, and acquisition outcomes.
Section 3 presents our sample and methodology. Section 4
reports the results of our analysis. Section 5 discusses the
results and concludes the paper.
THEORETICAL FRAMEWORK
As its essence lies in the belief that outcomes are
influenced by a combination of factors, rather than by
individual variables, configurational analysis does not
aim to validate specific hypotheses in the hypothetico-
deductive tradition, but rather to uncover configurations
leading to specific outcomes (Ragin, 2008). Thus,
according to the fsQCA approach, several combinations
of factors can lead to positive outcomes, following the
principle of equifinality (Ragin, 2008), and the configura-
tions that lead to negative outcomes are not always
diametrically opposed to those leading to positive out-
comes (Campbell et al., 2016).
With this in mind, our theoretical framework does
not aim to develop specific hypotheses to test, but rather
to highlight factors that prior research has identified as
impacting investors’perceptions of acquisitions, and
hence their investment decisions, and potentially generat-
ing value for the acquirer, in the form of cumulative
abnormal returns (CAR). We will start by explaining
how investors create opinions and make decisions about
acquisitions, and then turn to specific factors that play a
role in this process.
2COLOVIC ET AL.
Investor perception of acquisitions: signals and
cumulative abnormal returns (CAR)
Examined from the point of view of signalling theory, the
announcement of an M&A deal can be perceived as a sig-
nal (Spence, 1973; Stiglitz, 2000), sent by the acquiring
firm to investors. By sending such a signal, acquirers
inform investors about their strategy, specifically with
regard to their activity portfolio and geographic presence.
However, despite these signals, investors might find
themselves lacking information they need to evaluate the
deal, because inevitably, acquirers do not disclose all
the information. Acquirers restrict some information to
managers, expressly keeping it from investors
(Schijven & Hitt, 2012). In the absence of official infor-
mation, therefore, investors will look for other signals all-
owing them to evaluate the deal and its implications for
the acquiring firm (Reuer & Ragozzino, 2014). Such sig-
nals can reside in the acquiring firm’s tangible and intan-
gible resources, and competences. They can also emanate
from the characteristics of the deal itself and of the target
firm, and from the strategic fit between the acquirer and
the target. In line with configurational philosophy, we
argue here that instead of looking at individual resources
and capabilities, investors will develop a holistic assess-
ment of the acquirer’s M&A decisions, considering the
acquirer’s different tangible and intangible assets and
capabilities, and the strategic fit between the acquirer and
the target.
When investors develop a positive perception of the
M&A deal, this should lead to CAR around the date of
the deal. CAR clearly indicate the effects of deal
announcements, as they provide an estimation of inves-
tors’perceptions of the deal and, to some extent, predict
the future outcomes of the deal. We can indeed assume
that when investors refrain from investing in the acquirer
following the announcement of the deal, they do not
expect the deal to benefit the acquirer. Building on the
seminal work by Campbell et al. (2016), this research
focuses on uncovering combinations of factors that create
or destroy value for the acquirer, leading to positive or
negative CAR. The bulk of research on M&A perfor-
mance has used CAR as a dependent variable. It is a
common trend in the M&A literature (Haleblian
et al., 2009), which, like Campbell et al. (2016), we follow
in our research. In what follows, we rely on prior research
to identify the factors: first, those relative to the acquirer,
from the perspective of the resource-based view, and then
those relative to the M&A deal that have the potential to
affect M&A deal outcomes, in particular CAR.
Resources, capabilities, and acquisition outcome
The resource-based view posits that superior firm
performance relies on the possession and use of
valuable, rare, inimitable, non-substitutable resources
(Barney, 1991). One basic assumption of the resource-
based view is that resources and capabilities are hetero-
geneous across firms (Peteraf, 1993), and that
consequently some firms distinguish themselves from
others by creating superior value. What firms possess in
terms of resources—and how they use, manage, and
orchestrate these resources—constitute important, inter-
dependent strategic features that underpin a competitive
advantage (Sirmon et al., 2011). To achieve a competi-
tive advantage, firms must dispose of both tangible and
intangible resources (Barney, 1991). Because they are
difficult to replicate, intangible assets are particularly
important for distinguishing the firm from its competi-
tors (Hall, 1992).
Intangible resources
Scholars have repeatedly pointed to reputation as the
key intangible resource. It allows firms to achieve rent
and profit and indicates overall firm effectiveness
(Dierickx & Cool, 1989; Barney, 1991; Dollinger
et al., 1997). Examining the role of reputation in
M&As, Chalençon et al. (2017) find that it has a posi-
tive effect on short-term performance of M&A
deals measured by CAR. However, research has
pointed out that reputation can both stimulate and
hinder strategic moves, such as M&As (Petkova
et al., 2014; Lamotte et al., 2021). Thus, in search of
performance, reputable firms will look for opportuni-
ties and might be inclined to take risks. At the same
time, a high reputation might prevent firms from
making some strategic decisions, because they are
cautious about preserving their reputations. While
many scholars have emphasized the role of reputation
in M&As, empirical investigation of the impact of
reputation remains scarce, in particular because of the
difficulty of measuring it.
Tangible resources
Firm size is a valuable indicator of the tangible
resources a firm has at hand, including physical,
financial, and human resources. It is logically assumed
that the greater the size of the firm, the greater its
resources, and consequently, the greater its ability to
make investments, including M&As. Size can be con-
sidered a highly relevant indicator for resources the
company possesses. The number of employees is fre-
quently used to indicate firm size. Such a measure also
indicates the competences possessed by the firm, as
employees naturally have a variety of competences in
an array of areas such as technology, finance, market-
ing, and supply chain management.
INVESTORS’DECISIONS FOLLOWING ACQUISITION ANNOUNCEMENTS: A CONFIGURATIONAL ANALYSIS OF THE ROLE OF
ACQUIRERS’RESOURCES, CAPABILITIES, AND STRATEGIC FIT WITH THE TARGET FIRM
3
Capabilities
Along with tangible and intangible resources, the ability
to combine, refine, and renew these resources, in other
words, company capabilities (Teece et al., 1997), also
indicate to investors the potential performance outcomes
of M&A deals, and they have been frequently investi-
gated in M&A research, particularly prior M&A
experience. According to the findings of Meschi and
Metais (2006), M&A experience has a positive impact on
abnormal returns for the acquirer on the day of the deal
announcement. Similarly, Harzing (2002) finds a positive
relationship between acquirer experience and the value
creation of cross-border M&As. Barkema and
Schijven (2008) argue that prior experience signals to
investors that the acquirer is able to select appropriate
targets and integrate them successfully. More recently,
Galavotti et al. (2017, p. 129) find evidence that prior
cross-border acquisition experience “generates momen-
tum for subsequent cross-border acquisitions to the
extent that coordination can be effectively managed”.
Furthermore, the literature also suggests that experience
from past deals can be valuable to firms both in success
and in failure (Vermeulen & Barkema, 2001; Nadolska &
Barkema, 2007; Collins et al., 2009; Zollo, 2009). In
other words, experience from both successful and unsuc-
cessful acquisitions can help firms improve their future
M&A outcomes.
Scholars also consider that an acquirer’s prior perfor-
mance can influence investors’perceptions of an M&A
deal, since if an acquirer has performed well in the past,
this is more likely to be the case in the future.
M&A research has considered leverage an important
financial capability. High leverage can provide both a
positive and a negative signal to investors. It can suggest
that the acquirer will lack the financial resources needed
for post-acquisition integration (Hitt et al., 1998). On the
other hand, leverage can signal that acquisition strategy
is not driven by excess cash.
To summarize, prior research has identified several
resources and capabilities that investors take into account
when they form perceptions and make investment
decisions regarding M&A deals. In addition to these,
other factors relative to the strategic fit between the
acquirer and the target firm can provide valuable signals
to investors about the M&A deal.
Strategic fit
The ‘relatedness’of acquirer’s and target’s resources is
important with regard to the stakeholder value created
by M&As. The underlying hypothesis is that when the
resources of the two entities are related, the deal should
create greater value than when its purpose is diversifica-
tion (Dos Santos et al., 2008). Unrelated M&A deals are
regarded as riskier, because the acquirer cannot transfer
its knowhow to the target, making post-acquisition per-
formance less certain. Research has thus stressed that
when relatedness is high, the chances of post-acquisition
performance are greater (King et al., 2004), as relatedness
is a crucial factor of synergies in M&As (Signori &
Vismara, 2018). However, Barney (1988) notes that the
relatedness should be studied in combination with other
conditions.
In addition to relatedness, the international dimen-
sion of M&A deals is another factor relevant to the out-
come of M&A deal announcements. Investors often
consider cross-border M&As riskier than domestic deals,
for three main reasons. First, cross-border M&As entail
dealing with different country settings, such as institu-
tions and regulations, which can be challenging for the
acquirer. Second, investors may anticipate that cultural
differences will lead to post-integration problems. Socio-
cultural differences may affect the acquirer’s ability to
understand and interact with the host environment
(Miller & Eden, 2006), as the acquirer may lack sufficient
understanding of different social norms, beliefs and
values (Hofstede, 1980; Kogut & Singh, 1988). Third,
acquirers might suffer from the liability of foreignness
(Zaheer, 1995) when acquiring firms in countries in which
they have no significant presence. The liability of foreign-
ness is conceptualized as a phenomenon whereby foreign
firms are at a disadvantage compared with local firms in
a host country (Miller & Eden, 2006; Moeller et al., 2013;
Zhou & Guillén, 2015). One might therefore expect inves-
tors to evaluate international deals more negatively than
domestic deals. However, as we have already argued, this
condition should be analysed in conjunction with others,
as investors consider a combination of conditions rather
than single conditions when evaluating an M&A deal.
We depict the theoretical framework underpinning
our investigation in Figure 1.
METHOD
Analytical approach
Our analytical approach is fuzzy-set qualitative compara-
tive analysis (fsQCA)—a relatively novel method
pioneered by political science researchers (Ragin, 2000;
Fiss, 2011). The fsQCA analytical approach proved suit-
able for our research goals. Our fundamental premise is
that investors follow deals closely and care about whether
acquirers have enough resources to succeed, and
whether deals offer enough opportunities for success.
However, the effect of acquirer’s resources on adding
value to deals can be ambiguous, that is, more resources
do not always mean superior deal outcomes
(Eckbo, 2009; Ang & Ismail, 2015). Moreover, resources
can incorporate threats, that is, if handled poorly, they
can jeopardize deal outcomes (Kim et al., 2011; Qiu
et al., 2014). Hence, our research goal is to show that the
4COLOVIC ET AL.
ambiguity over whether acquirer’s resources create
opportunities or threats can be resolved by identifying
and theorizing about configurations of acquirer’s
resources.
Unlike regression analysis, which focuses on the net
impact of individual factors on outcomes, fsQCA is
an integrative approach, emphasizing the derivation
and interpretation of combinations of factors
(i.e., configurations) and their association with the out-
comes of interest (Fiss, 2007; Rihoux & Ragin, 2009).
Rather than linear algebra and probability theory,
fsQCA is powered by Boolean algebra and set theory
(Fiss, 2007; Rihoux & Ragin, 2009; Whitesitt, 2012).
And instead of establishing associations between inde-
pendent and dependent variables, fsQCA establishes
associations between causal and outcome conditions.
Finally, studies in various social science disciplines have
demonstrated the superior interpretability of configura-
tions over regression coefficient estimates (Aguilera &
Desender, 2012; Bell et al., 2014; Campbell et al., 2016;
Cabrilo & Dahms, 2020; Fainshmidt et al., 2020).
fsQCA comprises several steps (Fiss, 2007, 2011).
First, we calibrate causal and outcome conditions, that
is, transform the independent and dependent variables
numerically to reflect their set-memberships of presence
and absence, 1 and 0. While dichotomous variables are
calibrated into crisp-sets either “fully-in”or “fully-out”
(i.e., 1 or 0), continuous variables are calibrated into
fuzzy sets memberships ranging on a scale between
“fully-in,”“neither in, nor out,”and “fully-out”(i.e., 1,
0.5, 0). Each of the variables underwent the procedure of
calibration in order to be qualitatively and quantitatively
adjusted for fuzzy-set QCA (Fiss, 2011; Greckhamer
et al., 2018). The procedure of calibration consists of
arithmetic operations in which the values of the observa-
tions are numerically readjusted to reflect their fuzzy-set
membership score, that is, the degree to which each
value of the observations belongs to a condition (full
membership) or not (full non-membership) (Ragin, 2008;
Fiss, 2011). The most tested and validated method of
calibration is the direct method of assignment of mem-
bership scores (Ragin, 2008; Rihoux & Ragin, 2009;
Greckhamer et al., 2018). According to Ragin (2008), it
takes the following steps to transform continuous and
ordinal variables into membership scores:
1. Determining and fixing the upper and lower bound
thresholds and the crossover point for each of the
variables. This must be performed based on substan-
tive knowledge about the variables and/or on the
sample characteristics when necessary (e.g., Campbell
et al., 2016; Greckhamer, 2016).
2. Calculation of the deviation scores for each of the
observations and their conversion into log odds. A
deviation score is the difference between the value of
an observation and the value of the crossover point
set in the previous step, and its conversion into log
odd is performed by multiplying it with:
a. the ratio of log odd of full membership (for values
above the value of the crossover point),
b. or the ratio of log odd of full non-membership (for
values below the value of the crossover point).
3. Transformation of log odds into membership scores
through the following arithmetic formula:
Membership score =exp (log odds)/[1 +exp (log odds)].
As stated above, the calibration procedure is both
qualitative and quantitative. It is quantitative because of
the arithmetic transformations based on the value
converted into membership scores, and qualitative
because of the thresholds selected and fixed according to
the contextual substance surrounding the variables
(Misangyi et al., 2017; Furnari et al., 2020). We have set
the thresholds by following the best practices suggested in
methodological review studies (Misangyi et al., 2017;
Greckhamer et al., 2018; Furnari et al., 2020). In accor-
dance with these best practices, we set the thresholds
either by finding scales that have already been tested and
validated in the literature (e.g., Campbell et al., 2016;
Greckhamer, 2016), or by setting the thresholds in
FIGURE 1 A theoretical framework of
factors influencing investors’decisions
following acquisition announcements
INVESTORS’DECISIONS FOLLOWING ACQUISITION ANNOUNCEMENTS: A CONFIGURATIONAL ANALYSIS OF THE ROLE OF
ACQUIRERS’RESOURCES, CAPABILITIES, AND STRATEGIC FIT WITH THE TARGET FIRM
5
accordance with the precepts established by Rihoux and
Ragin (2009) and Ragin (2008) in their seminal works on
the fsQCA method. It is imperative to note that due to
the substantive and contextual nature of the thresholds,
they may not be adjusted randomly, because doing so
would make little theoretical sense and would yield
inconsistent empirical results.
We calibrated the causal and outcome conditions of
our study using the direct calibration procedure in the
software package fsQCA 3.0 (fs/QCA Software, 2017).
After calibrating the conditions, the second step was to
construct the truth table, comprising all combinations of
the values of causal conditions corresponding to the
outcome condition. The total number of possible combi-
nations (i.e., rows in the truth table) equals 2
k
, where kis
the number of causal conditions. Only a fraction of all
the possible combinations of causal conditions in the
truth table will be reflected in the data, and even fewer of
the combinations will qualify for the solutions (Rihoux &
Ragin, 2009). To be considered viable, configurations
must pass the thresholds of both frequency and consis-
tency. The frequency threshold is the number of cases in
the sample belonging to each of the configurations. The
larger the sample size, the higher the frequency threshold,
that is, the minimum number of cases belonging to a
configuration (Rihoux & Ragin, 2009). Following previ-
ous studies, we set the frequency threshold at 11 cases
per configuration, so that at least 80% of all the cases of
the sample was retained (Crilly, 2010; Fiss, 2011;
Campbell et al., 2016). Next, we operationalized the con-
sistency threshold using two indicators—raw and PRI
(Proportional Reduction in Inconsistency) consistency—
both of which reflect the level to which the cases belong-
ing to each configuration are structurally consistent with
each other in their conditions, and the degree to which
they represent those conditions (Rihoux & Ragin, 2009).
While raw consistency reflects the degree to which a
configuration of causal conditions corresponds to an
outcome, PRI consistency reflects the degree to which
that configuration corresponds to both the outcome and
the inverse of that outcome. Concurrent high raw and
PRI consistency values signify more robust results,
namely, configurations highly likely to correspond to a
single outcome. Following prior management studies
using fsQCA, we set the thresholds for raw and PRI
consistency at 0.80 and 0.70 (Crilly, 2010; Fiss, 2011;
Campbell et al., 2016).
To derive the final two separate sets of
configurations—those corresponding to the outcome and
the opposite outcome—we used the computational algo-
rithms embedded in the fs/QCA 3.0 software. fs/QCA 3.0
applies easy and difficult counterfactuals to derive com-
plex, parsimonious, and intermediate solutions based on
the easy and complex counterfactuals. In the final config-
urations, solid black circles represent the presence of con-
ditions, while hollow circles represent the absence of
conditions within the scope of a configuration.
Sample
We compiled our dataset using data obtained from sev-
eral well-established sources. The originality of our
research, besides the configurational approach, resides in
its inclusion of an intangible resource—reputation—in
our data and analysis. Indeed, while many authors have
emphasized the role of reputation in M&As, it has very
rarely been included in empirical studies. Because reputa-
tion data was available for US and European companies
for the 2010–2015 period, we have collected data cover-
ing this period from other sources. First, we collected
data on US and European acquisitions from Zephyr by
Bureau van Dyck. We focused on both domestic and
transnational deals between 2010 and 2015 inclusively.
To ensure we captured a broad sample of deals, we set
our sample to include all announced and completed
intra- as well as inter-industry deals. Second, we collected
data on the reputation of acquiring companies from
Reputation Institute—a pioneer in measuring and track-
ing the perceived reputation of companies and their
top executives around the globe. Third, we collected
company-specific data about acquirers from DataStream
by Thomson Reuters. Fourth, we calculated the short-
term cumulative abnormal returns of acquiring compa-
nies using stock-price data collected from DataStream.
We adopted a lagged design in which the causal
conditions trailed the outcome condition by one year
(Misangyi & Acharya, 2014; Campbell et al., 2016). After
collecting the initial data from each of the sources and
matching the causal and outcome conditions for each
deal, we derived the final dataset comprising 1,065
observations.
Measurement and calibration of conditions
Cumulative abnormal returns of acquirers
We estimated the cumulative abnormal returns of
acquirers over the period spanning five business days
before and after deal announcements, namely, CAR [5;
+5]. Review studies and meta-analytical studies
(Hackbarth & Morellec, 2008; Stahl & Voigt, 2008;
Haleblian et al., 2009) suggest that event windows of [1;
+1], [3;+3], and [5;+5] are consistent in their values
and can be relied upon with the same degree of confi-
dence. Hence, in this study we have chosen to use CAR
[5;+5] as the outcome condition in line with prior stud-
ies on M&A performance (Becher, 2009; Baker
et al., 2012; Gaur et al., 2013). Following prior studies,
we calculated the cumulative abnormal returns using the
market model with an estimation period between 265 and
11 days before announcement dates (Aybar &
Ficici, 2009). In accordance with the scale developed by
Campbell et al. (2016) specifically for calibrating
acquirer-CAR, we set an increase of five percentage
6COLOVIC ET AL.
points (i.e., +5%) as “fully-in,”no change (i.e., 0%) as the
crossover point, and negative five percentage points
(i.e., 5%) as “fully-out.”
Acquirer’s reputation
We calibrated the causal condition of the acquirer’s repu-
tation using the original measurement scale ranging from
0 (worst reputation) to 100 (best reputation). In accor-
dance with the original measurement scale, we set 100 as
“fully-in,”50 as the crossover point, and 0 as “fully-out.”
Acquirer’s experience
We measured the acquirer’s experience as the total num-
ber of deals made by acquirers over the 10 years before
the focal deals (Cuypers et al., 2017). We calibrated the
causal condition of acquirer’s experience using 76 as
the level for “fully-in”(95th percentile of the sample),
18 as the crossover point (the median of the sample), and
3 as the level for “fully-out”(5th percentile of the
sample).
Acquirer’s leverage
We measured the acquirer’s leverage as the ratio between
the total amount of debt and common equity one year
before the focal deals (Ahern, 2012). We calibrated the
causal condition of acquirer’s leverage (expressed in per-
centage points), using a scale on which 295.50% was the
level for “fully-in”(95th percentile of the sample), 45.23%
was the crossover point (the median of the sample), and
9.83% was the level for “fully-out”(5th percentile of the
sample).
Acquirer’s prior performance
We measured the acquirer’s prior performance as that
acquirer’s return on equity one year before the focal deals
(Cording et al., 2008). We calibrated the causal condition
of prior acquirer’s performance using a scale on which
48 was the level for “fully-in”(95th percentile of the sam-
ple), 16.53 was the crossover point (the median of the
sample), and 0.26 was the level for “fully-out”(5th per-
centile of the sample).
Acquirer’s size
We measured the acquirer’s size as that acquirer’s num-
ber of employees one year before the focal deals
(Krishnan et al., 2007). We chose to measure acquirer’s
size using the number of employees for the following
reasons. First, from a theoretical perspective, in this
study, we consider acquirer’s size a causal condition
whose importance derives from the amount of resources
that acquirers could deploy in their deals. In line with the
M&A literature (Larsson & Lubatkin, 2001; Amiot
et al., 2006; Maguire & Phillips, 2008), we consider the
availability of human and financial resources as instru-
mental in achieving positive outcomes in deals. Follow-
ing the lead of extant M&A studies using the number of
employees to express acquirer’s size, we reasoned that
this measure directly reflects the amount of human
resources available to acquirers as well as the amount of
financial resources by proxy. This is because developing
and keeping human resources requires considerable
financial commitment (Maguire & Phillips, 2008; Datta
et al., 2010), thus indicating the financial strength of
acquirers.
Second, from a methodological perspective, measures
of acquirer’s size expressed in monetary terms are at risk
of being compromised in terms of cross-country compa-
rability due to the cross-country variance in methods of
accounting as well as the fluctuations in exchange rates
between the currency of measurement and the currency
of expression of acquirer’s size. Indeed, the practice of
accounting differs across countries, making monetary
expression of firm size highly sensitive to the differences
in how firms in different countries are legally obliged
to measure their total assets (Barth et al., 2008;
Nobes, 2009; Almeida et al., 2011). Furthermore, due to
the fluctuation in exchange rates between different
currencies and the US dollar, monetary measures will be
exposed to inconsistencies related to exchange rate fluctu-
ations (Shwayder, 1972; Engel, 1999).
We calibrated the causal condition of acquirer’s size
using a scale on which 302,000 was the level for “fully-in”
(95th percentile of the sample), 63,621 was the crossover
point (the median of the sample), and 5,482 was the level
for “fully-out”(5th percentile of the sample).
Relatedness and internationality
We measured industry relatedness between acquirers and
targets as the numerical similarity of their primary (first)
four-digit SIC codes, that is, more shared digits in the
first four-digit SIC codes corresponds to greater industry
relatedness (Campbell et al., 2016). This measure is
widely accepted for measuring industry relatedness in the
M&A literature. The similarity between SIC codes is con-
sidered a reliable indication of the degree of similarity of
business (Haleblian & Finkelstein, 1999; Laamanen &
Keil, 2008; Campbell et al., 2016). However, we acknowl-
edge the limitation of SIC codes as a measure of vertical
relatedness of business. Consequently, this will limit the
relevance of our results to horizontal relatedness between
acquirers and targets. We calibrated industry relatedness
using a scale on which four identical digits in the SIC
INVESTORS’DECISIONS FOLLOWING ACQUISITION ANNOUNCEMENTS: A CONFIGURATIONAL ANALYSIS OF THE ROLE OF
ACQUIRERS’RESOURCES, CAPABILITIES, AND STRATEGIC FIT WITH THE TARGET FIRM
7
codes indicated “fully-in,”two identical digits was the
crossover point, and no identical digits indicated “fully-
out.”Finally, we assigned values of 1 to international
deals and 0 to domestic deals.
Table 1 presents the variables, their measurement,
and the sources. Table 2 shows the calibration scales for
the causal and outcome conditions of our study.
RESULTS
Our fuzzy-set qualitative comparative analyses yielded
five configurations (see Table 3), three of which corre-
spond to positive outcomes for acquirers (i.e., CAR
higher than positive five percentage points) and two of
which correspond to negative outcomes (i.e., CAR lower
than negative five percentage points).
A hollow circle indicates the absence of a condition in
a specific configuration, meaning that this condition is
not part of the configuration, whereas a solid circle indi-
cates the presence of a condition in a specific configura-
tion. A blank space indicates no empirical impact of the
causal condition on the outcome, which means that it
does not matter whether the condition is present or
absent in the configuration, as it does not participate in
determining the outcome.
For the three configurations corresponding to positive
outcomes, the overall solution coverage is 0.24 and the
overall solution consistency is 0.80. For the two configu-
rations corresponding to negative outcomes, the overall
solution coverage is 0.20 and the overall solution
consistency is 0.85. The overall solution coverage and
consistency for the positive and negative outcomes
are in line with previous methodological standards
(Crilly, 2010; Campbell et al., 2016). Below, we first
provide detailed interpretations of the presence of each
causal condition in each configuration (lateral view).
Then we interpret each of the configurations (verti-
cal view).
Cross-configurational analysis by causal
conditions (lateral view)
Experience is a necessary condition in all deals perceived
by investors as “bad,”while the lack of experience is a
necessary condition for well-perceived deals. It appears
therefore that investors prefer when non-experienced
acquirers are involved in M&As. Taken at face value, this
echoes recent findings in finance and management
suggesting that highly acquisitive firms are more often
punished by investors after M&As (Lockett et al., 2011;
Malhotra et al., 2018).
Reputation is present in configurations generating
both positive and negative outcomes. Hence, it becomes
important to interpret the presence of reputation in con-
junction with other causal conditions. In other words, if
highly reputed firms conduct M&As that investors both
like and dislike, then what other resources differentiate
the two categories? Nevertheless, we note that reputation
is present in all configurations, which demonstrates its
importance (in combination with other factors) for inves-
tor perception of the deals. In line with the configura-
tional approach, although reputation is present in
configurations leading both to positive and negative
outcomes, it should not be excluded from the analysis, on
the contrary, its important role should be highlighted.
Size appears a necessary condition for bad investor
perceptions, that is, it is included in both configurations
3 and 4. It determines good investor perceptions to a
lesser degree (configuration 1 does not include it, while
configuration 2 does). We performed two types of robust-
ness checks, using the total assets and the revenue of the
acquirers alternatively as the measure of acquirer’s size.
TABLE 1 Variables, measurement and sources
Variable Measurement Source
CAR Cumulative
Abnormal
Returns of the
acquirer, based on
a market model
Author’s calculation
based on
Datastream
Reputation RepTrackTM index,
developed by the
Reputation
Institute, based on
a survey of more
than 2000
individuals per
country
Local branches of the
Reputation
Institute
Experience Number of cross-
border
acquisitions
conducted by the
acquirer over the
10-year period
prior to the focal
deal
Authors’calculation
based on Zephyr
Size Number of employees Datastream
Prior performance Return on equity one
year before focal
deals
Datastream
Leverage Ratio between the
acquirers’total
debt and common
equity one year
before focal deals
(in %)
Datastream
Relatedness Numerical similarity
of their primary
(first) four-digit
SIC codes
Authors’construction
based on Zephyr
International Dummy variable: 1 if
the acquirer and
the target are not
located in the
same country
Authors’construction
based on Zephyr
8COLOVIC ET AL.
The original results retain their interpretation and robust-
ness and the overall solution coverage and consistency
indicators remain close to those of the original analyses.
Prior performance appears to be important, though
not necessary, for good investor perceptions, since while
it is included in configurations 1b and 2, it does not mat-
ter at all for configuration 1a. It is less associated with
bad investor perceptions (configuration 4 includes it,
while configuration 3 does not).
Leverage appears necessary for good investor percep-
tions, since it is included in all three configurations
1a, 1b, and 2. The absence of leverage also appears to
indicate bad deals.
Relatedness appears necessary for bad investor per-
ceptions (it is included in both configurations 3 and 4).
Its role is less clear for good investor perceptions (it is
included in configurations 1b and 2, but not in
configuration 1a).
Internationality does not appear to determine either
good or bad investor perceptions. In other words, inves-
tors consider that good and bad deals can occur both
domestically and internationally.
Individual configurations (vertical view)
We distinguish two groups of transactions in which
acquirers benefitted from more than 5% positive CAR,
namely, those in configurations 1a and 1b, and those in
configuration 2. Configurations 1a and 1b comprise
related domestic deals, while configuration 2 comprises
diversifying international deals.
Deals in configurations 1a and 1b benefit from
economies of scale and increased domestic market
share (related and domestic). In both configurations, the
acquirers are non-acquisitive, well-reputed, and are not
pre-disposed to spending frivolously (due to high lever-
age). Acquirers in configuration 1a are small in terms of
employee numbers, while those in configuration 1b are
historically high-performers. Comparing size and prior
performance, it appears that, all things being equal,
performance does not matter for small acquirers, while
size does not matter for high performers.
Deals in configuration 2 benefit from complementary
resource acquisition and/or business diversification
(unrelated and international). In this configuration,
TABLE 2 Calibration scales of causal and outcome conditions
Mean S.D. Fully-in Crossover Fully-out
Experience 26.70 24.17 76 18 3
Reputation 67.20 7.70 100 50 0
Size (employees) 90,609.59 93,920.45 302,000 63,621 5,482
Prior performance 26.79 221.27 48 16.53 0.26
Leverage 106.44 267.06 295.50 45.23 9.83
Relatedness 0.57 0.50 4 2 0
International 0.61 0.49 1 - 0
CAR [5; +5] 0.18 5.51 5.00 0.00 5.00
TABLE 3 Configurations leading to positive and negative M&A outcomes
Positive M&A outcome (CAR > 5%) Negative M&A outcome (CAR < 5%)
1a 1b 2 3 4
Experience NNN●●
Reputation ●●●● ●
Size (employees) N●● ●
Prior performance ●●N●
Leverage ●●● N
Relatedness ●●N●●
International NN●N●
Raw coverage 0.10 0.09 0.14 0.08 0.12
Unique coverage 0.01 0.01 0.14 0.08 0.12
Consistency 0.78 0.80 0.81 0.83 0.86
Solution coverage 0.24 0.20
Solution consistency 0.80 0.85
Note: ●indicates the presence of antecedent condition, Nindicates the absence of antecedent condition. A blank space indicates a lack of empirical impact of the causal
condition.
INVESTORS’DECISIONS FOLLOWING ACQUISITION ANNOUNCEMENTS: A CONFIGURATIONAL ANALYSIS OF THE ROLE OF
ACQUIRERS’RESOURCES, CAPABILITIES, AND STRATEGIC FIT WITH THE TARGET FIRM
9
acquirers are large, non-acquisitive, and have good repu-
tations and prior performance. This last condition and
the differences in strategic fit between the acquirer
and the target single out this configuration among those
leading to a positive outcome. Indeed, this is the only
configuration involving an international unrelated
acquisition.
Among the deals in which acquirers suffered from
more than 5% negative CAR, we also distinguish two
groups of transactions—configurations 3 and 4. Configu-
ration 3 comprises deals made by experienced, highly
reputed, large firms—whose prior performance is poor—
to acquire domestic, related targets. This configuration
indicates that acquirers might be looking to solve
their performance problems by making acquisitions.
Configuration 4 are deals pursued for international
expansion within the same industry by acquisitive, highly
reputed, large firms with good performance and little
leverage.
DISCUSSION AND CONCLUSION
Our study provides support for the key principles of
fsQCA, demonstrating its appropriateness for the exami-
nation of business-related phenomena. We find five con-
figurations, three leading to good (positive) and two
leading to bad (negative) short-term stock-market perfor-
mance, that is, positive or negative perception of M&A
deals by investors around the announcement of the deal.
This confirms the principle of equifinality, stipulating
that there are different pathways to performance, not just
one (Ragin, 2008). In other words, several configurations
of conditions (variables) can lead to the same result.
Moreover, we find that the badly performing deals do
not symmetrically oppose successful ones. Indeed, we
find two rather than three configurations of bad deals,
and some conditions can be found in both types of deals.
We thus find evidence of asymmetric causality, in line
with prior research (Campbell et al., 2016). Taken
together, our findings support the idea that investors
assess holistically (Schijven & Hitt, 2012), rather than
examining the effect of individual factors separately and
disconnectedly.
Unlike Campbell et al. (2016), whose results exhibit a
much higher solution coverage for bad rather than good
deals (0.28 versus 0.18), our solution coverage is similar
for both types, although slightly higher for good deals
(0.24 versus 0.20). However, our study places greater
emphasis on the acquirer’s characteristics and on reputa-
tion in particular, which might explain the difference.
According to Campbell et al. (2016, p. 175), “superior
deals often rely on private synergy, which cannot be
accurately assessed without access to private informa-
tion”; however, the inclusion of the acquirer’s reputation
might mitigate the opacity of successful deals. To offer
deeper understanding of positively and negatively
perceived deals, we profile each of the configurations
below before discussing individual conditions.
Deals with a positive outcome
Three configurations generate a positive reaction, thus
creating value for the acquirer around the announcement
of the deal. Because we consider the two first configura-
tions as quite similar, we have labelled them 1a and 1b.
The first configuration points to a well-reputed firm that
does not rely heavily on acquisitions to grow. Indeed, it
lacks experience in this field, having made three or fewer
acquisitions in the past 10 years. This means that each
acquisition is probably selected very carefully to accom-
plish a very precise strategic objective. Despite being a
large firm in legal terms, the acquirer is relatively small
for such firms. It is leveraged, indicating to investors that
it is not making the acquisition because of excess cash,
and therefore is not acting opportunistically. Again, this
indicates that the acquisition is made for a very specific
goal. Acquirer and target are in related industries and are
located in the same country. Together, these conditions
suggest the example of a well-reputed firm that is looking
to increase its domestic market share through a related
acquisition. We can label this configuration a domestic,
scale-focused, related acquisition. As the companies are
related, investors anticipate the creation of synergies and
a relatively easy integration of the acquired firm, as the
acquirer has appropriate knowledge of the industry to
conduct the integration. This might explain why the
investors consider such deals appropriate and are confi-
dent that they will create value for the acquirer.
The second configuration, 1b, shares some of the
features of 1a. The acquirer is also inexperienced in
acquisitions, and investors do not consider its size as
an important factor. It is a well-reputed firm and
produces good returns on equity. Again, the acquirer is
leveraged, indicating that acquisitiveness and empire-
building (Jensen, 1986) are not its intention. The target
operates in a related industry on the acquirer’s domestic
market. As size is not considered an important condition
in this configuration, we can assume that the acquirer is
looking to broaden its domestic product range, by buying
a firm operating in a related area with complementary
products or technologies. We could label this configura-
tion domestic, scope-focused, related acquisition. Investors
may assess such deals positively because the operation
makes strategic sense and is low-risk, given the acquirer’s
high performance.
The last configuration leading to a positive outcome
shares some of the features of the two previous
configurations, but it also presents some particularities.
In this configuration, the acquirer is also a well-reputed,
well-performing firm and an inexperienced acquirer. It is
also highly leveraged, as in configurations 1a and 1b,
indicating to investors that the deal is not driven by
10 COLOVIC ET AL.
acquisitiveness (Ghosh & Jain, 2000; Aivazian
et al., 2005). The acquirer, a large firm, is acquiring an
unrelated firm in a foreign market. Geographic expan-
sion is therefore one important motive driving the acqui-
sition, the other being entry to another industry via
acquisition. We label this configuration international con-
glomerate diversification. The potential of this type of
configuration probably lies in economies of scope and
learning (Hitt et al., 2017). The acquirer can learn in two
ways. First, it can learn by operating in a different mar-
ket from its domestic one, in terms of culture, norms,
institutions, competition, and so on, gaining experience
that can encourage it to increase its international pres-
ence in the future. Second, the acquirer can learn from a
different industry, which can benefit its original activities
if the industry in which the target operates has unique or
superior features. However, given the greater risk of non-
relatedness both industry-wise and country-wise, it is
crucial for the acquirer to have a number of features:
non-acquisitiveness, good reputation, good prior perfor-
mance, and size. Investors may well consider that large
firms with good prior performance have the necessary
resources to undertake a risky, international, unrelated
acquisition. Taken together, investors might evaluate the
potential of such deals positively, because they expect
substantial learning benefits for the acquirer.
Deals with a negative outcome
As indicated in Table 3, configurations 3 and 4 lead to
negative acquisition outcome. Configuration 3 are deals
made by large, acquisitive buyers with a good reputation
but poor prior performance, whose purpose is probably
to create economies of scale and/or domestic market
power. We label this configuration performance-boosting
domestic expansion. Such buyers may well be making
acquisitions to solve problems of poor performance.
Investors therefore assume that they are unable to
improve their performance internally and are trying
to buy an external solution to their problems. Moreover,
investors could interpret acquisitiveness as particularly
troublesome, since it could signal that buyers attempt to
use the costly, high-risk instrument of acquisitions
to solve all their problems. Given that such deals usually
involve a premium, investors may consider this method
of solving poor performance problems as too costly.
Configuration 4 comprises deals made by large, expe-
rienced, well-reputed firms, with good performance and
an absence of leverage, indicating surplus cash available,
and pursuing related acquisitions abroad. These acquisi-
tions are probably conducted for the purpose of market
power accumulation, and perhaps, to a lesser extent,
cost-optimization (due to geographic differences). We
label this configuration aggressive empire building.
Despite the acquirers’proven strengths, their acquisitions
are regarded as bad deals because of their acquisitiveness,
their potential overconfidence (due to good prior perfor-
mance and good reputation), and their accumulation of
unlimited resources that could be wasted without extreme
care (i.e., lack of leverage and a large number of
employees). Furthermore, as the M&A literature has
shown, firms with good prior performance and/or a
well-established, enduring reputation tend to suffer
from hubris when making acquisitions (Roll, 1986;
Hayward & Hambrick, 1997; Malmendier & Tate, 2008,
2015). In other words, investors do not like it when a
large, well-reputed firm that has been performing well
enough to have no leverage (because it does not need to
borrow too much on its balance sheet) suddenly decides
to buy an international competitor. We present the five
configurations that we identified in Figure 2.
Resources, capabilities, and strategic fit
After detailing the features of positively and negatively
perceived acquisitions, we turn to the contribution of
the factors included in the configurations: acquirer’s
resources and capabilities, and the strategic fit between
the acquirer and the target.
In terms of resources, size is present not only in the
negative configurations, but also in one of the positive
configurations. Consequently, size can be considered a
fuzzy factor, contributing sometimes to positive, some-
times to negative outcomes. Although its presence is nec-
essary, which means that investors take it into account, it
should be analysed in conjunction with other factors. The
same goes for reputation. Reputation is present in all our
configurations, both good and bad, which suggests that
investors can judge deals by well-reputed firms both posi-
tively and negatively. While reputation seems to be a nec-
essary condition in all types of deals, we need to
investigate what kind of combinations of reputation and
other factors generate positive outcomes. Our argument
is founded on the idea of investors’visceral perceptions
of the potential success or failure of acquisitions, based
on the buyer’s procurement of new resources and on the
opportunities and/or threats raised by the deal
(Schijven & Hitt, 2012; Campbell et al., 2016). Investors
follow deals closely, and they care about whether
acquirers have enough resources to succeed and
whether the deals offer development opportunities. On
the other hand, finance and management studies have
repeatedly demonstrated that the procurement of new
resources does not guarantee value creation in M&As
(Park, 2002; Cording et al., 2008; Zaheer et al., 2013). On
the contrary, certain opportunities provided by deals can
harbor implicit threats, that is, opportunities can prove
fruitless if handled badly, and can jeopardize the success
of a deal (Boone & Mulherin, 2008; Malmendier &
Tate, 2008). Hence, we demonstrate that this ambiguity
can be clarified by examining higher-order interactions
between the acquirer’s resources and the opportunities
INVESTORS’DECISIONS FOLLOWING ACQUISITION ANNOUNCEMENTS: A CONFIGURATIONAL ANALYSIS OF THE ROLE OF
ACQUIRERS’RESOURCES, CAPABILITIES, AND STRATEGIC FIT WITH THE TARGET FIRM
11
raised by the deal, namely, which resources enable buyers
to make the most of the opportunities or mitigate the
threats raised by a deal.
With regard to capabilities, investors almost always
seem to view experience badly. Overall, and perhaps
counterintuitively, our results suggest that acquirer expe-
rience is a weakness rather than a strength when it comes
to investors’perceptions. In this study, we consider
acquirer’s M&A experience as a measure of the stock of
capabilities of making successful deals. As such, the num-
ber of deals performed in the past has been convention-
ally considered a reliable measure of acquirer’s M&A
capabilities (McDonald et al., 2008; Zollo &
Reuer, 2009; Castellaneta & Conti, 2017). According to
this stream of literature, it is the participation in M&As,
not the outcomes of those deals, that affords acquirers
the valuable experience about the “good”and the “bad”
practices. In fact, as demonstrated by meta-analyses
(Datta & Grant, 1990; King et al., 2004; Stahl &
Voigt, 2008), M&A outcomes often depend on factors
external to acquirers, depending on random chance as
much as on acquirers’capabilities. Consequently, the
number of deals in which an acquirer has participated in
the past would reflect more reliably their capabilities of
doing M&As. This can be viewed through the notion of a
track record. The fact of having done many deals estab-
lishes a structural, as opposed to a substantive, percep-
tion of expertise.
However, we appreciate fully the counter-
intuitiveness of our finding regarding the lack of
acquirer’s experience as a condition for positive investor
reaction to announced deals. Although some M&A
studies have suggested that more experience is, by and
large, a positive factor for outcomes of M&As
(Loderer & Martin, 1990, 1997), others have contributed
to a more nuanced view on acquirer’s experience
(Singh & Zollo, 1998; Haleblian & Finkelstein, 1999).
Specifically, it is argued that too much experience can
lead to hubristic attitudes on the part of acquirers, who
will then fail to perceive adequately the complexity and
risks involved in their deals (Roll, 1986; Seth et al., 2000).
Our results appear to elaborate on this view in particular.
We equally find that investors do not view acquirer’s
experience as a universal positive factor to M&A success,
but rather as a factor that contributes to acquirer’s hubris
or, at least, as an indicator of acquisitiveness, which is
often another negative factor for M&A outcomes
(Beckman & Haunschild, 2002; Yim, 2013). This last
point is akin to investors seeing experience in a dubious
light, wherein the random variability of deals renders so
much experience suspect as a guarantor of competence.
However, this may also be because investors interpret
experience as acquisitiveness. In other words, investors
may prefer deals initiated by infrequent acquirers and dis-
like those made by frequent buyers, because they might
believe that acquisitions are made just for the sake of
acquiring (whatever company), and not necessarily for
strategic or financial reasons.
Leverage appears in all three configurations that
investors perceive positively. However, it is also present
in one of the configurations that leads to negative out-
comes, which means that leverage also has to be exam-
ined in combination with other factors. Prior
performance is a similar case, as it is present in some of
FIGURE 2 A graphical representation of
configurations corresponding to positive and
negative investor reactions
12 COLOVIC ET AL.
the positive configurations, but also in one of the nega-
tive configurations.
In terms of strategic fit, relatedness can also act both
ways, appearing in both types of configuration. As for
the geographical dimension, both domestic and interna-
tional deals can be viewed positively or negatively.
It appears therefore that out of the seven factors in
our configurations, only acquisition experience is always
negative. Investors consistently view deals conducted by
acquisitive firms negatively. To some extent, this finding
contradicts prior research, which indicates that the role
of experience is unclear and complex (King et al., 2004).
In our study, we consistently find it in poorly perceived
deals. All the other conditions in our configurations can
be considered “fuzzy,”meaning that they can act both
ways, and therefore need to be analysed in combination
with other factors.
Contributions, limitations and future research
Building on the seminal work by Campbell et al. (2016),
this research advances knowledge of the ways in which
investors assess M&A announcements. In particular, we
show that instead of analysing the impact of individual
factors on investors’decisions, scholars should acknowl-
edge investors’holistic, configurational, rather than
factor-by-factor, reasoning. We reveal that several factors
related to the acquirer and the nature of the deal should
be studied in combination. We advance M&A research,
and in particular, the emerging stream based on fsQCA,
by including acquirer-specific variables in our analysis,
particularly their resources and capabilities. This focus
on resources and capabilities extends the scarce prior
work conducted on the topic (Campbell et al., 2016).
Indeed, the method of fuzzy-set qualitative comparative
analysis allows for a key feature of the resulting
configurations—equifinality (Fiss, 2007; Rihoux &
Ragin, 2009). Equifinality of configurations means that
despite the differences in constitution of the configura-
tions, each of the configurations corresponds equally to
the outcome of interest, for example, CAR, in our study.
In contrast to the reductionist view of resources as indi-
vidually contributing to firm outcomes (Anderson, 1999;
Fainshmidt et al., 2020), we see our results as a signifi-
cantly evolved way of perceiving how acquirers can
achieve positive outcomes by means of different bundles
of resources. Our study joins the steadily growing litera-
ture stream advocating for the holistic consideration of
resources as acting not independently of other contribut-
ing factors, but instead contributing to firm outcomes
through complex interaction (Gruber et al., 2010;
Misangyi et al., 2017; Furnari et al., 2020). More
broadly, our results suggest that these different bundles
can be viewed as the different means of resource orches-
tration through which firms achieve their goals (Sirmon
et al., 2011).
Within the framework of resource orchestration
(Sirmon et al., 2011), our results show that to send posi-
tive signals to the financial market, acquirers must man-
age the breadth of resource orchestration carefully by
choosing to diversify either across products or across bor-
ders. By extending the breadth of either the product
range or the international presence through M&As,
acquirers can orchestrate their resources at a level of
complexity that is manageable, and yield positive returns,
thus sending a positive signal to the financial market.
Furthermore, our results (configuration 3 corresponding
to positive investor reaction) confirm the findings of Hitt
et al. (2006) by demonstrating that human resources (the
number of employees) are crucial for successful cross-
border M&As, namely, the simultaneous presence of the
causal conditions of human resources and international-
ity and product relatedness in the same configuration,
corresponding to positive investor reaction. We also con-
tribute to management and strategy literature more gen-
erally by proposing strategic profiles of M&A deals:
domestic, scale-focused, related acquisition; domestic,
scope-focused, related acquisition; international con-
glomerate diversification; performance-boosting domestic
expansion; aggressive empire building. These profiles
advance strategy literature by uncovering the strategic
nature of M&As. Furthermore, by showing that some
resources act in both positive and negative configura-
tions, we suggest that how resources are deployed (in our
case, for which kinds of acquisitions), is decisive in under-
standing the complex impact of resources on strategic
moves and their outcomes.
Our study is not without limitations that open up ave-
nues for future research. First, our dataset comprises
deals completed by firms with a reputation score devel-
oped by the Reputation Institute. Due to the availability
of reputation data, it covers M&A deals completed by
US and European acquirers over the 2010–2015 period.
Similarly, our analysis does not include deals by acquirers
not scrutinized by the Reputation Institute. Second, fur-
ther research could investigate more precisely the role of
the results of the previous participations in M&As. Since
developmental scientists and psychologists have deter-
mined that learning can occur differently (Levitt &
March, 1988; Popper & Lipshitz, 2000; Jiménez-
Jiménez & Sanz-Valle, 2011) and that the substance of
learning (Fiol & Lyles, 1985; Crossan, Lane, &
White, 1999; Argote & Miron-Spektor, 2011) can vary
with the outcomes of the events under which learning
occurs, we believe that more investigation into this direc-
tion should be conducted in the field of M&As. Third,
the number of factors included in the analysis is limited
to seven. Future research could pursue our line of investi-
gation exploring the role of other factors in investors’
assessments of M&A deals.
fsQCA opens up an entirely new world of research in
the M&A literature, providing scholars with the opportu-
nity to analyse M&A deals using a novel approach. We
INVESTORS’DECISIONS FOLLOWING ACQUISITION ANNOUNCEMENTS: A CONFIGURATIONAL ANALYSIS OF THE ROLE OF
ACQUIRERS’RESOURCES, CAPABILITIES, AND STRATEGIC FIT WITH THE TARGET FIRM
13
hope that our study will stimulate other researchers to
join the fsQCA community and propose alternative
explanations for some of the inconclusive findings
relative to the performance of M&A deals.
ORCID
Ana Colovic https://orcid.org/0000-0002-0979-7402
Olivier Lamotte https://orcid.org/0000-0003-2050-3193
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How to cite this article: Colovic, A., Lamotte, O. &
Yang, J. (2021) Investors’decisions following
acquisition announcements: A configurational
analysis of the role of acquirers’resources,
capabilities, and strategic fit with the target firm.
European Management Review,1–17. https://doi.
org/10.1111/emre.12481
INVESTORS’DECISIONS FOLLOWING ACQUISITION ANNOUNCEMENTS: A CONFIGURATIONAL ANALYSIS OF THE ROLE OF
ACQUIRERS’RESOURCES, CAPABILITIES, AND STRATEGIC FIT WITH THE TARGET FIRM
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