Contributions published at International Management (Thomas Keil)

We draw on group information-processing theory to investigate how target boards of directors may contribute to target value capture during the private negotiations phase in acquisitions. We view target boards as information-processing groups and private negotiations as information-processing tasks. We argue that target board meeting frequency is associated with increased processing—gathering, sharing, and analyzing—of acquisition-related information, which improves target bargaining and, ultimately, target value capture. We further posit that this value-enhancing effect of target board meeting frequency is more pronounced when target board composition improves the ability of target boards to process acquisition-related information. Finally, we expect that meeting frequency is more consequential for target bargaining and value capture when acquisition complexity imposes high information-processing demands on the target boards during private negotiations. Empirical evidence from a sample of acquisitions of publicly listed firms in the United States offers support for our group information-processing perspective on board contribution to shareholder value in firms targeted for acquisition.

Momentum theory suggests that acquisition experience leads to acquisition momentum in the form of a higher likelihood of subsequent acquisitions of the same type. However, this argument has been challenged theoretically and empirically. We reconcile conflicting predictions and findings of prior research and extend momentum theory by incorporating activity load as a novel causal mechanism to both replicate the base finding and explain deviations from it. We find that a high activity load due to increased acquisition activity acts as a counterforce to momentum, decreasing the likelihood of subsequent acquisitions of the same type. Moreover, we also find that the interplay of routines, cognitive frames, and activity load causes companies to alternate between different types of acquisitions – from small to large and from large to small – as management engages in attention modulation to preserve momentum. Taken together, our arguments and findings contribute to an improved understanding of temporal patterns of acquisition behaviour.

How does the appointment of an outside CEO affect the hiring firm’s performance? Prior research reports that outside CEOs tend to underperform compared to inside CEOs, with high performance variance. Extending CEO-centric perspectives, we predict that experiential learning enhances post-succession performance, while negative transfer learning undermines it. We then offer a novel stakeholder-centric perspective, conjecturing that stakeholders’ negative sentiment toward the CEO appointment undermines post-succession performance. We further conjecture that outside CEOs are less effective in leveraging their executive experience and suffer more from negative transfer and negative sentiment compared to inside CEOs, who can leverage their familiarity and social embeddedness in the firm, which explains why outside CEOs may underperform. Analyzing the appointments of CEOs in US public firms, we find that counter to expectations, the length and breadth of their executive experience do not explain post-succession performance nor the performance differences between outside CEOs and inside CEOs. Rather, the misfit between the CEOs’ corporate background and their firms’ characteristics and the negative sentiment surrounding their appointments explain performance differences and the underperformance of outside CEOs. Accordingly, our study directs attention to the important yet previously understudied reactions of stakeholders to CEO appointments.

We draw on the behavioral theory of the firm and prospect theory to examine how performance feedback (decision context) and the characteristics of the alternatives (decision content) that decision makers face jointly determine organizational risk-taking choices. While the behavioral theory of the firm has identified performance feedback’s important role in driving organizational risk-taking decisions, it has not considered the intrinsic attributes of alternatives, specifically the magnitude and likelihood of their outcomes, which have been the focus of prospect theory. We argue that these two attributes play a key role in decision makers’ assessment of alternatives, but because achieving organizational goals is the prime objective in organizations, performance feedback drives how decision makers process information regarding these attributes. Analyzing 23,895 fourth-down decisions from the U.S. National Football League, we find that decision makers weigh attainment discrepancy and the magnitude and likelihood of outcomes in their choices, depending on deadline proximity. Furthermore, the size and valence of attainment discrepancy modify the weight of the magnitude and likelihood of outcomes in risky choices. Our arguments and findings suggest extensions to the behavioral theory of the firm and imply modifications to prospect theory when applied to the organizational context.

Research Summary In corporate acquisitions, overconfident chief executive officers (CEOs) often make biased decisions, subsequently paying unjustifiably high acquisition premiums. We investigate the predeal process in which the acquisition premium is decided upon and, drawing from procedural rationality theory, argue that the pursuit of greater procedural rationality through slow-paced predeal processes reduces the tendency of overconfident CEOs to inflate acquisition premiums. The empirical results based on a sample of acquisitions involving publicly held US firms show that overconfident CEOs tend to pay high acquisition premiums, replicating earlier findings of such a relationship. More importantly, the results show that the tendency of overconfident CEOs to overpay for acquisitions decreases under conditions in which the predeal processes are slower in pace. Managerial Summary CEOs often exhibit excessively high levels of confidence in their ability to make successful corporate acquisitions. Driven by the belief in their ability, overconfident CEOs often end up overpaying for acquisitions. Our study provides suggestive evidence that setting a slow acquisition process pace is an important prerequisite for an acquiring firm and its board of directors to attenuate the inflating effect of CEO overconfidence on acquisition premiums. Our arguments and results imply that boards of directors should slow the pace of predeal acquisition processes if their CEO is exhibiting signs of overconfidence.

Research Summary When organizational environments change, experience, and organizational beliefs are often devalued and may become an obstacle to organizational adaptation. The literature on unlearning suggests organizations can overcome this problem by unlearning. However, prior work focuses mostly on unlearning of what has worked in the past (success beliefs) and neglects unlearning of what did not work (failure beliefs). We examine the differences in unlearning these two types of beliefs and their implications for learning and adaptation under environmental change. Using a simulation model, we find that (a) the implications of unlearning success and failure beliefs exhibit fundamentally different temporal dynamics because their underlying mechanisms are different, (b) organizations can often gain more from unlearning failure beliefs, and (c) unlearning failure beliefs is the more robust strategy. Managerial Summary In our study, we investigate the implications of unlearning for an organization's ability to adapt to a (more or less) changing environment. We show that organizations should unlearn selectively because unlearning success beliefs (i.e., beliefs about what has worked in the past) have different implications from unlearning of failure beliefs (i.e., beliefs what has not worked in the past). Most importantly, our study suggests that organizations should focus on unlearning failure rather than success beliefs, in particular, given the difficulties of unlearning old (success) beliefs and the problems associated with knowing when old beliefs turned obsolete by environmental changes. In focusing on unlearning failure beliefs, organizations also pursue a less risky strategy than with unlearning success beliefs.

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This study examines how the ownership structure of corporations shapes their responses to discontinuous technological change. We analyze whether mixed ownership, a situation where following privatization a company's shares are held both privately and by the government, is associated with less innovation in response to discontinuous technological change. We argue that mixed ownership is associated with governance conflicts that affect a company's ability to respond to the challenges posed by discontinuous technological change. Our empirical analysis uses data on European telecommunications operators for the period 2000–2016 when they faced sweeping technological change due to the advent of Internet-based communication services. Our baseline result suggests that operators with mixed ownership file around 70% fewer patents in relevant digital technologies than companies that are fully private or where the government owns a majority of shares. We find that mixed ownership also affects negatively the acquisition of externally developed technology.

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Despite the long-standing research interest in the pre-deal phase of mergers and acquisitions, many important questions remain unanswered. We review and synthesize the extensive but rather fragmented research on this topic area in the fields of management, finance, accounting, and economics. We organize our review according to six themes, that is, deal initiation, target selection, bidding and negotiation, valuation and financing, announcement, and closure, which represent the main categories of activities performed during the pre-deal phase. Our review shows that most of the existing research relies on a rather high-level, simplified, and static conception of the pre-deal phase. On the basis of our review, we put forward a research agenda that calls for a more granular examination of individual activities and decisions, a more comprehensive analysis of the interplay among the different actors involved in the pre-deal phase, a better understanding of the role of the temporal dynamics, and the extension of the theoretical base from variance-based to process-based theorizing.

Organizations are often conceptualized as systems of interdependent choices that exhibit a core–periphery structure. Research is inconclusive, however, regarding whether organizations should focus their search efforts on their core or peripheral choices. In this paper, we seek to reconcile contradictory arguments and suggest that the efficacy of a search focus depends on the time horizon, environmental change, and how the core and periphery interact. In so doing, we demonstrate that the directionality of interdependence and whether interdependencies occur mostly within the core or between the core and periphery are key determinants of the implications of focus. We discuss the implications of our findings for various streams of research, including research on structural inertia and business model innovation.

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In many firms, strategic initiatives lead to frustration rather than performance improvements and strategic renewal. One frequently overlooked key to driving value through strategic initiatives lies in shifting the focus from launching disconnected individual strategic initiatives to managing an integrated portfolio of initiatives. This article identifies five key management practices that allow firms to address obstacles to effective initiative management and to enhance value creation through the deliberate management of initiative portfolios.