Browsing by Author "Walker, Michael"

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Explaining acquisition behavior in the US software industry - How do firm-specific and environmental conditions impact acquisition behavior?
(2013) Walker, Michael
School of Science | Master's thesis
Acquisitions are becoming an increasingly popular method for companies to execute strategies. Though popular, most acquisitions fail to reach their expected results and many believe the failure is due to poor timing in respect to firm specific and industry conditions. The objective of this study was to identify and evaluate what firm specific and environmental conditions impact acquisition behavior. Six conditions for acquisition behavior were identified and tested for their impact on acquisition behavior in the following year. The six variables are R&D intensity of the focal firm, previous acquisition experience of the focal firm, acquisition intensity within the environment, focal firm profitability, changes in market share, and density of firms within the industry. The impact from each of these conditions was evaluated with respect to the number of acquisitions performed by each focal firm in each year using a negative binomial regression model. The results of the regression are as follows:. - A firm's profitability in the previous year has a positive impact. - A change in market share in the previous year has a positive impact. - R&D Intensity in the previous year has a negative impact when all firms are considered, but a positive impact when focusing only on regularly behaving firms. - Previous acquisition experience has a positive impact. - Acquisition intensity in the environment has a positive impact. - The evolution of an industry throughout its industry life cycle has a positive impact. This study comprised of three phases, starting with an exploratory literature review phase which identified and selected conditions for acquisition behavior. The second phase was an explanatory empirical phase which used a negative binomial test to evaluate if the selected conditions had an impact on acquisition behavior in the dataset. The final phase narrowed the scope of the sample to reduce the effect of extreme conditions of each variable and to help understand how firms under 'normal conditions' behave. The setting for the empirical study is the US software industry between 1980 and 2006. The sample is from a Compustat dataset also used in a previous acquisition activity study conducted by Keil and Laamanen (2012).