Critical Review: Research Rationale & Questions
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Resource Redeployment Following Horizontal Acquisitions in Europe and North America, 1988–1992, by Laurence Capron, Pierre Dussauge and Will Mitchell.
The paper focuses on redeployment of resources between target and acquiring businesses after acquiring them horizontally. It critically evaluates the perspectives on the resources that are important and subject to market failure (Capron & Hulland, 1998). Aspects that are covered in the report include managerial, R&D, marketing, manufacturing, and financial resources.
The main idea is to show that targets and acquirers that horizontally acquisitions redeploy resources frequently (Capron & Hulland, 1998). In addition it makes the reader understand that as the asymmetry of the merger parties increases the magnitude of redeployment of each resource. It tackles that issues that challenges businesses to focus on the market for business rather than market for resources. The businesses should focus on evolutionary issues that emphasis on organizational differences in the markets that are competitive.
The research is a qualitative paper where horizontal acquisitions are analyzed on their resources deployment. This type is chosen in order to investigate the two arguments on market failure incentives in the acquisition of businesses, which are firstly; the frequent redeployment of resources after horizontal acquisitions. Secondly is that the stronger firm has better incentives so as to deploy the resources to the weaker firm. The five categories i.e. managerial, R&D, marketing, manufacturing, and financial resources are then are then analyzed on their effects on horizontal acquisitions (Capron & Hulland, 1998). The effect of the relativity of the strength of the resource redeployed is also analyzed in that the target and acquirer are given the options.
The data is collected from a survey from American and European companies in the same industry in 1994. The sample collected data from 2020 mergers and acquisition that were performed in the period 1988 – 1992. The companies were those with the level 4 of the US Standard Industrial Classification (SIC). The period chosen i.e. 1988 – 1992 was for the reason that there was no need to include companies that had recently considered merging and their dealings were not yet finalized. The source of the data was the international merger yearbook (1990, 1991, 1992); the Merger and Acquisition Sourcebook (1990, 1991, 1992), Mergers and Acquisitions International (1990, 1991, 1992), and Fusions ET Acquisitions (1989, 1990, 1991, 1992) (Capron & Hulland, 1998).
The companies in question were spread across Europe where a proportion of 73% of the firms that acquired other companies and 59% of the targeted companies were in France, United States and United Kingdom.
The survey was in four phases where the first phase involved the development of scales of measurements that were based on the literature and other suggestions from consultants. This led to evaluation of five types of resources to be used in the study and the development of a formal questionnaire (Capron & Hulland, 1998).
The second phase was the translation of the questionnaire into different languages such as French. Interviews were also held with executives that had a wealth of knowledge on the mergers so as to add value to the data.
The third phase was a pilot survey where revised instruments of survey were applied in that the executives and CEOs in 10 firms that had acquired others were interviewed. A final version of a questionnaire was drafted from the findings (Capron & Hulland, 1998). The fourth phase involved sourcing information from the different firms that were acquiring where the CEOs would respond to a given questionnaire. From the survey 273 responses were received and 20 were eliminated; this left a total of 273 sets of acquisitions to be reviewed. The unique targets were 253 while unique acquirers were 190.
Research Design Problem
The major problem in the data was the over representation of French firms and the under representation of the US and UK firms (Capron & Hulland, 1998). The other bias was the collection of data from executives who would definitely give only the positive information about their firms.