The takeover selection decisions of multinational enterprises: Empirical evidence from European target firms

Abstract

This article studies the selection patterns of takeover decisions taken by multinational enterprises (MNEs) by analysing the characteristics of acquisition targets. Drawing on the evolutionary economic geography and the international business literatures, our conceptual framework emphasises key micro-level factors influencing cross-border takeovers, such as the global search of MNEs for novel firm-specific knowledge, their cost-reduction behaviour and the heterogeneity of routines among potential target firms. The mediating role of the technological and the regional institutional contexts of target firms is also considered. Using data on a large sample of European target firms for 1997–2013, our results support a process of selection whereby MNEs acquire underperforming firms that developed valuable organisational and cognitive routines, as a strategy to access novel knowledge bases while reducing the cost of purchasing foreign assets.