Managerial Risk‐taking in International Acquisitions in the Brewery Industry: Institutional and Ownership Influences Compared
| Author | Mike Geppert,Christoph Dörrenbächer,Ian Taplin,Jens Gammelgaard |
| DOI | http://doi.org/10.1111/j.1467-8551.2011.00806.x |
| Date | 01 September 2013 |
| Published date | 01 September 2013 |
Managerial Risk-taking in International
Acquisitions in the Brewery Industry:
Institutional and Ownership Influences
Compared
Mike Geppert, Christoph Dörrenbächer,1Jens Gammelgaard2and
Ian Taplin3
University of Surrey, Surrey Business School, Guildford, Surrey GU2 7XH, UK,1Berlin School of Economics
and Law, Badensche Str. 50–51, D-10825 Berlin, Germany, 2Copenhagen Business School, Department of
International Economics and Management, Porcelænshaven 24, DK-2000 Frederiksberg, Denmark, and
3Wake Forest University, Sociology Department, 1834 Wake Forest Road, 233 Carswell Hall,
Winston-Salem, NC 2710, USA
Corresponding author email: m.geppert@surrey.ac.uk
This paper deals with the role that institutional differences play in managerial risk-
taking when firms engage in international acquisitions. It is assumed that multinational
corporations (MNCs) have different interests and capabilities when dealing with inter-
national acquisition, which in the authors’ view are significantly shaped by specific home
country institutional influences. This study concerns the question of how different forms
of ownership – concentrated (e.g. family and bank based) and dispersed (stock market
based) – influence risk-taking and managerial decision-making in large international
acquisitions. Comparing a total of 12 large acquisitions of four leading MNCs in the
global brewery industry, the paper shows that mutually reinforcing influences of country
of origin (coordinated vs liberal market economies) and ownership (family ownership vs
stock market ownership) lead to different risk profiles and managerial risk-taking with
regard to international acquisitions.
Introduction
Mergers and acquisitions (M&As) are an impor-
tant and much researched aspect of corporate
behaviour since they permit firms to use opportu-
nities otherwise not available to them under
normal operational parameters. Typically, they
can provide a series of benefits such as technologi-
cal acquisition, market share increases, scale
economies, access to distribution channels, verti-
cal and horizontal integration and even diversifi-
cation (Ahuja and Katila, 2001; Trautwein, 1990).
However, since many M&As do not succeed
(Sirower, 1997), there has been a tendency to seek
out specific aspects of such failure rather than see
it as a result of more complex integration prob-
lems. By examining the initial context and drivers
of change that provide the motivation behind
such strategies, it is possible to evaluate outcomes
and consider the role played by institutional fea-
tures of the acquiring firm’s home country in the
shaping of such behaviour. This is especially
important when considering international activi-
ties by firms.
This paper examines the role that institutional
differences of coordinated vs liberal market
economies, and simultaneously the effect of own-
We are indebted to Kerry Sullivan and Sebastian Dieng
for the input provided to earlier drafts of the paper.
bs_bs_banner
British Journal of Management, Vol. 24, 316–332 (2013)
DOI: 10.1111/j.1467-8551.2011.00806.x
© 2012 The Author(s)
British Journal of Management © 2012 British Academy of Management. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
ership patterns, play in managerial risk-taking
when engaging in international acquisitions. We
assume that multinational corporations (MNCs)
have different interests and capabilities when
dealing with international acquisitions, which are,
in our view, significantly shaped by specific home
country institutional influences of the acquiring
firm. This study investigates how different forms
of ownership influence risk-taking and manage-
rial decisions about international acquisitions of
four major players in the global brewing industry.
The brewing industry has undergone consi-
derable consolidation over the past decade, as
firms have dealt with static domestic markets,
intense rivalry in key overseas markets and oppor-
tunities for expansion in emerging markets. In
the 1990s, the industry changed from being pri-
marily domestic oriented or focusing on low-
commitment internationalization strategies such
as export and licensing, to be very concentrated
and truly global (Lopes, 2007). In the last decade,
international acquisitions have increased signifi-
cantly across the industrial sector and, to some
degree, they replace the strategy of forming joint
ventures with local partners (Lopes, 2007).
However, given the larger commitment and the
amount of resources involved, acquisitions are
seen as both financially and politically more risky
than other entry modes (see for example Barkema
and Vermeulen, 1998). The influence of the wider
society on these strategic decisions, such as home
country institutional differences and how they
affect acquisition behaviour, are often neglected
or viewed in a deterministic way, which eliminates
managerial agency. Similarly, discussion of how
risk is assessed is viewed as either an expression of
changing strategic initiatives (new management or
a reaction to dramatic changes in market activity)
or the manifestation of a longstanding propensity
that is culturally embedded. Both tend to oversim-
plify the interaction of key processes or the role of
imitative behaviour that can occur.
This paper argues that acquisition risk is con-
ditional upon institutional features as well as
firm ownership structure. By differentiating risk
according to key firm characteristics, we are able
to show how overlapping and reinforcing institu-
tional impacts make a clear difference in shaping
risk-taking in large acquisitions. Our paper, there-
fore, focuses on an issue which has not been sys-
tematically explored so far: the comparison of
strategic decisions behind large international
acquisitions and the role of managerial risk-
taking. In order to understand and assess differ-
ences in managerial risk-taking, we refer to
national specific institutional features of the
acquiring company and compare how features of
home country specific financial systems influence
risk profiles and risk-taking within MNCs. We
compare four MNCs in the same industrial sector,
two originating from liberal market economies
with large domestic markets for beer, and two
originating from coordinated market economies
with a small home market.
Analysing acquisition risk-taking:
an eclectic review of the literature
Acquisition risks
Acquisitions are, in general, risky investments
compared with other types of market entry such as
export, licensing and strategic alliances, as they
require a higher level of financial investment. Even
compared with greenfield establishments, they
incur greater risk due to the high premiums often
paid for the target firm. High premiums put further
risks on non-reversible investments, such as low
divestment price of target firms (Brouthers and
Dikova, 2010). Our first assessment criterion for
acquisition risk is therefore the premium paid in
relation to the share price of the target firm.
The second criterion of acquisition risk is the
relative size of the target firm, in terms of amount
and quality of resources, in relation to the acquir-
ing firm and the latter’s ability to capitalize on
the target firm resources. From a resource-based
point of view, Penrose’s (1959) growth theory
predicts that current acquisitive growth is an
outcome of previous organic and acquisitive
growth. Companies are (or should be) con-
strained by their amount and quality of resources,
where past investments are likely to lead to path
dependences in future strategic action (Teece,
Pisano and Shuen, 1997). Brouthers and Dikova
(2010) express this situation as strategic flexibility,
which is provided by past investment in human
resources, information systems and financial
structures. Hoffmann and Schaper-Rinkel (2001)
also find that external growth strategies require
internal resources, particularly capital and man-
agement capacity. Lockett et al. (2011) emphasize
that growth constraints are due to adjustment
cost, which is the time and effort used in integrat-
Managerial Risk-taking in Brewery Industry 317
© 2012 The Author(s)
British Journal of Management © 2012 British Academy of Management.
To continue reading
Request your trial