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Supply chains and the success of M&As: Investigating the effect of structural equivalence of merging firms’ supplier and customer bases

Chae, S., Son, B-G. ORCID: 0000-0002-7395-0598, Yang, T. & Yang, Y. (2022). Supply chains and the success of M&As: Investigating the effect of structural equivalence of merging firms’ supplier and customer bases. International Journal of Operations and Production Management, doi: 10.1108/IJOPM-12-2021-0745

Abstract

Purpose – This study investigates the extent to which structural equivalence between acquiring and target firms is associated with post-merger and acquisition (M&A) performance—a relationship that is proposed to be moderated by industry-level vertical relatedness between acquiring and target firms.

Design/methodology/approach – Applying social network analysis and regression, this study analyzes a buyer-supplier relationship network dataset of 279 M&A deals completed between 2010 and 2017 to test the hypotheses. Structural equivalence is measured as the proportion of common customers and suppliers between an acquiring firm and a target firm.

Findings – Supporting a view about the importance of supply chains in explaining M&As outcomes, the results suggest that the structural equivalence in the supplier network is positively associated with post-M&A firm performance. The results also show that the effect of the structural equivalence in the customer network is moderated by vertical relatedness between two merging firms (i.e., structural equivalence contributes to post-M&A performance when vertical industry relatedness is high).

Originality/value – This study contributes to the M&A and supply network literature by investigating the performance implications of structural equivalence in supplier and customer networks, demonstrating the importance of taking a supply chain view when explaining M&As outcomes. Specifically, we suggest considering structural equivalence as a new type of relatedness between merging firms (i.e., relatedness in network resources in explaining post-M&A performance). It also indicates how industry-level vertical resource relatedness, which is about relatedness in internal resources between the two firms, could interact with firm-level network resource relatedness, which is about relatedness in external supply chain resources between the two firms, in affecting post-M&A performance.

Publication Type: Article
Additional Information: This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
Publisher Keywords: Mergers and acquisitions, Supply networks, Structural equivalence, Vertical relatedness
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments: Bayes Business School > Management
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