THE EFFECT OF INNOVATION CAPABILITIES AND EXPERIENCE ON CROSS-BORDER ACQUISITION PERFORMANCE

Due to the integration of the European market, the globalization process, and the rising importance of technological innovation, there has been a surge in cross-border acquisition strategy for European firms. Innovative technology and experience are the main drivers behind firms’ acquisition imperatives to realize sound performance. Based on the resource-based view and organizational learning perspective, our empirical research focuses on the effects of European firms’ innovative capabilities and experience on their acquisition performance when targeting United States firms. The results indicate that both innovative capabilities and experience have a positive effect on acquisition performance. This suggests that in order to have successful acquisition performance, European firms need to reinforce their innovative capabilities and commit to accumulating experience in articulating cross-border acquisition strategy. In addition, we discuss the interaction effect that relatedness has on the acquisition performance of European firms. Our findings indicate that related acquisitions associated with redundant or similar innovative capabilities and acquisition experience hinder acquisition performance. We posit that relatedness has a negative moderating effect on acquisition performance.