THE KNOWLEDGE EFFECTS OF PRIOR ALLIANCES ON ACQUISITION PERFORMANCE: AN EMPIRICAL STUDY

Motivation: This paper provides further empirical evidence that prior strategic alliances made with firms similar to or in the same industry as the acquisition target positively affect the focal acquisition’s performance. In doing so, the paper aims to fill a gap in the literature on how prior strategic alliances affect acquisition performance. Earlier research: Earlier empirical studies such as Porrini (2004a) show that a prior partner-specific alliance, between a US manufacturing acquirer and target, positively relates to post-acquisition performance. Porrini (2004b), using the same dataset of US manufacturing acquirers and targets, shows that prior general alliance experience is able to positively explain differences in low-tech and high-tech acquisitions. Zollo & Reuer (2010) do an empirical study of US commercial bank mergers and show that prior general alliance experience of the acquirer with any other partner can positively explain acquisition performance provided that there is a lower requirement for postmerger integration and the quality of the acquirer-target relationship is good. These three published papers are the only ones known to this researcher that study the relationship between prior strategic alliances and post-acquisition performance. This is surprising given the immensity of literature in both these areas. Taking a closer look at the nature of the prior alliance experience studied in these three papers, there seems to be neglect of a middle ground between prior partner-specific alliance experience and prior general alliance experience, namely similar technology or industry alliance experience. This paper tries to fill this gap in the literature by providing empirical evidence that shows how prior industry alliance experience can also positively explain post-acquisition performance.