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International acquisitions and emerging market firms' performance—a structural contingency perspective
Author(s) -
Agnihotri Arpita,
Bhattacharya Saurabh
Publication year - 2017
Publication title -
thunderbird international business review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.553
H-Index - 37
eISSN - 1520-6874
pISSN - 1096-4762
DOI - 10.1002/tie.21946
Subject(s) - industrial organization , business , contingency , strategic business unit , emerging markets , scope (computer science) , unit (ring theory) , autonomy , organizational structure , perspective (graphical) , marketing , economics , finance , management , linguistics , philosophy , mathematics education , mathematics , artificial intelligence , computer science , political science , law , programming language
Entry modes have impact on firms' performance in international markets. Using an organizational structural contingency perspective, we assert that firms with mechanistic structure can enhance their performance in international markets if they choose acquisitions as an entry mode. Mechanistic structure limits organizations' learning capability, which can be managed through acquisitions but not through other entry modes such as joint ventures. For managing limitations associated with the poor knowledge absorption capability of mechanistically structured organizations, firms should not follow the standard integration procedures associated with acquisitions aiming to achieve economies of scale or scope. Rather, they should provide corporate parenting advantage to the newly acquired unit by (a) granting complete autonomy and (b) contributing required resources for future growth, thus treating the acquired business as a strategic business unit. Since mechanistic structures are more common in emerging markets, we explain our perspective using illustrative caselets from these markets.