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Observational Learning from Acquisition Outcomes of Innovation Leaders
Author(s) -
Chen ShengSyan,
Huang ChiaWei,
Lin ChihYen
Publication year - 2016
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12132
Subject(s) - incentive , observational learning , competition (biology) , observational study , business , knowledge acquisition , dreyfus model of skill acquisition , industrial organization , marketing , knowledge management , economics , psychology , computer science , microeconomics , experiential learning , ecology , pathology , biology , economic growth , medicine , mathematics education
We examine how learning from observing the acquisition outcomes of innovation leaders affects the acquisition decisions and performance of followers in an industry. Followers tend to increase the probability of acquisition and the size of an acquisition when innovation leader acquisitions produce more favorable outcomes, and reduce both when innovation leader acquisitions suffer more unfavorable outcomes. Industry competition, environmental uncertainty, prior acquisition experience, geographic proximity, and managerial incentives are important mechanisms affecting observational learning in acquisitions. Follower acquisitions perform better when innovation leaders’ acquisition outcomes convey more favorable signals, and more poorly when they convey more unfavorable signals.