Mergers and Acquisitions - The Standing of theory in the Quest for Better Institutions and Policy

“Mergers and acquisitions to date is the only method by which the unique resources of firms that are organizationally embedded can be passed on from one firm to another and hence also potentially survive across generations.”

In CASE Network Studies and Analyses Report No. 401, CASE Fellow Camilla Jensen delves into the subject of mergers and acquisitions. She notes that the existing literature is much like a battlefield of ad hoc theory-testing, leaving behind a fragmented field. The standing of theory in the field of mergers and acquisitions is weak for at least three reasons. Research is best described as a battlefield of ad hoc theory testing leaving behind a fragmented field. Research has focused traditionally on high intensity markets under the Anglo-Saxon variant of capitalism. Empirical evaluation is prone to be inexact and suffers among other from significant aggregation problems between the micro (firm performance) and macro level (economic growth). The deficiencies in the standing of theory will be reflected in weak institutions to handle the political processes concerning value, liquidity, efficiency and fairness aspects that affect the market for corporate assets within and across different variants of capitalism.

The objective of the paper is to outline a research agenda and policy dilemmas from a research project that combines neoclassical theory, the resource based view of the firm, and institutional theory in an attempt to formulate a more general theory of mergers and acquisitions. Towards this objective the paper poses the following questions 1) What can we learn from the existing literature?, 2) What are the blank spots in our knowledge about mergers and acquisitions? and 3) What are the potential dilemmas in a public policy perspective?