Bilateral Resource Redeployment and Capabilities Improvement Following Horizontal Acquisitions

This paper studies the incidence and impact of bilateral redeploymentof resources between target and acquiring firms following 253horizontal acquisitions involving North American and Europeanfirms between 1988 and 1992. The resources include ten typesof technical, commercial, administrative and financial resources.We find that acquisitions often involve substantial technicaland commercial integration of the resources of the acquirerand target, while representing managerial and financial expansionof the acquirer rather than the target. In turn, we show thatbilateral redeployment improves five types of capabilities ofthe acquiring and target businesses, induding R&D capabilities,time to market, product quality, product cost and output flexibility.The empirical implications support the conceptual argument thatacquisitions play a key role in business adaptation.