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An institutional approach on the effects of diversification type

An institutional approach on the effects of diversification type In this study, the authors argue that there is more than meets the eye on the effects over postacquisition performance and diversification. This study aims to propose that the conditions that allow higher returns are dependent on the institutional context. The authors suggest that diversification strategies differ in their impact on postacquisition performance when moderated by the institutional inefficiencies of economies.Design/methodology/approachThis research is based on a quantitative approach. The authors statistically test the hypotheses based on multiple regression analysis.FindingsResults show a negative moderating effect of the institutional inefficiencies of the target country on the relationship between the diversification decisions of the firm and its postacquisition performance. So that Latin American firms that perform Cross-border acquisitions with higher degrees of diversification are related to worse performance. However, the degree of institutional inefficiencies negatively moderates this relation, attenuating the negative effects of diversification over performance.Originality/valueAlthough past research has shown that economies with high institutional inefficiencies can benefit from higher levels of diversification, no study has considered the impact of the institutional inefficiencies when discussing many economies, to authors’ acknowledgment. The authors provide evidence that, in the case of Latin American firms, diversification reduces performance; however, the degree of institutional inefficiencies negatively moderates this relation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Research: The Journal of the Iberoamerican Academy of Management Emerald Publishing

An institutional approach on the effects of diversification type

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1536-5433
eISSN
1536-5433
DOI
10.1108/mrjiam-07-2021-1192
Publisher site
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Abstract

In this study, the authors argue that there is more than meets the eye on the effects over postacquisition performance and diversification. This study aims to propose that the conditions that allow higher returns are dependent on the institutional context. The authors suggest that diversification strategies differ in their impact on postacquisition performance when moderated by the institutional inefficiencies of economies.Design/methodology/approachThis research is based on a quantitative approach. The authors statistically test the hypotheses based on multiple regression analysis.FindingsResults show a negative moderating effect of the institutional inefficiencies of the target country on the relationship between the diversification decisions of the firm and its postacquisition performance. So that Latin American firms that perform Cross-border acquisitions with higher degrees of diversification are related to worse performance. However, the degree of institutional inefficiencies negatively moderates this relation, attenuating the negative effects of diversification over performance.Originality/valueAlthough past research has shown that economies with high institutional inefficiencies can benefit from higher levels of diversification, no study has considered the impact of the institutional inefficiencies when discussing many economies, to authors’ acknowledgment. The authors provide evidence that, in the case of Latin American firms, diversification reduces performance; however, the degree of institutional inefficiencies negatively moderates this relation.

Journal

Management Research: The Journal of the Iberoamerican Academy of Management – Emerald Publishing

Published: Sep 22, 2022

Keywords: Institution-based view; Diversification; Strategy; Unrelated diversification; Related diversification; Institutional inefficiencies; Visão baseada em instituições; Diversificação; Estratégia; Diversificação não relacionada; Ineficiências institucionais; Diversificação relacionada; Visión institucional; Diversificación; Estrategia; Diversificación no relacionada diversificación relacionada; Ineficiencias institucionales

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