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Publication: Examining Links between Pre and Post M&A Value Creation Mechanisms — Exploitation, Exploration and Ambidexterity in Central European SMEs

The concepts of exploration and exploitation are types of organizational learning and innovation behaviour and are crucial for sustainable company development. Acquisitions establish the capability of pursuing both exploration and exploitation.

 Even if researchers have begun to integrate the concepts of ambidexterity, exploration, and exploitation into M&A research, it can still be described as fragmented. The contribution of this paper is threefold. First, the pre-acquisition acquirer–target fit is integrated in terms of exploration and exploitation with actual success with post-merger exploration and exploitation. Second, it is investigated how post-merger exploration, exploitation, and ambidexterity — that is, simultaneous success in exploitation and exploration — affect acquisition performance. Third, it is shown when and how acquisition experience can be beneficial by shedding light on the value of acquisition experience by investigating its more nuanced influences on in-domain and cross-domain relationships. 

Primary data was collected by conducting a mail and online survey in spring 2013, the focus was on the German-speaking part of Europe and on long-living industries (e.g., machinery engineering).
It is argued that a fit between a target and acquirer benefits post-merger success when it comes to strategic orientation – similarity is necessary because it establishes shared beliefs and a common understanding about how to conduct business. Positive effects of success with post-merger exploitation and exploration success on M&A performance were observed. Empirical evidence is presented that a simultaneous increase in success with post-merger exploration and exploitation negatively affects M&A performance. In addition to that evidence is revealed that combined efforts — that is, to increase exploration and exploitation after an acquisition — are too demanding for SMEs involved in M&A transactions. Regarding acquisition experience the results show that M&A experience positively influences in-domain relationships, yet has no significant effect on cross-domain relationships. Three managerial implications can be drawn from the study. First, strategic fit is more complex than it seems; managers should seek targets with similar strategic orientations regarding explorative or exploitative learning. Second, simultaneously integrating and increasing exploration and exploitation activities invariably causes organizational conflicts and, in turn, overextension because integrating organizations is very demanding for SMEs. Third, acquisition experience is at once beneficial for and detrimental to acquisition performance.

 Florian Bauer, Andreas Strobl, Mai Anh Dao, Kurt Matzler, Nicole Rudolf