The motive behind international diversification acquisition by business group
Abstract
This study aims to determine the influence of the industry group business on international acquisition diversification with private ownership and strategic asset seeking as moderating variables. Using resource-based and institutional theory, this study hypothesizes that the industry group business provides benefits and encourages diversification of international acquisitions. In addition, this study also argues that private ownership and strategic assets seeking amplify the influence of industry group business on diversification international acquisition. The novelty of this research aims to address by proposing strategic assets seeking as a moderated variable that influence industry group business on diversified international acquisitions. The sample data of this research are companies listed on the Indonesia Stock Exchange between 2018–2021. The findings of this research can be useful for companies to understand the significance of intangible assets and how they can leverage them to gain a competitive advantage in their respective industries. The results of this study will greatly assist researchers in the field of international acquisitions.
Keyword : international acquisition, diversification, industry group business, strategic assets seeking, private ownership
How to Cite
Edi, E., Tilani, A., & Karjantoro, H. (2024). The motive behind international diversification acquisition by business group. Business: Theory and Practice, 25(1), 286–294. https://doi.org/10.3846/btp.2024.19568
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Ceipek, R., Hautz, J., Mayer, M. C. J., & Matzler, K. (2019). Technological diversification: A systematic review of antecedents, outcomes and moderating effects. International Journal of Management Reviews, 21(4), 466–497. https://doi.org/10.1111/ijmr.12205
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Eduardsen, J., Marinova, S. T., González-Loureiro, M., & Vlačić, B. (2022). Business group affiliation and SMEs’ international sales intensity and diversification: A multi-country study. International Business Review, 31(5), Article 101989. https://doi.org/10.1016/j.ibusrev.2022.101989
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Komisi Pengawas Persaingan Usaha. (n.d.). https://kppu.go.id/
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Organization for Economic Cooperation and Development. (2008). Economic and other impacts of foreign corporate takeovers in OECD countries. In International investment perspectives 2007: Freedom of investment in a changing world (pp. 65–91). OECD Publishing. https://doi.org/10.1787/iip-2007-5-en
Pereira, V., Temouri, Y., Budhwar, P., & Tarba, S. (2021). Cross-border acquisition performance of emerging market multinational enterprises: The moderating role of state-ownership and acquisition experience. Long Range Planning, 54(6), Article 102107. https://doi.org/10.1016/j.lrp.2021.102107
Petersen, B., & Seifert, R. E. (2014). Multinational enterprises, markets and institutional diversity. In A. Verbeke, R. van Tulder, & S. Lundan, Multinational enterprises, markets and institutional diversity (progress in international business reseaarch) (Vol. 9). Emerald Group Publishing Limited. https://doi.org/10.1108/S1745-886220140000009030
Popli, M., & Ladkani, R. M. (2020). Value constraining or value enabling? The impact of business group affiliation on post-acquisition performance by emerging market firms. Management and Organization Review, 16(2), 261–291. https://doi.org/10.1017/mor.2019.51
Popli, M., Ladkani, R. M., & Gaur, A. S. (2017). Business group affiliation and post-acquisition performance: An extended resource-based view. Journal of Business Research, 81, 21–30. https://doi.org/10.1016/j.jbusres.2017.08.003
Purkayastha, A., Pattnaik, C., & Pathak, A. A. (2022). Agency conflict in diversified business groups and performance of affiliated firms in India: Contingent effect of external constraint and internal governance. European Management Journal, 40(2), 283–294. https://doi.org/10.1016/j.emj.2021.05.004
Rajendran, H., & Keerthipati, R. (2020). The impact of cultural difference in cross border merging and acquisition international business [Thesis MSc International business]. ResearchGate.
Sandria, F. (2022, December 28). Resep bisnis orang terkaya Ke-5 RI: Diversifikasi & akuisisi! [Indonesia’s 5th richest man’s business recipe: Diversification & acquisition!]. CNBC Indonesia. https://www.cnbcindonesia.com/market/20221228023531-17-400697/resep-bisnis-orang-terkaya-ke-5-ri-diversifikasi-akuisisi
Schommer, M., Richter, A., & Karna, A. (2019). Does the diversification–firm performance relationship change over time? A meta-analytical review. Journal of Management Studies, 56(1), 270–298. https://doi.org/10.1111/joms.12393
Shaban, O. S., Al-hawatmah, Z., & Abdallah, A. A. (2019). Mergers and acquisitions in Jordan: Its motives and influence on company financial performance and stock market price. Corporate Ownership and Control, 16(2), 67–72. https://doi.org/10.22495/cocv16i2art7
Shao, X. F., Gouliamos, K., Luo, B. N. F., Hamori, S., Satchell, S., Yue, X. G., & Qiu, J. (2020). Diversification and desynchronicity: An organizational portfolio perspective on corporate risk reduction. Risks, 8(2), Article 51. https://doi.org/10.3390/risks8020051
Shi, X., Sutherland, D., Williams, C., & Rong, K. (2021). Chinese MNE acquisition of unrelated foreign businesses: The role of diversified business group affiliation, private ownership and strategic asset seeking. Journal of Business Research, 129, 145–156. https://doi.org/10.1016/j.jbusres.2021.02.036
Sidik, S. (2021, December 27). Ini dia! 8 merger & akuisisi paling fenomenal sepanjang 2021 [Here they are! 8 most phenomenal mergers & acquisitions throughout 2021]. CNBC Indonesia. https://www.cnbcindonesia.com/market/20211227155255-17-302401/ini-dia-8-merger-akuisisi-paling-fenomenal-sepanjang-2021
Sutherland, D., Anderson, J., & Hertenstein, P. (2018). Is the strategic asset seeking investment proclivity of Chinese MNEs different to THAT of developed market MNEs? A comparative analysis of location choice and orientation. Management International Review, 58, 911–933. https://doi.org/10.1007/s11575-017-0339-6
Sutherland, D., Anderson, J., & Hu, Z. (2020). A comparative analysis of location and non-location-bounded strategic asset seeking in emerging and developed market MNEs: An application of new internalization theory. International Business Review, 29(2), Article 101635. https://doi.org/10.1016/j.ibusrev.2019.101635
Telkom Indonesia. (2017, November 24). Telkom group akuisisi perusahaan satelit Malaysia [Telkom group acquires Malaysian satellite company]. https://www.telkom.co.id/sites/about-telkom/id_ID/news/telkomgroup-akuisisi-perusahaan-satelit-malaysia-496
Alam, A., Khan, S., & FareehaZafar. (2014). Strategic management: Managing mergers & acquisitions. International Journal of BRIC Business Research, 3(1), 1–10. https://zenodo.org/records/3342031
Arte, P., & Larimo, J. (2022). Moderating influence of product diversification on the international diversification-performance relationship: A meta-analysis. Journal of Business Research, 139, 1408–1423. https://doi.org/10.1016/j.jbusres.2021.10.037
Batsakis, G., Wood, G., Azar, G., & Singh, S. (2018). International diversification and firm performance in the post-acquisition period: A resource dependence perspective. Journal of Business Research, 93, 151–159. https://doi.org/10.1016/j.jbusres.2018.02.025
Carabel, T. C., González, A. B., & del Castillo Peces, C. (2021). Intangible assets and business results of large companies. Intangible Capital, 17(2), 108–123. https://doi.org/10.3926/ic.1390
Carmo, G. G. A. do, & Marcondes, R. C. (2016). Mergers and acquisitions with a focus on resources and organizational capabilities. Rebrae, 9(1), 26–42. https://doi.org/10.7213/rebrae.09.001.AO02
Ceipek, R., Hautz, J., Mayer, M. C. J., & Matzler, K. (2019). Technological diversification: A systematic review of antecedents, outcomes and moderating effects. International Journal of Management Reviews, 21(4), 466–497. https://doi.org/10.1111/ijmr.12205
Dancaková, D., Sopko, J., Glova, J., & Andrejovská, A. (2022). The impact of intangible assets on the market value of companies: Cross-sector evidence. Mathematics, 10(20), 1–14. https://doi.org/10.3390/math10203819
Dang, M., Nguyen, N. V., Mazur, M., Puwanenthiren, P., & Nguyen, N. T. (2021). Global policy uncertainty and cross-border acquisitions. The Quarterly Review of Economics and Finance, 80, 224–235. https://doi.org/10.1016/j.qref.2021.01.020
Edi, Basri, Y. Z., & Arafah, W. (2020). CEO characteristics, firm reputation and firm performance after merger and acquisition. Business: Theory and Practice, 21(2), 850–858. https://doi.org/10.3846/btp.2020.12782
Eduardsen, J., Marinova, S. T., González-Loureiro, M., & Vlačić, B. (2022). Business group affiliation and SMEs’ international sales intensity and diversification: A multi-country study. International Business Review, 31(5), Article 101989. https://doi.org/10.1016/j.ibusrev.2022.101989
Elia, S., Greve, P., Vallone, T., & Castellani, D. (2021). The micro-foundations of industrial diversification through foreign acquisitions: The multifaceted role of CEO experience. Long Range Planning, 54(6), Article 102104. https://doi.org/10.1016/j.lrp.2021.102104
Fathollahi, M., Harford, J., & Klasa, S. (2022). Anticompetitive effects of horizontal acquisitions: The impact of within-industry product similarity. Journal of Financial Economics, 144(2), 645–669. https://doi.org/10.1016/j.jfineco.2021.06.017
Grøgaard, B., Rygh, A., & Benito, G. R. G. (2019). Bringing corporate governance into internalization theory: State ownership and foreign entry strategies. Journal of International Business Studies, 50(8), 1310–1337. https://doi.org/10.1057/s41267-019-00237-5
IDN Financials. (2021). Ifishdeco akuisisi 40% saham Nikel Sinar Indonesia dari perusahaan afiliasi. https://www.idnfinancials.com/id/news/41194/ifishdeco-acquired-nikel-sinar-indonesia-affiliate
Komisi Pengawas Persaingan Usaha. (n.d.). https://kppu.go.id/
Kumar, V., Singh, D., Purkayastha, A., Popli, M., & Gaur, A. (2020). Springboard internationalization by emerging market firms: Speed of first cross-border acquisition. Journal of International Business Studies, 51(2), 172–193. https://doi.org/10.1057/s41267-019-00266-0
Li, J., Li, P., & Wang, B. (2019). The liability of opaqueness: State ownership and the likelihood of deal completion in international acquisitions by Chinese firms. Strategic Management Journal, 40(2), 303–327. https://doi.org/10.1002/smj.2985
Neuhauser, K. L. (2007). Mergers and acquisitions: A global view. In G. N. Gregoriou & K. L. Neuhauser (Eds.), Mergers and acquisitions (pp. 1–4). Palgrave Macmillan. https://doi.org/10.1057/9780230589681_1
Nigam, N. K., & Gupta, C. P. (2023). Negative related diversification, positive related diversification and firm’s performance: Measurement and application. Global Business Review, 24(1), 48–67. https://doi.org/10.1177/0972150919886415
Organization for Economic Cooperation and Development. (2008). Economic and other impacts of foreign corporate takeovers in OECD countries. In International investment perspectives 2007: Freedom of investment in a changing world (pp. 65–91). OECD Publishing. https://doi.org/10.1787/iip-2007-5-en
Pereira, V., Temouri, Y., Budhwar, P., & Tarba, S. (2021). Cross-border acquisition performance of emerging market multinational enterprises: The moderating role of state-ownership and acquisition experience. Long Range Planning, 54(6), Article 102107. https://doi.org/10.1016/j.lrp.2021.102107
Petersen, B., & Seifert, R. E. (2014). Multinational enterprises, markets and institutional diversity. In A. Verbeke, R. van Tulder, & S. Lundan, Multinational enterprises, markets and institutional diversity (progress in international business reseaarch) (Vol. 9). Emerald Group Publishing Limited. https://doi.org/10.1108/S1745-886220140000009030
Popli, M., & Ladkani, R. M. (2020). Value constraining or value enabling? The impact of business group affiliation on post-acquisition performance by emerging market firms. Management and Organization Review, 16(2), 261–291. https://doi.org/10.1017/mor.2019.51
Popli, M., Ladkani, R. M., & Gaur, A. S. (2017). Business group affiliation and post-acquisition performance: An extended resource-based view. Journal of Business Research, 81, 21–30. https://doi.org/10.1016/j.jbusres.2017.08.003
Purkayastha, A., Pattnaik, C., & Pathak, A. A. (2022). Agency conflict in diversified business groups and performance of affiliated firms in India: Contingent effect of external constraint and internal governance. European Management Journal, 40(2), 283–294. https://doi.org/10.1016/j.emj.2021.05.004
Rajendran, H., & Keerthipati, R. (2020). The impact of cultural difference in cross border merging and acquisition international business [Thesis MSc International business]. ResearchGate.
Sandria, F. (2022, December 28). Resep bisnis orang terkaya Ke-5 RI: Diversifikasi & akuisisi! [Indonesia’s 5th richest man’s business recipe: Diversification & acquisition!]. CNBC Indonesia. https://www.cnbcindonesia.com/market/20221228023531-17-400697/resep-bisnis-orang-terkaya-ke-5-ri-diversifikasi-akuisisi
Schommer, M., Richter, A., & Karna, A. (2019). Does the diversification–firm performance relationship change over time? A meta-analytical review. Journal of Management Studies, 56(1), 270–298. https://doi.org/10.1111/joms.12393
Shaban, O. S., Al-hawatmah, Z., & Abdallah, A. A. (2019). Mergers and acquisitions in Jordan: Its motives and influence on company financial performance and stock market price. Corporate Ownership and Control, 16(2), 67–72. https://doi.org/10.22495/cocv16i2art7
Shao, X. F., Gouliamos, K., Luo, B. N. F., Hamori, S., Satchell, S., Yue, X. G., & Qiu, J. (2020). Diversification and desynchronicity: An organizational portfolio perspective on corporate risk reduction. Risks, 8(2), Article 51. https://doi.org/10.3390/risks8020051
Shi, X., Sutherland, D., Williams, C., & Rong, K. (2021). Chinese MNE acquisition of unrelated foreign businesses: The role of diversified business group affiliation, private ownership and strategic asset seeking. Journal of Business Research, 129, 145–156. https://doi.org/10.1016/j.jbusres.2021.02.036
Sidik, S. (2021, December 27). Ini dia! 8 merger & akuisisi paling fenomenal sepanjang 2021 [Here they are! 8 most phenomenal mergers & acquisitions throughout 2021]. CNBC Indonesia. https://www.cnbcindonesia.com/market/20211227155255-17-302401/ini-dia-8-merger-akuisisi-paling-fenomenal-sepanjang-2021
Sutherland, D., Anderson, J., & Hertenstein, P. (2018). Is the strategic asset seeking investment proclivity of Chinese MNEs different to THAT of developed market MNEs? A comparative analysis of location choice and orientation. Management International Review, 58, 911–933. https://doi.org/10.1007/s11575-017-0339-6
Sutherland, D., Anderson, J., & Hu, Z. (2020). A comparative analysis of location and non-location-bounded strategic asset seeking in emerging and developed market MNEs: An application of new internalization theory. International Business Review, 29(2), Article 101635. https://doi.org/10.1016/j.ibusrev.2019.101635
Telkom Indonesia. (2017, November 24). Telkom group akuisisi perusahaan satelit Malaysia [Telkom group acquires Malaysian satellite company]. https://www.telkom.co.id/sites/about-telkom/id_ID/news/telkomgroup-akuisisi-perusahaan-satelit-malaysia-496