Experimental and Model Learning and the Propensity to Make Exceptionally Large Acquisitions

T. Laamanen, M.V.J. Maula, and M. Mullagiri (Finland)


Acquisitions, acquisition experience, isomorphism


This paper examines the effects of acquisition experience on the propensity to perform large acquisitions during a merger and acquisition wave. An empirical analysis is performed using a sample of all public acquirers in the United States that had acquired a total of 1747 public firms during 1997-2000. Based on institutional theory and behavioral learning theory, we hypothesize and find that imitation and acquisition experience are both important drivers of acquisition behavior. Both are independently positively related to a firm's propensity to engage in large acquisitions. We also find that acquisition experience moderates negatively the likelihood of imitation. Thus, we conclude that both vicarious and behavioral learning are important determinants of large acquisitions and that acquisition experience reduces a firm's tendency for mimetic isomorphism.

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