Original Research

Mergers and acquisitions in emerging markets: What drives absorptive capacity in target firms?

Sherilee Pillay, Manoj D. Chiba, Abdullah Verachia, Morris Mthombeni
South African Journal of Business Management | Vol 52, No 1 | a2039 | DOI: https://doi.org/10.4102/sajbm.v52i1.2039 | © 2021 Sherilee Pillay, Manoj D. Chiba, Abdullah Verachia, Morris Mthombeni | This work is licensed under CC Attribution 4.0
Submitted: 02 April 2020 | Published: 21 May 2021

About the author(s)

Sherilee Pillay, Department of Management, Gordon Institute of Business Science, University of Pretoria, Johannesburg, South Africa
Manoj D. Chiba, Department of Management, Gordon Institute of Business Science, University of Pretoria, Johannesburg, South Africa
Abdullah Verachia, Department of Management, Gordon Institute of Business Science, University of Pretoria, Johannesburg, South Africa
Morris Mthombeni, Department of Management, Gordon Institute of Business Science, University of Pretoria, Johannesburg, South Africa


Share this article

Bookmark and Share

Abstract

Purpose: The purpose of this study was to investigate how knowledge flow and productivity affect the absorptive capacity of target firms in emerging markets.

Design/methodology/approach: We used self-administered questionnaires to measure absorptive capacity, knowledge flow and productivity constructs. The sample comprised individuals who were employees of firms that completed acquisitions between 2015 and 2017. The acquisitions were publicly announced and the target firms were all in emerging markets.

Findings/results: Firstly, our results confirmed the multidimensional nature of absorptive capacity. Secondly, we found a positive correlation between a target firm’s knowledge flow and productivity and its absorptive capacity. Thirdly, our results indicated that knowledge flow and operational processes will support the introduction and integration of external knowledge into a target firm. Therefore, understanding the absorptive capacity of target firms is central to the ability of new and existing knowledge to be assimilated.

Practical implications: The realisation of the strategic intent of an acquisition is dependent on effective knowledge flow, supported by efficient communication and operational processes. The target firm’s absorptive capacity is, therefore, a key consideration for acquiring firms. Understanding this will be useful for firms to consider acquisitions of target firms in emerging markets and could potentially enhance their chances of success.

Originality/value: This study contributes to the limited body of research on emerging market merger and acquisition activity. It responds to the call for further research to be conducted on emerging markets and the role of absorptive capacity in realising the strategic intent of acquisitions.


Keywords

absorptive capacity, knowledge flow, productivity, target firm; emerging markets.

Metrics

Total abstract views: 721
Total article views: 435


Crossref Citations

No related citations found.