Organization and Strategy Seminar（2018-15）

Topic: The liability of ignorance: a double-edged sword to the short-term post-acquisition performance in cross-border acquisitions

Speaker: Hao Wang,the Ohio State University

Time: Wednesday, 28 November, 15:05-16:30 pm

Location: Room 111 , Guanghua Building 2

Abstract:

There is an old belief that “every man is best known to himself”, but does one nation really know the facts about itself and what if the perceptions are not the “facts”? The ignorance, defined as the lack or distortion of “true” knowledge, has been identified as one key determinate for human decisions, so the prior literature has covered the two important topics regarding ignorance: 1) liability of foreignness: the extra cost for companies from home nation due to lack of knowledge to local market; and 2) liability of origin: the distorted knowledge for host nation towards the companies from the home nation. However, the effect of ignorance towards oneself is rarely studied in the acquisition research. This paper proposes the concept of “liability of ignorance” (LOI): the cost or benefit from the misperceptions towards one nation itself and further explore how LOI influences the international acquisitions. As LOI is a multi-dimensional concept, I first focus on one important dimension: the technology development for both home and host nations, and investigate the double-sword effects of LOI on the short-term post-acquisition performance for the targets. Using 1,017 transactions of 32 nations from 2009 to 2017, the results demonstrated that the home nation ignorance has a negative effect whereas the host nation ignorance leads to a higher post-acquisition performance. In addition, the relationship between home nation ignorance and performance is positively moderated by national-dyadic favorability, meaning that how much the home and host nation like each other, but such moderation effect is not found significantly with the host nation. This research contributes to an understanding of LOI and suggests that the ignorance may not always a bad thing for the post-acquisition performance, which further completes the discussion of ignorance and importance of the knowledge in the acquisition literature.

Introduction:

Hao Wang (王浩) is a PhD candidate in International Business at the Fisher College of Business, the Ohio State University. One area of Hao Wang’s research focuses on the cultural and institutional impacts of international business such as governance structure of firms and the performance of cross-border mergers and acquisitions, especially the machine learning approach to analyze effects of the cognitive bias in the international acquisitions. Hao is also working to explore how the adaptation and development of artificial intelligence, such as the algorithm-based communication with the self-learning machine, will change the current business. Another line of research examines cross-cultural negotiations and the managers’ behavioral effect on the strategies of multinational firms.

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