Outside-insiders: the role of supply networks in post-M&A operational performance

Abstract

Purpose Adopting network theory, this study explores how efficiency-driven mergers and acquisitions (M&As) affect acquiring firms’ short-term and long-term operational performance and how acquiring firms’ supply network structural attributes moderate the effects of efficiency-driven M&As in both the short and long terms. Design/methodology/approach We collect archival data from multiple sources and construct a sample that consists of 1,568 manufacturing firms during 2010–2017. We apply propensity score weighting-enabled fixed effects models to test the proposed hypotheses. Findings We find that efficiency-driven M&As lead to decreased operational performance in the short term while having a neutral effect on the firm’s long-term operations. Moreover, both supply network betweenness centrality and structural holes of the acquiring firm help attenuate the short-term negative M&A effect, whereas only betweenness centrality significantly elevates the acquiring firm’s post-M&A operational performance in the long term. Originality/value This study provides further evidence to the M&A performance literature by distinguishing the short- and long-term effects of efficiency-driven M&As. More importantly, it advances the understanding of the critical role of supply networks in tackling post-M&A challenges. It enriches the supply network literature by investigating the differential effects of betweenness centrality and structural holes, thereby disclosing the nuances between the bonding and flow functions of supply networks.