Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms

While overseas acquisitions by emerging-economy firms are gaining increased attention from the business press, our understanding of whether and why this inorganic mode of international expansion creates value to acquirer firms is limited. We argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally, thus constituting an important strategic lever of value creation for emerging-economy firms. Furthermore, the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments: country markets that carry the promise of higher quality of resources, and therefore, stronger complementarity to the existing capabilities of emerging-economy firms. An event study of 425 cross-border acquisitions by Indian firms during 2000-2007 supports our predictions. Journal of International Business Studies (2010) 41, 397-418. doi:10.1057/jibs.2009.47