Knowledge Generation, Trust and the Secretive Geographies of Merger and Acquisition Processes

Authors: Harald Bathelt, University of Toronto, Sebastian Henn*, University of Jena
Topics: Economic Geography, Business Geography, Europe
Keywords: Knowledge Generation; Mergers and acquisitions; Proximity; Secretive geographies; Trust
Session Type: Paper
Day: 4/5/2019
Start / End Time: 1:10 PM / 2:50 PM
Room: 8217, Park Tower Suites, Marriott, Lobby Level
Presentation File: No File Uploaded

In studying knowledge transfers over geographical distance, numerous studies exist about knowledge exchanges in producer-user or headquarter-subsidiary settings, while less attention has been paid to the knowledge transfers in mergers and acquisitions (M&As), which involve high costs and an extraordinary degree of risk and uncertainty with potentially fundamental (positive or negative) consequences for the respective firms and regions alike. To keep the risks associated with such complex transactions at bay, the buying firm strongly depends on detailed knowledge about the structure and value of the target unit to be acquired while the seller needs to have reliable knowledge about the goals of the acquisition and the price the buyer is willing to pay. This paper aims to investigate how the different parties involved in such risky endeavors transfer knowledge and how the level of trust is generated required to come to a successful conclusion. Our empirical analysis focuses on national and international corporate acquisitions and takeovers involving German firms and is based on semi-structured in-depth interviews with different actors conducted in Germany since 2011. We distinguish between the two extremes of relational or exclusive vs. auction or market-based procedures and systematically analyze the conditions under which knowledge is exchanged, the role face-to-face contacts play and how secretive geographies of meetings evolve, and the ways in which trust is created and uncertainties are reduced.

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