Build, buy or partner? The relative performance of an acquisitive strategy

We conceptualize mergers as one of several strategies for creating value and study merger performance by evaluating the performance of firms employing an acquisitive strategy. Relative to other firms, acquisitive firms are valued lower, exhibit lower employee and total factor productivity, and innovate less. These effects are concentrated among firms whose workforce is vulnerable to acquisition-related personnel disruptions and/or those that are more dependent on employee relationship-specific investments. We therefore propose that an acquisitive strategy diminishes firm value and performance by fostering disruptive conditions that undermine employee effectiveness and weaken their incentives.