Research On The Effect Of Experiential Learning On Serial Mergers And Acquisitions

The 20 th CPC National Congress report puts forward that "building up the strength,quality and size of state-owned capital and state-owned enterprises" and "promote the development and growth of private economy".As an important way for enterprises to grow,mergers and acquisitions(M&As)provide a source of motivation for enterprises to create economies of scale,cultivate R&D capabilities,and enhance industry power.According to WIND database,there were 9 170 M&A deals in China in 2022,leveraging funds of 2 446.2 billion.With the rise of the M&A market,serial M&A companies have become the main force in initiating M&As,with 85% of M&A companies choosing to make multiple M&As.Despite there are so many companies make serial M&As,not all of them can benefit from these activities.Geely continuously acquired Volvo,Proton,and Daimler,achieving market expansion and core technology acquisition.Hengkang Pharmaceutical has also been engaged in serial M&As for six consecutive years,resulting in a goodwill impairment of over 1.8 billion.This shows that the results of M&As between these serial M&A companies are very different.Existing research has shown that learning from past M&A experience can improve M&A capabilities.The deeper research of accumulated experience on M&As has shifted from M&A quantity to segmented experience,such as analyzing the impact of success and failure experience of firms’ first M&A transaction.However,these studies fail to get consensus on the direction of the impact,meanwhile mostly focus on the results of first time M&A,so these studies lack of a systematic exploration on how accumulated success and failure experience affect the whole progress of serial M&As,and there is still room for further subdivision of the experience,such as combine M&A period and environment to test the effect of multiple imprintings.In addition,with the deepening of China’s economic system reform,many abroad theoretical and empirical conclusions may have the problem of "acclimatization",and domestic research suggestions also have the phenomenon of "time passing" due to policy optimization.Therefore,how experiential learning affect serial M&A in China need study deeply.In response to the above background and research shortcomings,basing on firm growing theory,organizational imprinting theory,organizational learning theory,prospect theory and attention-based view,following "before-during-after" approach,along "whether,why,and how" path,this paper systematically analyzes the impact,mechanism and boundary conditions of accumulated success and failure experience on the probability,premium,and performance of serial M&A.This paper aims to answer the following questions: Firstly,at selection stage,will serial M&A companies continue the wins or take the wins after successful M&A? Will they avoid the loses or go through the loses after failed M&A? Secondly,at bargaining stage,Will serial M&A companies be blindly optimistic or cautious after success? Will they take risks or learn from past after failure? Thirdly,at integration stage,can success and failure experience transform into performance improvement? Who is the mother of success,success or failure?To answer above questions,this paper conducts an empirical analysis of M&As data of A-listed companies.Firstly,this paper analyzes the overall status of Chinese M&A companies.This paper verifies that China M&As activities has structural transformation of “low district system”(1998-2006)and “high district system”(2007-2020),indicating the existence of the wave of M&As in China.According to descriptive statistics,M&As clusters occur during the wave,and 81% of these activities are announced and implemented by serial M&A companies.This provides a practical basis for the study of this paper,and is also the practical significance of this study.Secondly,this paper proves the positive relevance between success and failure experience and the probability for serial M&As.i.Both success and failure experience increase the likelihood of serial M&As.Companies will continue the win after success and become more courageous when they fail.Compared to failure experience,success experience have a greater promoting effect.ii.Impact mechanism.Success and failure in the past would enhance the risk preference of the serial M&A companies,which manifest as higher strategic aggressiveness and thus accelerate the process of serial M&As.iii.Boundary conditions.The impact of success and failure experience is more persistent in state-owned enterprises,and will weaken with the deepening of marketization.Growth pressure will enhance the impact of success experience and weaken the impact of failure experience.iv.Further subdivide the experience.From the perspective of merger and acquisition results(degree of success and failure),major success and small failure experience can better promote the likelihood of serial M&A;From the perspective of M&A period(experience depreciation),since Chinese economy has entered the new normal period,and the economic development model and objectives have changed,the new normal is taken as the time dividing point of whether the experience is depreciated,and the experience before the new normal has been proved to be depreciated;From the perspective of the M&A environment(environmental imprinting),there is a mixed effect between the imprinting of M&A results and the imprinting of M&A environment,failure experience in boom periods and success experience in bust periods plays a greater role in driving serial M&As.Thirdly,this paper proves the negative relevance between success and failure experience and the premium of serial M&As.i.Success and failure experience can reduce the premium of serial M&As,and the negative effect of success experience is greater.ii.Impact mechanism.By accumulating and learning the success and failure experience,companies can better value targets in more complex information environments and suppress the emergence of irrational behavior,manifested as information effect and rational effect.iii.Boundary conditions.Learning effect will be weakened in state-owned enterprises,which means there is a "resource curse" effect in state-owned enterprises;The learning effect is better in enterprises with deeper digital transformation degree,which means digitalization can empower the experience learning process of companies.iv.Further subdivide experience.Small success and small failure experience can be absorbed more easily,and the impact of experience depreciation and environmental imprinting is the same with previous chapter.Finally,this paper proves the positive relevance between success and failure experience and the performance of serial M&As.i.Both success and failure experience can "nurture" success and improve serial M&A performance,and the promotion effect of success experience is greater.ii.Impact mechanism.This impact is achieved by improving the selection stage and integration stage of M&As.ii.Boundary conditions.The state-owned enterprise nature of the M&A company would weaken the impact of experience on performance;Misvaluation weakens the impact of experience,and excessive attention to misvaluation has a crowding out effect on experiential learning.iv.Further subdivide experience.Both major and small success experience promote the improvement of serial M&A performance,while the role of failure experience varies depending on the degree of loss.Small failure helps to improve performance,while major failure inhibit learning.The conclusion on the impact of experience depreciation and environmental imprinting is consistent with the previous two chapters.This paper mainly has innovations in the aspects of research theory,research design,and research methods.Firstly,innovation in research theory.On one hand,expands the explanatory boundary of organizational imprinting theory.Previous research mostly focuses on the company’s founding period,analyzing the impact of imprinting formed by one single factor.This paper focuses on the sensitive period of M&As,verifies the effect of M&A imprinting,and explores the mixed role of multiple imprintings in the same sensitive period;On the other hand,enriches the research on experiential learning of serial M&As.This study shows that accumulated experience is not homogeneous,and the impact of success and failure is different.At the same time,the results,period and environment of M&As all affect the formation and continuation of success and failure experience.Secondly,innovation in research design.In terms of variable design,enriches the variable measurement of M&A experience.After group the M&A experience according to success and failure,this paper further subdivide the success and failure experience by results,period and environment of M&As,using the transformation of the new normal according to reality and the environmental imprinting according to theory,which is different from previous studies;In terms of content design,enriches the existing content of serial M&As.Analyzing serial M&A companies helps to grasp the overall regularity of serial M&As;Looking for boundary conditions that may affect experiential learning from the nature of equity,digital transformation and misvaluation these practical issues will help provide suggestions for enterprises to carry out M&A activities at the current stage.Thirdly,innovation in research methods.When conducting endogeneity tests on accumulated success and failure experience,the exogenous variable of M&A market age is tentatively used to reestimate the M&A results;Then,the reestimated M&A results are recounted as success and failure experience;This method provide some possible references for the endogeneity tests of the countable variables.