Abstract

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<jats:title content-type="abstract-subheading">Purpose</jats:title>
<jats:p>The purpose of this paper is to analyze corporate scope decisions in acquisitions with a focus on the relationship between target country unfamiliarity and acquirer-to-target relatedness and on the moderating effects played by product diversification and international experience.</jats:p>
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<jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title>
<jats:p>Using a dataset of 689 acquisitions completed in the period 2007-2013 by acquirers located in 60 countries, this paper utilizes an ordered logistic regression analysis.</jats:p>
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<jats:title content-type="abstract-subheading">Findings</jats:title>
<jats:p>With greater target country unfamiliarity, acquirers are encouraged to pursue greater acquirer-to-target relatedness. This finding suggests that acquirers tend to seek a balance between product and international diversification to reduce the sources of uncertainty in their acquisition moves. While past international experience strengthens this relationship, diversification experience has a negative moderating effect and hence encourages acquirers to reduce relatedness at increasing market unfamiliarity.</jats:p>
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<jats:title content-type="abstract-subheading">Originality/value</jats:title>
<jats:p>The originality of this paper is twofold. First, the authors extend the traditional internationalization-diversification framework to an unfamiliarity-relatedness relationship in the context of acquisitions. Second, the authors propose a construct of target country unfamiliarity in acquisitions that goes beyond the traditional domestic vs cross-border dichotomy by including previous experience in the target country.</jats:p>
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