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When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account

When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Peer Review Version DOI: 10.1177/00222429221137817 Author Accepted Manuscript When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Journal: Journal of Marketing Manuscript ID JM.21.0243.R4 Manuscript Type: Revised Submission Brand/Product Choice, Brand/Product/Category Management, Research Topics: Consumer Behavior/Cognition Methods: Behavioral Experiments Journal of Marketing Peer Review Version Page 1 of 68 Author Accepted Manuscript When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Alessandro Biraglia Associate Professor of Marketing Leeds University Business School, University of Leeds, United Kingdom a.biraglia@leeds.ac.uk 19 Christoph Fuchs Professor of Marketing, Faculty of Business, Economics, and Statistics, University of Vienna, Austria christoph.fuchs@univie.ac.at Elisa Maira UX Research Lead bol.com, The Netherlands emaira@bol.com Stefano Puntoni Sebastian S. Kresge Professor of Marketing The Wharton School University of Pennsylvania USA 42 puntoni@wharton.upenn.edu Journal of Marketing 60 Peer Review Version Page 2 of 68 Author Accepted Manuscript When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Brand acquisitions are a popular growth strategy. However, both anecdotal evidence and initial empirical evidence suggest that acquisitions can harm the acquired brand. This paper proposes and tests a theoretical framework that seeks to explain when and why consumers react negatively toward acquired brands. Across ten studies using different methods, research designs, product categories, and brands, we demonstrate that these negative brand reactions can be explained by the perceived loss of a brand’s unique values. Building on this values authenticity account, we document that the negative effect of acquisitions depends on the acquired brand’s values, brand age, leadership continuity, and the alignment between acquiring and acquired brands. Our findings offer important theoretical and managerial implications, helping managers predict and 31 mitigate the negative effects of acquisitions for brands. Keywords: acquisitions, branding, brand values, values authenticity, authenticity, signaling theory, consumer reactions Journal of Marketing 60 Peer Review Version Page 3 of 68 Author Accepted Manuscript Acquiring firms is one of the most common ways to pursue growth; the global value of acquisitions amounted to $2.3 trillion in 2019 (JP Morgan 2020). Acquisitions are often 8 motivated by the target firm’s brand equity, as well as the market position it has created and nurtured (Bahadir, Bharadwaj, and Srivastava 2008; Kumar and Blomqvist 2004). Despite the importance of brand equity in motivating acquisitions, anecdotal evidence suggests that acquisitions can actually dilute the target firm’s brand value. For example, when Unilever acquired the Italian ice cream maker GROM, 83% of polled consumers described the acquisition as “bad news” (Bottero 2015). Four years later, reduced consumer interest led to the closure of several GROM retail outlets, including the ice cream maker’s first store. Similarly, consumer ratings for cosmetics brand The Body Shop plummeted after L’Oréal acquired it (BBC 2006). These examples show that there can be substantial consumer backlash after an acquisition, even when the acquired company is itself a large corporation; The Body Shop, for instance, was 31 already a global brand with over 2,000 stores at the time of its acquisition. Consumers can learn about brand acquisitions through news reports, exposure to brand communications, or word of mouth. Especially nowadays, with digital media and social networks facilitating the rapid dissemination of information, consumers are often aware that a brand has been acquired. For example, many consumers quickly learned of Amazon’s acquisition of Whole Foods, Unilever’s acquisition of the tea brand Pukka, or Microsoft’s acquisition of Activision Blizzard. Despite the topic’s importance, empirical research on consumer reaction towards acquired brands is scarce. The potential for brand acquisitions to generate negative reactions among consumers is supported by a considerable amount of anecdotal evidence and has also been documented in extant research (Frake 2017). However, little is known about when and why brand Journal of Marketing 60 Peer Review Version Page 4 of 68 Author Accepted Manuscript acquisitions (where one company takes over another) might trigger negative reactions among consumers; our paper aims to fill this research gap. 8 Our manuscript makes several contributions. This study contributes to marketing theory and practice by shedding light on when and how acquisitions can harm consumers’ willingness to buy products from acquired brands. Building on a signaling theory perspective, we introduce a framework based on values authenticity loss that can explain why consumers react negatively to acquired brands. Ten studies (using different product categories, types of brands, and measures of consumer reactions) document that values authenticity loss can explain this negative effect above and beyond alternative explanations. Moreover, we advance previous research on authenticity by demonstrating that a brand’s perceived values authenticity loss materializes independent of the size of the acquiring company; and we show that values authenticity is a more effective process variable than alternative process variables including perceived product quality 31 and underdog status. Building on our values authenticity framework, we identify and empirically document several managerially relevant moderators, including the number of times a brand has already been acquired, the continuity of the brand’s leadership, brand age (i.e., length of time on the market before being acquired), as well as its strategic positioning and the acquirer’s values alignment. Interestingly, our effects also reveal that acquisitions might not only harm the acquired brand (in terms of purchase intentions) but also the acquirer. Our findings lead to a series of actionable recommendations for managing and maintaining brand equity, both before and after acquisitions. More broadly, our findings suggest that managers should consider potential consumer reactions toward the acquired firm’s brand in their due diligence processes before acquisitions. Neglecting the demand-side impact of acquisitions might be one overlooked Journal of Marketing 60 Peer Review Version Page 5 of 68 Author Accepted Manuscript reason why so many acquisitions fall short of expectations (e.g., Christensen et al. 2011; Datta, Pinches, and Narayanan 1992; Dyer, Kale, and Singh 2003; King et al. 2004). Acquisitions and Consumers Acquisitions are transactions where ownership of a firm and its brand is transferred to another firm. Since acquisitions are complex operations involving all areas of both the acquiring and the acquired firm’s activities, the drivers of their success (or failure) have been investigated extensively in finance (e.g., Moeller, Schlingemann and Stulz 2005), economics (e.g., Jensen 1986; Kroll et al. 1997; Ravenscraft and Scherer 1987), organizational behavior (e.g., Larsson and Finkelstein 1999), and strategy research (e.g., Datta, Pinches and Narayanan 1992). In marketing, research on acquisitions has mainly focused on strategic marketing aspects by 31 adopting an internal, corporate view on acquisitions. For example, previous research has examined whether a strategic match between the two firms creates shareholder value (Swaminathan, Murshed, and Hulland 2008; Newmeyer, Swaminathan, and Hulland 2016); how brands, salesforce, and expertise are redeployed after the acquisition (Capron and Hulland 1999); the role of marketing integration in post-acquisition financial performance (Homburg and Bucerius 2005); and salesforce reactions to mergers and acquisitions (Bommaraju et al. 2018). Existing research on how consumers react toward acquired brands is scarce and has mainly explored how consumers evaluate (deliberate) post-acquisition brand changes. For example, Jaju, Joiner, and Reddy (2006) examined consumer reactions to alternative brand name redeployment strategies after an acquisition. Thorbjørnsen and Dahlén (2011) examined consumer reactions to 54 the deletion of the acquired brand and found evidence of consumer reactance: consumers Journal of Marketing 60 Peer Review Version Page 6 of 68 Author Accepted Manuscript develop more negative attitudes toward the acquirer brand and more positive attitudes toward the eliminated brand. This finding is consistent with research pointing to consumer reactance when 8 brands undergo other types of change (e.g., Walsh, Winterich, and Mittal 2010). A relevant line of research is Gaustad et al. (2018) and (2019) who examined how consumers react to brands that strategically changed their image following an acquisition or repositioning. Building on self- identity and self-brand connection research, the authors developed and tested theory about how consumers’ reactions depend on individual differences in self-brand connection. The central finding is that especially consumers with high levels of self-brand connection react negatively when they are informed about changes to important brand associations (e.g., that an acquisition would either dampen or augment the brand image). While investigating how consumers react to specific planned brand changes is relevant for acquisitions, it does not answer our main research questions and shed light on the signaling value of acquisitions on consumers. Specifically, it is 31 unclear what psychological reactions are elicited by learning that a brand has been acquired. Moreover, it is unclear whether acquisitions will have a negative impact on consumers’ intended and actual behavior and, if so, what acquisition-related factors will mitigate this effect. In a different line of research, Umashankar, Bahadir, and Bharadwaj (2021) found that acquisitions can lead to decreased customer satisfaction, most likely because corporate executives shift their attention away from customers to financial issues. In a related study, Frake (2017) analyzed consumer ratings of craft beers before and after they were acquired by large brewing corporations. He compared user ratings of two different platforms—one that disclosed that a craft beer brand was owned by a large corporation and one that did not. Users on the disclosing platform (who might have been more likely to be aware of the acquisition) provided 54 lower overall product ratings but not lower product attribute ratings (e.g., aroma and Journal of Marketing 60 Peer Review Version Page 7 of 68 Author Accepted Manuscript appearance). Yet, it is unclear what exactly underlies this discrepancy in consumer ratings—it is possible that this effect is due to uncontrolled for factors (e.g., user characteristics), a general 8 support for smaller companies documented in the previous literature (Paharia, Avery, Keinan 2014; Vandello et al. 2007), some authenticity-related process as speculated by the author, or some other reason. Our research aims to advance this stream of research. Specifically, we focus on how acquisitions can act as a signal that consumers interpret as jeopardizing the authenticity of the brand values and, in turn, have a negative effect on consumers’ purchases. We also investigate company-related factors (e.g., brand age, leadership continuity, alignment of the brand values of acquirer and acquired) impact consumers’ negative reactions to acquisitions. For the sake of conciseness, we use the broad label “consumer reactions to brand acquisitions” for a variety of marketing-relevant consumer responses, such as purchase intention and choice. Signaling Perspective and Values Authenticity Based on a signal theory perspective (Connelly et al. 2011), we posit that stakeholders interpret acquisitions as signals. Following a brand acquisition, investors or consumers are usually faced with incomplete information and with uncertainty regarding the future actions of the brand. This uncertainty triggers stakeholders to seek out signals—“observable actions that provide information about unobservable attributes and likely outcomes” (Bergh et al., 2014; p. 49 2). We argue that in the absence of “better” information, stakeholders use the mere knowledge that a brand has been acquired as a signal to form brand inferences, which can be positive or negative. For example, investors may view acquisitions as positive signals: an indication that the brand is valuable and desirable. Conversely, as the acquisition process entails transferring control Journal of Marketing 60 Peer Review Version Page 8 of 68 Author Accepted Manuscript to another company, consumers may perceive acquisitions as negative signals because they infer that acquisitions dilute the core values of the brand, or the brand’s values authenticity. 8 Authenticity is a broad concept that entails numerous facets (e.g., Beverland et al. 2008; Carroll 2015; Lehman et al. 2019; Morhart et al. 2015; Newman 2019; Thompson and Kumar 2022) as well as multiple psychological processes, depending on the domain studied (Nunes et al. 2021). We posit that potentially negative consumer reactions to acquisitions are best explained by one particular facet of authenticity: values authenticity. Values authenticity refers to the extent to which an entity’s stated values—abstract representations of desired end-states that serve as guiding principles (Schwartz 1992, Torelli et al. 2012)—are consistent with their actual beliefs and desires as well as their actions (Carroll 2015; Kernis and Goldman 2006; Lehman et al. 2019; Newman and Smith 2016; Newman 2019). Scholars have used different conceptualizations to describe this construct, but their core 31 content is consistent. For example, Beverland et al. (2008) define “moral authenticity” as the extent to which a producer is motivated by a genuine commitment to his or her craft. Dutton (2003, p. 259) defines “expressive authenticity” as the “true expression of an individual’s or a society’s values and beliefs.” Napoli et al. (2014) call this notion of authenticity “sincerity,” defined as the ability to remain true to espoused values. Morhart et al. (2015, p. 202) label this construct “integrity,” defined as “a virtue reflected in the brand’s intentions and in the values it communicates.” Finally, Nunes et al. (2021) also refer to this concept as “integrity,” directly building on the notion of “assessment of values” used by Newman (2019, p.10) to define values authenticity. Consistent with previous definitions of values authenticity and integrity, Nunes et al. (2021, p. 10) define brands having integrity as those “perceived intrinsically motivated and 54 not acting out of one’s own financial interest, while behaving autonomously and consistently Journal of Marketing 60 Peer Review Version Page 9 of 68 Author Accepted Manuscript over time.” The notion of consistency between values and actions is the common denominator across these different definitions, while other components (e.g., morality, intrinsic motivation, 8 craftmanship) tend to vary from definition to definition. Thus, we adopt the term “values authenticity” (Newman and Smith 2016), which has been used in marketing but also in organizational behavior, management, and psychology research to indicate the consistency between an entity’s values and actions (e.g., Lehman et al. 2019, Newman 2019). Predictions We propose that consumers may view an acquisition as a signal that the authenticity of a brand’s values is being disrupted. Specifically, we propose that when brands are acquired, consumers perceive that these brands lose part of their original core values—that is, what guides 31 their actions and makes them unique in the eyes of consumers. Borrowing the notion of core values from the literature on corporate values (Ashforth Rogers, and Corley 2011; Collins and Porras 1996; Collins, Porras, and Porras 2005; Lee, Hwang, and Chen 2017), we focus on brand values as those key principles guiding all business activities (Collins et al. 2005). When a brand is founded, it is usually imbued with a specific set of values by its founders, owners, or management team (Caroll and Wheaton 2009; Lehman et al. 2019)—what the brand’s core priorities and beliefs are and should be (Greyser and Urde 2019). Thus, founders typically establish brands with a set of beliefs and ideas that are internally determined (Newman and Smith 2016), forming the “soul” or DNA of the brand (Ashforth et al., 2011; Lee et al., 2017; Randazzo 1993). These brand values are often openly stated by brands through their 54 communications channels and are embodied by their marketplace decisions (Keller 2021). For Journal of Marketing 60 Peer Review Version Page 10 of 68 Author Accepted Manuscript example, Patagonia’s core values focus on environmental stewardship and Audi’s on technological leadership (Greyser and Urde 2019; see Collins and Porras 1996 for additional 8 examples). Brand values guide a company’s actions and serve as a guideline for the marketing program (Keller 1999). Notably, brand values are different from strategies; strategies tend to adapt to the circumstances of the business environment, whereas values tend to be more stable over time and represent a brand’s essential tenets (Collins and Porras 1996; Collins et al. 2005). Against this background, we argue that consumers perceive acquisitions as the impetus for an abrupt shift in a brand’s value system. An acquisition implies a change in ownership, which in turn raises questions about the continuity of, and control over, the values of the acquired brand. Since the change comes from an external entity (i.e., the acquirer), consumers may develop beliefs regarding the motivations and values of the acquirers, which might be considered at odds with the acquired brand’s original motivations and values. Consumers might assume that the 31 acquirer will exert external pressure to change the values of the acquired brand, in order to align them with its own. In some cases, consumers might suspect the acquirer of introducing new values and ideas to the brand that are inconsistent with its original values and ideas. Thus, irrespective of whether this is really the case, an acquisition may lead consumers to surmise that the acquired brand will lose part of its values authenticity. We find preliminary support for this conjecture in a preregistered study (N = 201; 50.2% female, M = 42.27 years, MTurk; #71441 age | AsPredicted) using real brands in a between-participants experiment (not acquired vs. acquired). After reading the description of a brand (Study 1s, Web Appendix A), participants assessed their perception of brand authenticity by rating the definition of the different dimensions of authenticity by Nunes et al. (2021), our definition of values authenticity, and five 54 items evaluating product quality (adapted by Johar and Simmons 2000). The results show a Journal of Marketing 60 Peer Review Version Page 11 of 68 Author Accepted Manuscript significant drop in the ratings of values authenticity (M = 5.27, SD = 1.06, M = 4.74, SD not acq. acq. = 1.34, t(199) = 3.09, p = .002), but no significant differences for the other dimensions of 8 authenticity or for product quality ratings. In sum, we propose that consumers’ negative reactions towards brand acquisitions (in terms of brand attitudes, purchase intention, and product preference) can be explained by a perceived loss of values authenticity. H1: The negative effect of brand acquisitions on consumer reactions is mediated by perceived loss of values authenticity. We next derive moderator variables that might mitigate the negative effect of acquisitions. These moderators are both managerially relevant and conceptually related to our proposed values authenticity account. Specifically, we predict that values authenticity is eroded 31 by acquisitions unless: (1) the continuity of leadership is explicitly maintained or has been previously severed; (2) the perceived alignment of the acquiring and target brand’s values is high (i.e., acquirer and acquired brand share the same values); (3) consumer expectations of values consistency is high (i.e., values are more malleable due to the young age of the brand or the acquisition is consistent with the core values of the brand). Importantly, these moderator variables represent brand-related information (such as the role of the brand’s founder, the brand values used, or the age of the brand) that is widely accessible to consumers and frequently used in brand marketing communications. As a result, consumers may use this information when forming impressions about brands. 54 Losing Versus Maintaining Core Values: Subsequent Acquisitions and Leadership Journal of Marketing 60 Peer Review Version Page 12 of 68 Author Accepted Manuscript Continuity According to our main prediction, an acquisition serves as a signal that the authenticity of 8 the values upon which the brand has been established is being disrupted. We argue that this disruption affects consumers’ perception of the focal brand’s core values system. In reality, brands are frequently acquired multiple times throughout their lives. Natura Cosméticos, for example, recently acquired The Body Shop, which had previously been acquired by L'Oréal. As a result, consumers may encounter situations in which a brand's value system has undergone multiple shifts because of a change of ownership. While previous research on acquisitions appears to have neglected the role of first versus subsequent acquisitions, we posit that this distinction may play an important role in signaling values authenticity loss. Consumers may interpret the first acquisition as a signal of values authenticity loss. In subsequent acquisitions, however, such set of original values would be considered as already lost, and the acquisition 31 should not serve as a strong signal. Thus, we predict that in case of subsequent acquisitions consumers’ negative reactions would be less severe. This prediction is consistent with previous research showing that people tend to be especially influenced by first (vs. subsequent) impressions, especially when it comes to negative attitudes and experiences (e.g., Tversky and Kahneman 1992). Accordingly, they adjust their subsequent evaluation around the initial impression. Hence, consumers may interpret first acquisitions as strong signals of values authenticity loss, but not subsequent acquisitions. H2: The negative effect of brand acquisitions is attenuated after the first acquisition. At the same time, consumers may evaluate an acquisition less negatively when the acquired brand is seen to protect its core values. We argue that this is possible when the brand Journal of Marketing 60 Peer Review Version Page 13 of 68 Author Accepted Manuscript does not replace the original management team by a new one, as it is often the case with acquisitions (Hellmann and Puri 2002; Boeker and Wiltbank 2005). Consumers see founders and 8 the original team in a brand as embodying the values of the company (Randazzo 1993). Founders shape and establish brands according to the values they envisioned for the company. Hence, their presence signals that a brand is committed to its core values, while their departure signals the opposite. Specifically, the founders’ or management team’s continued presence may constitute a signal of their way of doing business and of the direction the brand is taking. Based on our values authenticity loss account, we thus suggest that retaining the founder(s) of the brand or its management team after an acquisition will mitigate the perceived loss of original brand values and attenuate negative reactions to acquisitions. H3: The negative effect of brand acquisitions is attenuated when there is continuity in the management of the acquired brand. Values Alignment between Acquirer and Acquired Brand Furthermore, we expect that alignment between the values of the acquirer and acquired brands will reduce the negative effect of the acquisition. Existing research maintains that brands 39 can benefit (e.g., in terms of increased network efficiency) when they collaborate with other brands that share similar values and priorities (Bundy et al. 2018). This alignment of values fosters trust, can lead to more meaningful relationships, and reduce potential conflicts. We posit that consumers might evaluate the acquired brand less negatively when the acquirer and acquired brand share similar values, as consumers may evaluate this as a signal that the acquired brand’s values will be preserved after an acquisition. This proposition is consistent with previous research showing that consumers are generally appreciative when brands preserve their core values (Spiggle, Nguyen, and Caravella 2012). However, extant research has not examined the Journal of Marketing 60 Peer Review Version Page 14 of 68 Author Accepted Manuscript effect of an alignment of values between the acquirer and the acquired brand. We argue that consumers will perceive an acquisition more positively when the acquirer’s values are on a par 8 with those of the acquired brand. For example, consumers may not react negatively when a brand founded on the values of sustainability and environmentalism is acquired by another brand with the same values. H4: The negative effect of brand acquisitions is attenuated when the acquiring brand’s values are aligned with the values of the acquired brand Consumer Expectations about Values Consistency Many brands are established to facilitate growth (McKelvie and Wiklund 2010; Nason and Wiklund 2018) which is considered as a core value of many businesses (Frederick 1995); their main ambition is to expand their operations and reach as many customers as possible. For 31 example, Microsoft founder Bill Gates often mentioned his vision to have a “PC on every desk in every home.” Similarly, IKEA’s brand value promise is to “create a better everyday life for the many people.” Sometimes founders invoke growth values as the reason for selling the company. For example, the founder of Dot’s Pretzels explained the acquisition by Hershey's in November 2021 saying that she had “built the business with the idea of sharing them with everyone.” Some start-up brands are even founded with the explicit goal to be “taken over” after reaching a certain level of success (Uy, Foo, and Ilies 2015), and often actively communicate such growth ambitions to the public (Gao, Ritter, and Zhu 2013). We expect that a brand’s growth priorities might affect how consumers react to acquisitions. Based on our values authenticity account, we propose that consumers will react less negatively toward an acquired brand when its core values 54 include the pursuit of growth. Specifically, we expect that when a brand’s values—as reflected in Journal of Marketing 60 Peer Review Version Page 15 of 68 Author Accepted Manuscript their focus on growth—are consistent with said brand’s behavior and decisions (i.e., the brand’s decision to be acquired), such alignment between an entity’s inner beliefs and outer behavior 8 constitutes a signal of authenticity (Newman and Smith 2016). Thus, when a brand has an explicit focus on growth, consumers may not consider an acquisition to be inconsistent with the brand’s authentic values, and we expect the negative effect of an acquisition to be reduced. H5: The negative effect of brand acquisitions is attenuated when the brand is characterized by an explicit focus on growth. Regardless of the specific values they are founded on, brands can maintain leadership continuity and values consistency over a long period of time, even generations. For example, Australian beer manufacturer Cooper’s, established in 1862, proudly state in their communications that the Cooper family is still involved in company management after all these 31 years. Even more starkly, Antinori, one of the preeminent Italian winemakers, states on its website that “The Antinori family has been committed to the art of winemaking for over six centuries.” If loss of values authenticity underlies the proposed negative effect of acquisitions, we further expect that brand age moderates consumer reactions toward acquired brands. Research on historical authenticity suggests that an older age or longer history can positively shape the prestige and monetary value of brands; for example, it is suggested that consumers attribute a higher quality to brands with a strong heritage (Beverland 2005; Boyle 2003; Groves 2001). Previous research also shows how being older can not only imbue a brand with a reputation for craftmanship, but also with values expressed by the company founder (Carroll and Wheaton 2009; Hatch and Schultz 2017). For example, Antinori state that “All throughout its 54 history, 26 generations long, the Antinori family has managed the business directly making Journal of Marketing 60 Peer Review Version Page 16 of 68 Author Accepted Manuscript innovative and sometimes bold decisions while upholding the utmost respect for traditions.” Yet, having a long history and heritage does not necessarily mean that a brand has more integrity 8 (Newman, 2019). For example, the founders of many start-ups have strong personalities and vision, and consumer assessment of values authenticity may not necessarily be contingent on whether the brand was established recently versus long ago. Nevertheless, in the event of an acquisition, consumers might develop expectations regarding a brand’s values. Younger brands might be perceived as “not yet settled,” and still in the process of establishing their value system. Thus, value changes early in a brand’s lifetime may be perceived as more appropriate, similar to when greater allowances are made for young people whose personalities and value systems are more malleable and inconstant (Neel and Lassetter 2015). By contrast, older brands have underlying values that have guided their actions for many years; therefore, if an older brand is acquired, consumers may view the acquisition as a stronger signal of a deviation from these 31 values and evaluate it more severely. In sum, we predict that consumers will react less negatively towards acquired (vs. not acquired) brands when said brands are newer. H6: The negative effect of brand acquisitions is attenuated for younger brands. Overview of Studies We organize the empirical part into two main parts. In the first, we test the predicted negative effect of acquisitions on consumer reactions in terms of brand choice (Study 1) and purchase intentions (Study 2), and provide initial process evidence. We also examine the robustness and generalizability of the effect in light of different sizes of the acquirer (Studies 3a Journal of Marketing 60 Peer Review Version Page 17 of 68 Author Accepted Manuscript and 3b) and of partial acquisitions (Study 4). These studies also provide evidence for our values authenticity loss account and address alternative explanations. 8 The second part tests managerially relevant moderating variables and boundary conditions based on our theoretical account and is organized in three sections. Studies 5 and 6 examine the moderating effect of repeated acquisitions and leadership continuity. Study 7 examines the role of values alignment. Studies 8 and 9 examine consumer expectations about values consistency by testing the effect of growth values and of brand age. In all our studies, we determined sample sizes a priori based on pilot studies and report all conditions and participant exclusions (if any). All the stimuli are available in the Web Appendix. Data are archived at: https://osf.io/kxtdc/?view_only=1b65eec7636f4483944209c779df5f62. The Negative Effect of Acquisitions: Mediation, Robustness, Generalizability (Studies 1-4) As previously stated, many anecdotes and some empirical evidence point to a negative effect of acquisitions on brand preferences. Nevertheless, a systematic and internally valid test of this hypothesis is missing in the literature. We therefore begin our empirical investigation with a series of demonstrations pertaining to the impact of acquisition cues on consumer response to brands (Studies 1-2). In addition, these studies provide initial evidence for our values authenticity loss account (H1). In Study 3a and 3b, we examine the potential role of consumers’ general dislike for large corporations. In Study 4, we examine the robustness of the negative effect of an acquisition on the acquired brand if the brand is only partially acquired. Finally, in an add-on study, we also show that also the acquirer is affected by the negative effect of 54 acquisitions, but to a smaller extent. Journal of Marketing 60 Peer Review Version Page 18 of 68 Author Accepted Manuscript Study 1: Incentive-Compatible Choice Study 1 is an incentive-compatible choice experiment examining whether an acquisition can 8 shift consumers’ preference from an acquired brand in favor of a comparable product from another brand. Method. We recruited 404 US participants (44.8% female, M = 45.75 years, MTurk) age who were randomly assigned to one of two conditions in a preregistered experiment (#72033 | AsPredicted) using an incentive-compatible choice design (see Acar et al. 2021, Meyvis and van Osselaer 2018 for similar designs). We introduced participants to the logos and background descriptions of two chocolate brands, Ghirardelli and Russell Stover (Web Appendix B for full stimuli). Both brands are real US brands that have been acquired by the Swiss chocolate manufacturer Lindt-Sprungli but kept their original brand names. We presented both brands side by side and informed participants that they could win a box of chocolates in a lottery. 31 Specifically, we told participants that we would raffle off boxes of chocolate, and they could choose which brand they would like to receive. We manipulated between participants whether Ghirardelli or Russell Stover was mentioned as having been acquired. Thus, participants in the first condition were informed that Ghirardelli was acquired (and Russell Stover was not), whereas those in the second condition were told that Ghirardelli was not acquired (and Russell Stover was). We randomized the presentation order (whether Ghirardelli [Russell Stover] was displayed before or after) and the acquisition cue (whether Ghirardelli [Russell Stover] was acquired or not). In addition to product choice (our dependent variable), we measured both brands’ values authenticity (our mediator variable) with three items presented in random order: “The brand remains true to its espoused values,” “The brand refuses to compromise the values 54 upon which it was founded,” and “The brand has stuck to its principles” (1 = strongly disagree, 7 Journal of Marketing 60 Peer Review Version Page 19 of 68 Author Accepted Manuscript = strongly agree; α = .95). Upon study completion, we conducted a lottery in which three winners were randomly determined to receive their chosen box of chocolates. 8 Main findings. First, we examined whether acquisition information affected product choice. When Russell Stover was presented as acquired, 80.7% of participants chose the Ghirardelli chocolate (19.3% chose Russell Stover). When Ghirardelli was presented as acquired, only 62.2% of the participants chose the Ghirardelli chocolate (37.8% chose Russell Stover). Thus, providing brand acquisition information resulted in a significant 18.5% change in choice share (χ (1) = 16.92, p < .001). Second, we examined the ratings of values authenticity. Consistent with our expectations, the acquisition cue significantly reduced consumers’ perceptions of values authenticity for both brands (Ghirardelli: M . = 5.67, SD = .95 vs. M = 4.48, SD = 1.39, t(402) = 10.06, p < not acq acq. .001, d = 1.00; Russell Stover: M .= 5.52, SD = 1.01 vs. M = 4.40, SD = 1.41, t(402) = not acq acq. 31 9.15, p < .001, d = .91). We estimated a mediation model to test whether the observed loss in values authenticity mediates the negative effect of the brand acquisition on choice (H1). Results are in line with the hypothesis (ab = .15, SE = .06, 95% CI = .04, .27, PROCESS Model 4, 10,000 bootstrap resamples as in the subsequent studies). Study 1 provides initial evidence for the negative effect of acquisitions on consumer brand preference in an incentive-compatible experiment with real brands. The findings suggest that acquisitions can reduce the acquired brands’ choice shares in favor of competitors. This study also documents the mediating role of values authenticity. Study 2: Field Survey Journal of Marketing 60 Peer Review Version Page 20 of 68 Author Accepted Manuscript Study 2 employs a correlational design with recently acquired real brands to test the proposed negative effect of acquisitions on purchase intentions in the field, and to test whether values 8 authenticity underlies this effect. Specifically, we tested whether consumers’ negative reactions towards acquired brands materialize when consumers do not receive explicit information about the acquisition. For this purpose, we surveyed consumers regarding their willingness to buy or use recently acquired brands, and the latter’s perceived values authenticity. As a proxy measure for consumer acquisition knowledge, we measured the extent to which consumers know that other companies control the brand. We predict that higher consumer acquisition knowledge is associated with reduced purchase intentions. Method. Participants were 359 US consumers (56.5% female, M = 33.74 years, Prolific) age who were randomly assigned to one of six versions of a survey. In each of the six versions, we exposed participants to one of the following recently acquired brands: Wholefoods, Casamigos 31 Tequila, Dr Pepper, LinkedIn, Panera Bread, or Jimmy Choo—all major brands that were acquired in 2017. Participants read a brief description of the brand and product category. In this study, we deliberately refrained from mentioning the recent acquisition of the brand. Instead, as our independent variable, we asked participants to what extent they thought another company controlled the brand (“To the best of my knowledge the brand is… 1 = completely independent, 7 = completely controlled by another company”), which served as a proxy variable of brand acquisition knowledge. As our dependent variable, we measured purchase or usage intention with three items: “If I were going to buy [use] this product [service], the probability of buying We used the measure as proxy measure for awareness of an acquisition. A defining characteristic of an acquisition is the transferal of control (Akhigbe, Madura, and Spencer 2004). We refrained from measuring acquisition awareness directly because of impression management concerns—participants might incorrectly indicate awareness of an acquisition (even though they are not). We randomized the order of the control measure (administering it either at the beginning or at the end of the survey) and showed no significant effects on the results. Journal of Marketing 60 Peer Review Version Page 21 of 68 Author Accepted Manuscript [using] [brand name] is…,” “The probability that I would consider buying [using] products from this brand is…,” and “The likelihood that I would purchase[use] products from this brand 8 is…,”—all on a scale from 1 = very low to 7 = very high; (α = .96). We also measured perceived values authenticity (our proposed mediator variable) with the same items used in Study 1 (α = .85). A factor analysis revealed that the measures load on three factors (see Web Appendix C; the two-factor solution for purchase intention and values authenticity is robust in all subsequent studies). Finally, we asked respondents to fill out a series of demographic variables. Main findings. We conducted a regression analysis using bootstrapping procedures (PROCESS Model 4) with acquisition knowledge as the independent variable, purchase intention as the dependent variable, and values authenticity as the mediating variable. The analysis revealed a significant main effect of acquisition knowledge on purchase intention (b = -.12, SE = .06, p = .028) and on values authenticity (b = -.22, SE = .03, p <.001). This negative and 31 significant relationship supports our prediction that higher perceived external control (i.e., thinking that the brand is controlled by another company) reduces consumers’ purchase intentions and values authenticity ratings. Notably, values authenticity mediated the effect of perceived control on purchase intention (ab: -.05, SE = .02; 95% CI = -.09, -.02), providing converging support for H1. Study 3a and 3b: Robustness to Size of the Acquirer and Product Category The aim of Studies 3a and 3b is to test whether the negative effect of acquisitions materializes only when a large company acquires a smaller brand, as suggested in previous research (Frake 2017). In this case, it is possible that the observed adverse reactions are driven 54 by a general negative attitude towards large corporations (Paharia et al. 2014). In Study 3a and Journal of Marketing 60 Peer Review Version Page 22 of 68 Author Accepted Manuscript 3b, we manipulate the acquirer's size and test the robustness of the main and mediator effects examined in Studies 1-2. If our theoretical account centering on values authenticity loss is 8 correct, we expect the negative acquisition effect to hold irrespective of acquirer size. Method. For Study 3a [respectively 3b] we recruited 424 [400] US participants (47.6% female, M = 38.78 years, [45.8% female, M = 41.45 years] MTurk) and randomly assigned age age them to one of four conditions (not acquired, acquired by a bigger company, acquired by a smaller company, or acquired by a same-size company) in a between-participants design. Participants were first introduced to Rusty Root [Workman], a fictional brewing company [a real book publishing company] and read a brief description about the company and its foundation. In the not acquired condition, participants received no further information. In the bigger smaller, or same-size acquired conditions, participants read that in the brand was acquired by Fitch Fish [Hachette], a brewery [book publisher] which is bigger, smaller, or same-size depending on the 31 condition (see Web Appendix D for full stimuli). A separate test (N = 140) confirmed that our 33 2 manipulation of company size was effective (χ (6) = 200.26, p <.001). Next, we measured purchase intention (α = .96) and values authenticity (α = .94) as before. Main findings. We first compared participants’ purchase intention ratings in the not acquired condition with participants’ combined (average) ratings in the acquisition conditions. 43 Compared to participants in the not acquired brand condition, participants in the acquired conditions rated the brand lower on purchase intention (M = 4.79, SD = 1.48, M = 4.16, not acq. acq. SD = 1.49, F(1, 423) = 14.94, p < .001, d = .38) [M = 5.16, SD = 1.34, M = 4.74, SD = not acq. acq. 1.28, F(1, 399) = 7.82, p = .005, d = .28]. A one-way ANOVA revealed that participants’ purchase intention ratings were not significantly different across the three conditions (M = acq. bigger 4.14, SD = 1.61 vs. M = 4.07, SD = 1.42 vs. M = 4.26, SD = 1.42, F(2, 314) = acq. same size acq. smaller Journal of Marketing 60 Peer Review Version Page 23 of 68 Author Accepted Manuscript .42, p = .659, d = .002), [M = 4.65, SD = 1.41 vs. M = 4.80, SD = 1.28 vs. M acq. bigger acq. same size acq. = 4.78, SD = 1.13, F(2, 302) = .41, p = .661, d = .11]. Importantly, the results were not smaller 8 affected by the size of the acquiring company (individual contrasts: ps > .60, Figure 1). We also obtain consistent results if we repeat these analyses with values authenticity instead of purchase intention as the dependent variable (please see Web Appendix D for the results and contrasts on values authenticity of this study and Web Appendix E for the results on values authenticity of the remaining studies). 20 [Insert Figure 1 about here] A multi-categorical mediation analysis confirmed that the main effect is mediated by perceived values authenticity loss (indirect effect: ab = -.20, SE = .04; 95% CI = -.27, -.13), [ab = -.18, SE = .03; 95% CI = -.23, -.11]. As predicted, being acquired undermines the values authenticity of the acquired brand, with a subsequent negative effect on purchase intentions. If 32 the negative effect of acquisitions was caused by a generally negative disposition towards larger companies buying up smaller brands (e.g., Paharia et al. 2014), participants would have evaluated acquisitions by a smaller or same-size company less negatively. Our findings advance existing research, which has hitherto considered acquisitions inauthentic only when large companies bought smaller ones (Frake 2017). Based on our values authenticity account, we instead argue that acquisitions can reduce authenticity even when the acquiring company is smaller than the acquired company. Apart from providing process insights, this study is managerially relevant. It is not uncommon for companies to try to acquire larger ones (e.g., Porsche attempting to acquire Volkswagen, an automotive giant with far greater revenues, Los Angeles Times 2006, or Heinz-Kraft attempting to acquire Unilever, a company 55 over twice the size, Reuters 2017). Journal of Marketing 60 Peer Review Version Page 24 of 68 Author Accepted Manuscript Study 4: Robustness to Full versus Partial Acquisition The aim of Study 4 is to test whether the negative acquisition effect only materializes when 8 the entire brand is acquired, or if it still exists when smaller shares of the brand are acquired. Acquiring companies have two options: they can either acquire the entire brand, or just a share of it. From a managerial and legal perspective, it is particularly critical whether more than 50% of the shares are controlled by another company (Akhigbe, Madura, and Spencer 2004). We expect consumers to view a complete acquisition as a clear signal that a brand’s value system will change. However, consumers may view even a partial acquisition of a brand as a harbinger of change to the brand’s value system (because of increased external pressure). Therefore, it is conceivable that selling only a small share of the brand is sufficient to dilute a brand’s purchase intentions and values authenticity. Method. We recruited 424 US participants (46.9% female, M = 39.31 years, Prolific) age 31 who were randomly assigned to one of seven conditions of a between-participants design. We introduced participants to the same fictitious brand used in Study 3a (Rusty Root Brewery). In the not acquired condition, participants received no information about the acquisition. In the six acquired conditions, we manipulated the portion of Rusty Root acquired by the Fitch Fish company (either 15%, 30%, 45%, 60%, 75%, or 100%; Web Appendix F). We then measured purchase intention (α = .95) and values authenticity (α = .94) as before. Main findings. First, we compared participants’ purchase intention and values authenticity ratings for the not acquired condition with the aggregated ratings of the acquired conditions. Planned contrasts revealed that, compared to participants in the not acquired condition, participants in the acquired conditions indicated significantly lower purchase intention (M = not acq. 54 4.96, SD = 1.31, M = 4.43, SD =1.35, F(1, 423) = 7.99, p < .01, d = .25). Second, we acq. Journal of Marketing 60 Peer Review Version Page 25 of 68 Author Accepted Manuscript aggregated the acquired conditions into two groups: less than 50% of shares acquired, and more than 50% of shares acquired. Compared to participants in the not acquired condition, these 8 participants indicated reduced purchase intention when the acquirer bought less than the majority or more than the majority of the shares (M = 4.96, SD = 1.31, M = 4.53, SD = 1.41, not acq. acq.<50% M = 4.33, SD = 1.27; F(2, 421) = 5.04, p = .007, d = .39). The latter groups did not differ acq.>50% in terms of purchase intentions. We obtained similar results for values authenticity, with the main difference that the manipulation of acquired shares had a stronger effect on values authenticity. For example, participants already rated the focal brand lower on values authenticity, even when only 15% of the brand was acquired (M = 5.72, SD = .92, M = 5.05, SD = 1.14, t(119) not acq. acq.15% = 3.53, p <.001, d = .32). This was not the case for purchase intention; here, the negative purchase intention effect only started to become significant when more than 30% of the brand was acquired. These findings suggest that the share size of an acquisition has a more sensitive 31 effect on values authenticity than on purchase intention. A multi-categorical mediation analysis on purchase intention demonstrated a significant indirect effect through values authenticity on purchase intention (ab = -.10, SE = .02; 95% CI = -.14, = -.07). These findings suggest that the indirect effect through values authenticity remains robust across acquisition increments. In sum, the results of Studies 1-4 provide converging evidence in support of H1 and document the robustness and generalizability of the negative effect of acquisitions on consumers reactions to acquired brands. Yet, since acquisitions not only involve the acquired brand but also the acquiring company, it might be possible that negative reactions toward the acquired brand spill over to the acquiring company. To test this possibility that acquisitions harm also the acquirer, we conducted an add-on study (see Web Appendix G) in which we used the same basic 54 experimental manipulation as in the previous studies (acquired vs. non-acquired) but asked Journal of Marketing 60 Peer Review Version Page 26 of 68 Author Accepted Manuscript participants to indicate purchase intentions for both the acquired brand and the acquirer. As an empirical context, we introduced participants to two real food producers, Hershey and Pretzels 8 Inc. Consistent with the results in the previous studies, when participants were informed that Hershey purchased Pretzels Inc. (vs. not), they indicated significantly lower purchase intentions for Pretzels Inc. (M = 5.51, SD = 1.04 vs. M = 5.06, SD = 1.54, t(209) = 2.47, p = .014, d not acq, acq. = .34). Interestingly, participants in the acquired condition also indicated significant lower purchase intentions for Hershey, the acquirer (M = 5.88, SD = .96 vs. M = 5.58, SD = not acq, acq. 1.15, t(209) = 2.03, p = .044, d = .28). Taken together, these results suggest that acquisitions not only harm the acquired brand but also, to a lesser extent, the acquirer. The Moderating Effect of Repeated Acquisitions and Leadership Continuity (Studies 5-6) 31 The primary aim of Studies 5 and 6 is to examine of the first set of managerially relevant conditions under which the observed negative main and mediation effect of acquisitions is attenuated. Study 5 examines whether consumers’ negative reactions to an acquisition are attenuated when this was not the first time the brand had been acquired (H2). Study 6 examines the moderating effect of continuity of leadership (H3). Study 5: First versus Subsequent Acquisition Based on our values authenticity account, we expect that the negative acquisition effect is attenuated after the first acquisition of a brand (H2). To test this prediction, we compare two situations: one in which a brand is acquired for the first time, and one where the brand undergoes 54 a subsequent acquisition after the first. Moreover, this study addresses perceived product quality Journal of Marketing 60 Peer Review Version Page 27 of 68 Author Accepted Manuscript as another potential alternative account. Although the mediation results from the previous studies are difficult to explain using this account, it is possible that consumers expect acquisitions to 8 negatively affect product quality, which thereby lowers purchase intentions. Method. We recruited 363 participants (43.0% female, M = 40.38 years, MTurk) and age randomly assigned them to one of three conditions (not acquired, acquired for the first time, or acquired multiple times) in a between-participants design. Participants read information about Pinbag, a (fictitious) company producing backpacks. Participants in the first-time acquired condition read that the company had been recently acquired by another textile company. Participants in the subsequent acquisition condition read that Pinbag had been acquired by a textile company, and then recently acquired again by another textile company. Participants in the not acquired condition did not receive any acquisition-related information (see Web Appendix H for stimuli). A Chi-Square Test (χ (4) = 339.07, p < .001) confirmed that participants correctly 31 identified the brand as having been not acquired, acquired once, and acquired multiple times in the respective conditions. We measured purchase intention and values authenticity as in the previous studies. Furthermore, to examine whether any effect of the acquisition on purchase intention might be affected by product quality perceptions, we asked participants to evaluate product quality using a series of 7-point items adapted from Johar and Simmons (2000): engineering and design, reliability, materials, manufacturing process, and performance (α = .93). Main findings. An ANOVA on purchase intention produced a significant effect (F(2, 362) = 5.97, p = .003). We next conducted a series of planned contrasts. Compared to participants in the not acquired condition, participants in both the first time and subsequent acquisition conditions indicated lower purchase intention (M = 5.24, SD = 1.22 vs. M = 4.89, SD = not acq. first acq. 54 1.51, p = .041, d = .26 ; vs. M = 4.63, SD = 1.60, p = .003, d = .39). Moreover, consistent subseq. acq. Journal of Marketing 60 Peer Review Version Page 28 of 68 Author Accepted Manuscript with H2, we find no difference between the two acquired conditions (F(1,240) = 1.67, p = .198), indicating the negative acquisition effect is attenuated after the first acquisition. 8 The pattern of results for values authenticity are consistent (F(2, 362) = 29.89, p < .001; see Web Appendix I for detailed analyses). We also obtain similar patterns for product quality, even though the effect is weaker and only marginally significant (F(2, 362) = 2.84, p = .06; see Web Appendix I). We ran a multi-categorical parallel mediation analysis (Model 4) with values authenticity and product quality as mediators. The analysis reveals two significant indirect effects; importantly, the effect of values authenticity is significantly stronger (b = -.21, SE = .05) than that of perceived product quality (b = -.07, SE = .03; contrast: b = -.1352, SE = .0534, 95% CI = -.24, -.03). Next, we ran a mediation model with perceived values authenticity as the mediator controlling for product quality. The model reveals an indirect effect of values authenticity, and a non-significant indirect effect of product quality (95% bootstraps CI). These 31 results confirm that values authenticity plays an important role in determining consumers’ negative reactions toward an acquisition, above and beyond product quality perceptions. Study 6: Leadership Continuity Study 6 has two aims. The first is to examine a relevant boundary condition for the negative effect of acquisitions, namely the continuity of founder leadership (H3). The second is to provide further process evidence by measuring the mediating effect of values authenticity, and two potential alternative explanations, namely perceived product quality and “underdog” status. Method. We recruited 360 US participants (43.9% female, M = 41.44 years, MTurk) age who were randomly assigned to one of three conditions (not acquired, acquired/leadership 54 continuity, or acquired/leadership change) in a preregistered experiment (#69990 | AsPredicted) Journal of Marketing 60 Peer Review Version Page 29 of 68 Author Accepted Manuscript using a between-participants design. As in the previous study, participants read information about the backpack brand Pinbag. After reading about the brand and its founders, participants in 8 the not acquired condition received no further information, whereas participants in both acquired conditions read that the firm had been acquired by Alphatex, a fictitious textile and apparel firm. Participants in the acquired/leadership continuity condition read that the two founders maintained their role in the company. Participants in the acquired/leadership change condition read that the two founders left after the acquisition (see Web Appendix J for stimuli). After reading this information, participants indicated their purchase intention (α = .95), perceived values authenticity (α = .95), and product quality (α = .95) using the same scales as before. In addition, we asked participants to indicate the brand’s underdog status (“I think Pinbag is an underdog,” “Pinbag had to overcome obstacles to succeed,” “Pinbag is a brand that has passion for its products”; α = .74, (Acar et al., 2021). 31 Main findings. An ANOVA on purchase intention revealed a significant main effect (F(2, 359) = 17.64, p < .001). Follow-up contrasts revealed lower purchase intentions when the founders were no longer with the acquired brand (M = 4.76 vs. M = 3.87, t(357) not acq. acq./leader. change = 4.77, p < .001, d = .50). When the founders remained with the acquired brand, there was no significant difference in purchase intention between the two conditions (M = 4.76 vs. not acq. M = 4.89, t(357) = -.70, p = .484, d = .07; see Figure 2). acq./leader. cont. [Insert Figure 2 about here] We repeated these analyses with the three potential mediator variables, one at a time. The patterns were consistent for values authenticity, less pronounced for perceived product quality, and not consistent for underdog status (see Web Appendix K for details and contrast analyses). Journal of Marketing 60 Peer Review Version Page 30 of 68 Author Accepted Manuscript Next, we conducted a multi-categorical parallel mediation analysis (with the acquired vs. the acquired-leadership change conditions) and compared the indirect effects of values 8 authenticity with that of perceived product quality and underdog status, two potential alternative explanations. First, we found a strong significant indirect effect through values authenticity (b = - .71, SE = .17, 95% CI = -1.05, -.39). Consistent with the findings of Study 5, we also found a significant but substantially smaller indirect effect through perceived product quality (b = -.35, SE = .09, 95% CI = -.66, -.19). Consistent with the findings of Study 3a-3b, the indirect effect through underdog status was not significant (b = -.02, SE = .07, 95% CI = -.13, .15, see Web Appendix K). We next tested the relative explanatory power of the three potential process variables. We estimated three mediation models, one for each process variable, and entered the two remaining variables as covariates. The first model shows that the indirect effect of values authenticity remains robust, even when controlling for perceived product quality and underdog 31 status (ab = -.48, SE = .12, 95% CI = -.73, -.26). This, however, is not the case for the other two potential alternative explanations. The indirect effect through perceived product quality is not significant when controlling for values authenticity and underdog status (ab = .14, SE = .08, 95% CI = -.01, .32). Similarly, the indirect effect through underdog status is not significant when controlling for values authenticity and perceived product quality (ab = -.001, SE = .02, 95% CI = -.05, .05). These findings further support our theorizing on the key role values authenticity plays in determining consumers’ negative reactions towards an acquisition when the leadership of a brand changes. Journal of Marketing 60 Peer Review Version Page 31 of 68 Author Accepted Manuscript The Moderating Role of Values Alignment (Study 7) 8 The aim of the study in this section is to test a further boundary condition, namely whether consumers perceive the values of the acquirer to be aligned with those of the acquired brand. Study 7: The Role of Values Alignment In Study 7, we predict that consumers will react less negatively to an acquisition when there is stronger alignment between the values of the two brands (H4). Method. We recruited 361 US participants (73.1% female, M = 31.01 years, Prolific) age who were randomly assigned to one of three conditions in a between-participants design (not acquired, acquired/high values alignment, or acquired/low values alignment). For this study, we used Pela, an actual producer of environmentally-friendly phone cases and accessories, as the 31 target brand. The brand’s core values focus on environmentalism. Participants read a short description of the brand (see Web Appendix L for full stimuli). In the not acquired condition, participants did not receive any further information, whereas participants in the two acquisition conditions received acquisition information. In the high values alignment condition, participants were told that Patagonia, a clothing company known for its environmental values, had acquired the target brand Pela; in the low values alignment condition, we told participants that Supreme, a clothing company not known for environmental values, had acquired Pela. We selected these two US brands based on the website goodonyou.eco, which rates the sustainability of clothing producers. Furthermore, we conducted a pre-test with a separate sample of 100 participants wherein participants rated brands in terms of brand attitudes, brand familiarity, perceived quality, 54 and environmentalism as a core corporate value. Patagonia and Supreme only differed in terms Journal of Marketing 60 Peer Review Version Page 32 of 68 Author Accepted Manuscript of environmentalism (p = .017; for the other variables, ps > .30). We used the same scales as in previous studies to measure purchase intention (α = .94) and values authenticity (α = .86). As a 8 manipulation check of values alignment, we included the following item: “As far as you know, how much do the values of the brand Patagonia align with those of the brand Pela?” 1 = not at all, 7 = very much). Manipulation check. Values alignment. As expected, participants rated the values of the target brand (Pela) as more aligned with the values of Patagonia than of Supreme ( M = acq. align. hi 5.08, SD = 1.29 vs. M = 3.68, SD = 1.42, F(1, 238) = 63.56, p < .001). acq. align. lo Main findings. An ANOVA on purchase intention revealed a significant effect (F(2, 358) = 6.43, p = .002) consistent with H4. When the acquired brand had low values alignment (Supreme), participants indicated significantly lower purchase intention when the brand was acquired by Pela (M = 4.71, SD = 1.30, M = 4.08, SD = 1.67, t(358) = 3.44, p < 29 not acq. acq. align. lo .001, d = .36). When the acquired brand had a high values alignment (Patagonia), the difference in purchase intention between the acquired and non-acquired condition was not significant (M not = 4.71, SD = 1.30, M = 4.56, SD = 1.33 t(358) = -.84, p = .404, d = -.08; Figure 3). acq. acq. align. hi [Insert Figure 3 about here] A multi-categorical mediation analysis (Model 4) once again provides support for the mediating effect of values authenticity. The indirect effect through values authenticity is significant for the contrast between the not acquired condition and acquirer with low values alignment condition (b = -.29, SE = .09, 95% CI = -.48, -.13). However, the indirect effect is not significant for the contrast between the acquired and the high values aligned acquirer conditions (b = -.04, SE = .07, 95% CI = -.17, .09). Journal of Marketing 60 Peer Review Version Page 33 of 68 Author Accepted Manuscript The Moderating Effect of Values Consistency (Studies 8-9) In this section we test how values consistency can moderate the effect of acquisition on values authenticity. First, we show how acquisitions harm values authenticity less in the case of a brand established with a growth value orientation, as the acquisition is consistent with the brand’s founding values (Study 8). Second, we show how acquisitions may hurt old brands more as it disrupts values that are set in time (Study 9). Study 8: Growth Orientation of the Acquired Brand Study 8 tests the moderating role of growth orientation, that is, whether the acquired brand has an overarching growth objective. A brand’s growth orientation reflects values that are not 31 inconsistent with the decision to seek an acquisition. Specifically, we test our prediction that the negative effect of acquisition is attenuated when the brand puts a strategic priority on growth (i.e., an intention to reach as many consumers as possible; H6). Method. We recruited 504 US participants (44.5% female, M = 38.11 years, MTurk), 38 age and randomly assigned them to one condition of a 2 (brand: not acquired vs. acquired) x 2 (orientation: control vs. growth) between-participants design. Participants read a paragraph about an actual outdoor equipment brand, Tatonka. In the acquisition conditions, participants read that Tatonka was recently acquired by another company, Outdoor Tech; in the not acquired condition, participants did not receive this information. in the high growth conditions, participants read the following fictitious value statement from the company founder: “It is a 54 matter of how many people use my products. At the end of the day, we want lots of people to use Journal of Marketing 60 Peer Review Version Page 34 of 68 Author Accepted Manuscript and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” Conversely, in the control conditions, participants read: “It is not a matter of 8 how many people use my products. It is a matter that the passionate people use and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” (Web Appendix M for complete stimuli). Participants completed the same purchase intention (α = .95) and values authenticity (α = .92) scales as in the previous studies. Main findings. A 2 x 2 ANOVA produced a significant main effect of the brand acquisition factor on purchase intention (M = 4.80, SD = 1.47, M = 4.36, SD = 1.46, F(1, 503) = not acq. acq. 11.57 p < .001, η = .02), which was qualified by a significant interaction effect (F(1, 503) = 4.85 p = .028 , η = .01) consistent with H5. In the control condition, participants indicated significantly lower purchase intention when the brand was (vs. was not) acquired (M = 5.02, SD = 1.34, M = 4.29, SD = 1.61, F(1, not acq. acq. 31 503) = 11.56, p < .001; Figure 4). This, however, was not the case in the growth condition (M not = 4.58, SD = 1.54, M = 4.42, SD = 1.29, F(1, 503) = .756, p = .385). Moreover, the main acq. acq. effect of growth orientation was not significant (M = 4.50, SD = 1.42, M = 4.66, SD = growth control 1.52; F(1, 503) = 1.57, p = .210, η = .00), indicating that participants were neither more nor less likely to purchase the brand when it pursued a growth strategy. 43 [Insert Figure 4 about here] We found the same pattern of results for values authenticity (main effects: F (1, 503) = acq. 79.76, p < .001, F (1, 503) = .168, p = .682; interaction: F(1, 503) = 10.36 p < .001; see Web growth Appendix E for detailed analyses). A moderated mediation analysis (Model 7) confirms the mediating role of values authenticity (index: b = .21, SE = .07; 95% CI = .08, .35). The indirect effect through values authenticity is significantly stronger in the control condition (b = -.39, SE = Journal of Marketing 60 Peer Review Version Page 35 of 68 Author Accepted Manuscript .06; 95% CI = -.52, -.29) than in the growth condition (b = -.18, SE = .04; 95% CI = -.28, -.10; the two CI do not overlap). The results thus support our theorizing. Study 9: Brand Age Study 9 examines the moderating impact of brand age. We test whether the negative effect of acquisitions is stronger for an acquired brand that has been in the market longer, compared to a more recently established brand (H6). Method. We recruited 633 US participants on MTurk (47.4% females, M = 38.66 years), age who participated in a 2 (brand type: not acquired vs. acquired) x 2 (brand age: old vs. new) between-participants experiment. They were introduced to Pinbag, the fictitious backpack company used in Study 6. Participants in the acquired conditions read that the brand was acquired by a textile and apparel firm, whereas participants in the not acquired condition 31 received no further information. In the old brand condition, participants read that Tom Eagles, the firm’s founder, established his business in Pittsburgh, Pennsylvania, in 1869. In the new brand conditions, participants read the same text but that he established his business in 2010 (see Web Appendix N). Participants then completed the measures for purchase intention (α = .95) and values authenticity (α = .96) as before. Main findings. A 2 x 2 ANOVA on purchase intention produced a significant main effect of acquisition (M = 5.06, SD = 1.31, M = 3.94, SD = 1.47, F(1, 632) = 101.48, p < .001, not acq. acq. 2 2 η = .14) and a non-significant main effect of brand age (F(1, 632) = .019, p = .889, η = .00). In support of H6, the two-way interaction proved significant (F(1, 632) = 4.27, p = .039, η = .01). The negative effect of acquisition on purchase intention was stronger when the brand was old 54 (M = 5.16, SD = 1.23 vs. M = 3.82, SD = 1.50, t(629) = 8.53, p < .001) versus young not acq. old acq. old Journal of Marketing 60 Peer Review Version Page 36 of 68 Author Accepted Manuscript (M = 4.95, SD = 1.38 vs. M = 4.07, SD = 1.43, t(629) = 5.70, p < .001). The not acq. young acq. young same ANOVA on values authenticity displays the same pattern (main effect of acquisition: F(1, 2 2 8 632) = 560.58, p < .001, η = .47, interaction: F(1, 632) = 8.52, p < .01, η = .01). The main 10 2 effect of brand age proves not significant (F(1, 632) = .926, p = .336, η = .00). The results of a moderated mediation analysis (PROCESS Model 7) reveal a significant index of moderated mediation (b = -.14, SE = .05; 95% CI = -.24, -.05). The indirect effect through values authenticity is significantly stronger in the old brand condition (b = -.63, SE = .07; 95% CI = -.76, -.50) than in the young brand condition (b = -.49, SE = .06; 95% CI = -.61, - .38), further supporting our values authenticity loss account. Furthermore, we conducted a post- 25 test using the same stimuli and design as the main study (N = 207) to explore whether product quality could account for our findings. A 2 x 2 ANOVA on perceive product quality revealed a non-significant main effect of brand age (F(1, 206) = .212, p = .645) and a significant main effect of the acquisition factor (F(1, 206) = 16.88, p < .001). However, and in contrast to the previously observed significant interaction effect on values authenticity, the analysis revealed no significant interaction effect on perceived product quality (F(1, 206) = .937, p = .334). It is therefore unlikely, that perceived product quality offers an alternative explanation for the observed moderation effect in this study. General Discussion While extant research in accounting, finance, strategy, and organizational behavior has explored in detail how acquisitions impact organizations, little attention has been paid to how acquisitions impact consumers. Through a survey about real brand acquisitions, and nine Journal of Marketing 60 Peer Review Version Page 37 of 68 Author Accepted Manuscript experiments using both incentive-compatible and attitudinal measures, we shed light on this managerially important yet neglected topic. Building on a signal theory perspective, we propose 8 an account based on loss of values authenticity to contextualize negative consumer reactions toward acquired brands. Drawing on this account, we further predict managerially relevant boundary conditions that will attenuate the negative effect of acquisitions. Specifically, negative consumer responses to acquisitions are reduced when (a) brands have been acquired before (Study 5); (b) the original leadership remains involved in the company (Study 6); (c) the acquirer has values that align with the values of the acquired brand (Study 7); (d) acquired brands position themselves as having an orientation towards growth (Study 8); and (e) brands are younger (Study 9). In sum, our studies provide converging support for a values authenticity loss account regarding the negative effect of acquisitions on consumer response to brands. The very asset which often motivates them—the brand—can be endangered by acquisitions, by undermining the 31 authenticity of the brand’s values. Thus, more speculatively, our findings suggest a possible reason why so many acquisitions fail to meet commercial objectives (e.g., Christensen et al. 2011). Theoretical Implications Our research advances the current body of academic work on acquisitions by documenting when and why consumers react negatively to acquisition news. Specifically, we demonstrate the importance of values authenticity (relative to other accounts including perceived product quality and underdog status) in explaining negative reactions. Further, we show perceived loss of values authenticity is more relevant for certain brands (i.e., older brands that have been on the market Journal of Marketing 60 Peer Review Version Page 38 of 68 Author Accepted Manuscript longer; brands professing niche-oriented values) than for others (i.e., newer brands that have only been on the market for a short time; brands professing values related to growth). 8 More broadly, our results reveal that consumers react not only to marketing tactics, but also to high-level strategic actions of firms, such as acquisitions. Such actions constitute a signal that consumer can interpret and rely on in judgments and decision making. We demonstrate that a study of consumer behavior can be informative for corporate strategy decisions and illustrate how marketing strategy and consumer behavior intersect as streams of research. Thus, our work bridges consumer behavior with marketing strategy and corporate management research. By examining brand acquisitions through the theoretical framework of values authenticity, our moderating effects also contribute to the literature on values authenticity. As Newman (2019) points out while calling for further research in this area, values authenticity contains nuances that deserve more attention; our work unravels some of these nuances. First, we find that individuals’ 31 assessment of values authenticity is sensitive to even partial changes in ownership. In Study 4, consumer perception of authenticity dropped significantly after the acquisition, even when the acquirer bought only a small share of the company. In an add-on study, we also document that negative consumer reactions can also spill over to the acquirer, reducing consumers’ purchase intention. Second, we demonstrate that brand age per se does not influence consumers’ view of the genuineness of company values (Study 9). Yet, when an external agent or event seemingly interferes with those values, brand age becomes a factor in shaping consumer perception in this regard. Third, our study contributes to the literature by looking at how the alignment between the acquirer’s values and those of the acquired brand reduces potential negative consumer reaction (Study 7) because signaling alignment of core values helps brands preserve their authenticity. Journal of Marketing 60 Peer Review Version Page 39 of 68 Author Accepted Manuscript Moreover, we enrich the theory on values authenticity by demonstrating how a growth orientation can be considered authentic if the actions taken are consistently guided by such 8 values (Study 8). This finding also indicates that overtly conveying disinterest in the wider commercial market, as many “indie” or “hipster” brands do, might backfire if the founders decide to sell their company. By showing when growth-oriented values can be perceived as authentic, our research also helps shift the focus of studies on values authenticity, which have heretofore been mainly centered on small companies and craft market categories (Silver, Newman, and Small 2020). Finally, our studies rule out several alternative accounts. One such candidate process relates to a natural characteristic of acquisitions: that is, most acquisitions involve a large acquirer and a smaller acquired firm. Company size could therefore be seen as a potential confounding factor and provides an account grounded in greater sympathy overall for small (vs. large) firms. Research in social psychology and consumer behavior (e.g., Paharia et al. 31 2014) finds that when people witness competition, they tend to support the disadvantaged party. In Study 3a and 3b, we rule out such an account by demonstrating that consumers consider an acquired company less authentic, regardless of the size of the acquirer (bigger, same size, or smaller). Our study also shows that the values authenticity loss is independent of the acquirer’s size (which therefore revises previous suggestions in the literature, Frake 2017). Additionally, in Study 6 we empirically rule out the possibility that our findings are determined by an underdog effect, showing how values authenticity accounts for the mediating effect over and above other factors. We also address the possibility that acquisitions lead to a perceived loss of quality in the acquired brands. While our studies show that acquisitions may have a (slight) negative effect on product quality perceptions, values authenticity accounts for the effect on purchase intention 54 over and beyond product quality, as shown in Studies 5 and 6. It is important to acknowledge, Journal of Marketing 60 Peer Review Version Page 40 of 68 Author Accepted Manuscript however, that alternative explanations such as product quality perceptions and underdog status may be useful in explaining consumer reactions to acquisitions in particular contexts (e.g., 8 specific industries or consumer segments). Implications for Managerial Practice Despite their increasing popularity in the corporate world, between 60% and 80% of all acquisitions have reportedly failed to create value (Christensen et al. 2011; Dyer, Kale, and Singh 2003). Although explaining the reasons behind such high failure rates is beyond the scope of this research, our findings suggest that consumer discontent following an acquisition might play a role. Therefore, our research encourages managers to consider possible negative consumer reactions when evaluating the appeal of a new acquisition. Our findings are illuminating for brand managers because they reveal contexts where acquisitions are more (versus less) likely to 31 damage the brand. In particular, our results offer a word of caution with respect to acquiring firms operating in domains where authenticity is a key asset to brands (for example in sectors where symbolic value of products is important such as for “craft” or “artisanal” products). In addition to pointing out consumers’ negative feelings after acquisitions, our results offer valuable insights as to why acquisitions are often viewed unfavorably. The mechanism of values authenticity loss presented in this paper highlights the delicate nature of brand identity. While acquirers might think they have secured a stable and valuable asset by acquiring the target brand, our findings show that brand authenticity is easily tarnished by an acquisition. What can managers do to avoid this outcome? Our findings suggest that a series of considerations can be made, both before and after the acquisition process takes place. Journal of Marketing 60 Peer Review Version Page 41 of 68 Author Accepted Manuscript Before the acquisition. Managers can examine the target brand’s communications and identify whether the vision statement, advertising, social media accounts, and other forms of 8 branding contain any references to growth or reaching a broader range of customers. Such cues may make the acquisition process more favorable in the eyes of consumers (Study 8). Moreover, an alignment of values between the acquirer and acquired brands reduces potentially negative reactions (Study 7). Targeting brands aligned with the acquiring company’s core values and making this alignment salient can benefit the acquisition process. Similarly, the acquiring company could consider brand age a key factor. Consumers view the acquisition of a newer brand as less harmful (Study 9). Scouting for young, promising brands could prove beneficial, potentially giving the acquirer an aura of patronage and a reputation for investing in nascent businesses. Our findings in Study 5 reveal that negative consumer reactions are reduced in cases where brands have a history of being taken over. Accordingly, brands that have undergone 31 previous acquisitions should be an attractive acquisition target. After the acquisition. Our findings suggest that managers should carefully plan how to effectively frame announcements communicating acquisitions. For example, Study 6 shows that when consumers are made aware of management continuity, the negative effect of the acquisition is attenuated. This type of communication could be especially effective in the case of older brands. If the founders/original owners will not be involved with the company after its acquisition, managers may want to consider retaining long-term employees and highlighting this action in their communications. Similarly, maintaining a connection with the founders/original owners could prove beneficial to brands that are more oriented towards niche values (e.g., passion and craftsmanship); the presence of founders/original owners could act as an authenticity 54 proxy for these values, mitigating the negative impressions consumers may develop. In the case Journal of Marketing 60 Peer Review Version Page 42 of 68 Author Accepted Manuscript of companies with growth-oriented values or a newer brand, continuity of leadership could be positioned as an investment by the acquirer towards the brand, to nurture its potential and 8 develop its capabilities. Similarly, when the acquirer has values that align with those of the acquired brand, highlighting this can boost perceptions of the acquisition and nurture the brand. In sum, while forming expectations regarding the outcome of an acquisition, managers should carefully evaluate the characteristics of the brand they want to acquire and the values that drive the brand’s actions in the marketplace. Based on our findings, Figure 5 provides a checklist for managers involved in the acquisition process. [Insert Figure 5 about here] Directions for Future Research We focused on the negative effects of acquisitions because these are especially crucial from a practical point of view. However, more research is needed to investigate the potential positive 32 effects of acquisitions. For example, it is conceivable that information about acquisitions could also strengthen perceptions of firms. Acquisitions might signal that a firm is in demand, and consumers might accordingly infer that the target firm (and its products) is somehow “good,” because it would not have been acquired otherwise (Kardes, Posavac and Cronley 2004). While we identified a series of factors mitigating the negative effect of acquisitions, there are might also factors that could boost consumers’ reactions to acquisitions. For example, it is possible that acquired brands might also benefit from acquisitions in the eyes of consumers when the acquired brands fall short of having the (marketing) capabilities necessary to succeed in a competitive environment (e.g., R&D facilities, a strong distribution network, marketing intelligence for the analysis of competitors, and advertising resources to name a few). Similarly, when considering Journal of Marketing 60 Peer Review Version Page 43 of 68 Author Accepted Manuscript the continuity of management, consumers may actually be relieved and view acquirers in a more positive light when they take over a brand with poor or controversial management. 8 Another area that deserves further research is the dynamic acquisition process itself. In our experiments, as in most real-life situations, consumer cognizance of a brand acquisition occupies one moment in time, when in actual fact the acquisition may be a very long process. 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Journal of Marketing 60 Peer Review Version Page 50 of 68 Author Accepted Manuscript Figure 1. Study 3a and 3b: Effects of Acquirer Size on Purchase Intention Study 3a (beers) Study 3b (books) Notes: †p >.05; ***p <.001. Error bars = +/- 1 SE. 25 Figure 2. Study 6: Effects of Leadership Continuity on Purchase Intention Notes: †p >.05; *p<.05; ***p <.001. Error bars = +/- 1 SE. Journal of Marketing 60 Peer Review Version Page 51 of 68 Author Accepted Manuscript Figure 3: Study 7: Effects of Values Alignment on Purchase Intention Notes: †p >.05; ***p <.001. Error bars = +/- 1 SE. Figure 4: Study 8: Effects of Growth Orientation on Purchase Intention Notes: †p >.05; ***p <.001. Error bars = +/- 1 SE. Journal of Marketing 60 Peer Review Version Page 52 of 68 Author Accepted Manuscript Figure 5: Checklist for Managers Situation Recommendations YES Highlight the reputation of the brand. The brand has undergone previous acquisitions in the past. Develop ad-hoc communication strategies to explain how the values of the acquirer align with those NO of the acquired brand. YES Highlight continuity and the maintenance of the original values of the brand. The previous management (e.g., founders) will be left in charge after the acquisition. Involve individuals in the management who are close to the original ownership (e.g., promote long- NO term employees) and profile these individuals externally (e.g., feature them on the website). Highlight the alignment of the values and communicate the acquisition as an opportunity for the YES 19 acquired brand to strengthen and develop. The acquirer brand has values similar to those of the acquired brand (i.e., values alignment) Find an alternative common factor aside from the core values to explain the acquisition (e.g., NO possibilities for R&D and product quality). YES Communicate the acquisition as an act of patronage towards a promising, talented business. The brand is "young" (i.e., it has been on the market for a relatively short period of time). NO Emphasize the continuing involvement of the founders or other key personnel. YES Highlight the acquisition as an investment to develop the brand's capabilities and fulfill its vision. The brand was funded with a strategic growth goal (i.e., the founders wanted to expand since the very beginning) and communicates it. Highlight the acquirer's commitment to the passion and quality of the brand. Emphasize the continuing NO involvement of the founders or other key personnel. Journal of Marketing 60 Peer Review Version Page 53 of 68 Author Accepted Manuscript WEB APPENDIX When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Alessandro Biraglia (a.biraglia@leeds.ac.uk) Christoph Fuchs (christoph.fuchs@univie.ac.at) Elisa Maira (emaira@bol.com) Stefano Puntoni (puntoni@wharton.upenn.edu) Journal of Marketing 60 Peer Review Version Page 54 of 68 Author Accepted Manuscript TABLE OF CONTENTS WEB APPENDIX A: STIMULI AND RESULTS FOR STUDY 1S ............................................ 3 Table W1: Results from Study 1S ............................................................................................... 3 WEB APPENDIX B: STIMULI USED IN STUDY 1 ................................................................... 4 WEB APPENDIX C: FACTOR ANALYSIS IN STUDY 2 .......................................................... 5 Table W2: Total Variance Explained .......................................................................................... 5 Table W3: Component Matrix .................................................................................................... 5 Table W4: Rotated Component Matrix ....................................................................................... 5 WEB APPENDIX D: STIMULI USED IN STUDY 3A AND 3B ................................................ 6 Table W5: ANOVA and Contrasts for Values Authenticity in Studies 3A and 3B .................... 6 WEB APPENDIX E: RESULTS FOR VALUES AUTHENTICITY ACROSS STUDIES .......... 7 WEB APPENDIX F: STIMULI USED IN STUDY 4 ................................................................... 8 WEB APPENDIX G: ADD-ON STUDY (EFFECT ON THE ACQUIRER) ................................ 9 WEB APPENDIX H: STIMULI USED IN STUDY 5 ................................................................. 10 WEB APPENDIX I: FURTHER ANALYSES IN STUDY 5 ...................................................... 11 Table W6: ANOVAs and Contrasts: ......................................................................................... 11 Mediation Analyses: .................................................................................................................. 11 WEB APPENDIX J: STIMULI USED IN STUDY 6 .................................................................. 12 35 WEB APPENDIX K: FURTHER ANALYSES IN STUDY 6 .................................................... 13 Table W7: ANOVAs and Contrasts: ......................................................................................... 13 Mediation Analyses: .................................................................................................................. 13 40 WEB APPENDIX L: STIMULI USED IN STUDY 7 ................................................................. 14 WEB APPENDIX M: STIMULI USED IN STUDY 8 ................................................................ 15 WEB APPENDIX N: STIMULI USED IN STUDY 9 ................................................................. 16 These materials have been supplied by the authors to aid in the understanding of their paper. The AMA is sharing these materials at the request of the authors Journal of Marketing 60 Peer Review Version Page 55 of 68 Author Accepted Manuscript WEB APPENDIX A: STIMULI AND RESULTS FOR STUDY 1S High Sierra is an apparel company manufacturing a range of bags, backpacks, and other luggage accessories targeted to a wider consumer segment. The company has, in fact, different product lines, from 25 school backpacks to sports bags, from laptop bags to bigger pieces of luggage for traveling. [Acquired] Recently another company, Samsonite, showed interest in buying out High Sierra, a deal that was closed shortly after with the successful acquisition of High Sierra by Samsonite. Due to this deal, Samsonite now controls 100% of the High Sierra brand. [Not Acquired] No info Table W1: Results from Study 1S Not Acquired Acquired t df p Values Authenticity 5.27 (1.06) 4.74 (1.34) 3.092 199 .002 Authenticity (Connectedness) 4.96 (1.41) 4.76 (1.37) 1.006 199 .316 Authenticity (Legitimacy) 5.42 (1.19) 5.38 (1.07) .275 199 .784 Authenticity (Originality) 5.14 (1.29) 4.85 (1.36) 1.545 199 .124 Authenticity (Proficiency) 5.57 (0.97) 5.58 (1.16) -.094 199 .925 Authenticity (Accuracy) 5.11 (1.11) 5.13 (1.21) -.114 199 .909 50 Product Quality 5.60 (0.98) 5.67 (0.95) -.539 199 .591 Journal of Marketing 60 Peer Review Version Page 56 of 68 Author Accepted Manuscript WEB APPENDIX B: STIMULI USED IN STUDY 1 Ghirardelli [Russell Stover] is a confectionery company manufacturing a diverse range of chocolate products. The company has, in fact, different product lines, from chocolate squares and bars to truffles, 17 from cocoa powder for hot chocolate to a line of products for cakes and other home baking preparations. Over the years, the company has been in good financial condition, with good revenues. [Acquired] Recently, another company operating in the confectionary market showed interest in acquiring Ghirardelli [Russell Stover], a deal that was concluded shortly after with the successful acquisition of Russell Stover. As a result, the acquiring company now owns 100% of the Ghirardelli [Russel Stover] brand. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 57 of 68 Author Accepted Manuscript WEB APPENDIX C: FACTOR ANALYSIS IN STUDY 2 Table W2: Total Variance Explained Extraction Sums of Rotation Sums 9 Component Initial Eigenvalues Squared Loadings of Squared Loadings % of Cumulative % of % Cumulative Total Total Total Variance % Variance of Variance % 1 3.26 46.61 46.61 3.26 53.47 2.81 40.14 40.15 1.94 27.78 74.38 2 1.94 31.93 2.31 33.12 73.27 3 .92 13.19 87.57 .92 13.94 1.00 14.30 87.57 4 .53 7.61 95.19 18 5 .14 2.06 97.25 6 .13 1.78 100.00 Table W3: Component Matrix Component 1 2 3 Purchase Intention 1 .854 -.460 27 Purchase Intention 2 .828 -.479 28 Purchase Intention 3 .852 -.469 Values Authenticity 1 .647 .650 Values Authenticity 2 .465 .628 Values Authenticity 3 .641 .645 Perceived Control .930 Extraction Method: Principal Component Analysis. Table W4: Rotated Component Matrix Component 1 2 3 Purchase Intention 1 .961 Purchase Intention 2 .952 Purchase Intention 3 .965 Values Authenticity 1 .918 Values Authenticity 2 .767 Values Authenticity 3 .914 Perceived Control .985 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 4 iterations. Journal of Marketing 60 Peer Review Version Page 58 of 68 Author Accepted Manuscript WEB APPENDIX D: STIMULI USED IN STUDY 3A AND 3B Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. At the current time, the brewery is still an independent company. {Workman was founded as an independent book publisher in 1968. They publish different types of books including novels, essays on culture and music, as well as cooking books, travel guides, and calendars. 13 On average, Workman's yearly net profit reached $520,000.00. 14 At the current time, Workman is still an independent company.} [not acquired] No info [acquired by a bigger company] In January 2018, the brewery was acquired by Fitch Fish Inc, a brewery which is much bigger in size and production. 23 {In January 2022, Workman was acquired by Hachette, a publisher which is much bigger in size and 24 production} [acquired by a smaller company] In January 2018, the brewery was acquired by Fitch Fish Inc, a brewery which is much smaller in size and production. {In January 2022, Workman was acquired by Hachette, a publisher which is much smaller in size and production.} 33 [acquired by a same size company] 34 In January 2018, the brewery was acquired by Fitch Fish Inc, a brewery which is the same in size and production. {In January 2022, Workman was acquired by Hachette, a publisher which is the same in size and production} Table W5: ANOVA and Contrasts for Values Authenticity in Studies 3A and 3B Acquired by a bigger Acquired by a smaller Not Acquired Acquired by same size 43 company company company (N= 101) Study 3a 5.54 (1.08) 4.15 (1.47) 4.38 (1.28) 4.40 (1.27) F(3, 423) = 25.47, p <.001 Study 3b 5.76 (.81) 4.31(1.35) 4.59 (1.23) 4.59 (1.21) F(3, 396) = 30.10, p <.001 Study 3a contrasts: M = 5.54, SD = 1.08, M = 4.31, SD = 1.35, F(1, 423) = 73.90, p < .001; M = 4.15, SD = 1.46 vs. M = not acq. acq. acq. bigger acq same_size 4.38, SD = 1.28 vs. M = 4.40, SD = 1.27, F(1, 423) = 1.11, p = .331 acq. by smaller Study 3b contrasts: M = 5.76, SD = .81, M = 4.50, SD = 1.25, F(1, 399) = 85.90, p < .001; M = 4.31, SD = 1.35 vs. M = not acq. acq. acq. bigger acq same_size 4.59, SD = 1.23 vs. M = 4.59, SD = 1.21, F(1, 399) = 1.72, p = .182 acq. by smaller Journal of Marketing 60 Peer Review Version Page 59 of 68 Author Accepted Manuscript WEB APPENDIX E: RESULTS FOR VALUES AUTHENTICITY ACROSS STUDIES Study 1: Effect of acquisition on consumers’ choice of a chocolate brand (Chocolate brands; N = 404) Ghirardelli Russell Stover Choice study between two Not Acquired Acquired Not Acquired Acquired chocolate brands (N = 202) (N = 201) (N = 201) (N = 202) 5.67 (.95) 4.48 (1.39) 5.52 (1.01) 4.40 (1.41) F(1, 403) = 101.20, p <.001 F(1, 403) = 83.72, p <.001 Study 2: Field survey with brands (Various product/service categories; N = 359) 12 Perception that the brand is controlled by another company (1 = completely independent – 7 = completely Survey with real brands controlled by another company) b = −.22, (SE = .03), p <.001 Study 3a: Effect of acquirer size on consumers’ evaluations of the acquisitions (Fictitious beer brand; N = 424) Acquired by a bigger Acquired by a smaller Not Acquired Acquired by same size 4-cell (acquirer size) company company (N= 109) company (N= 106) (N= 106) (N= 103) 5.54 (1.08) 4.15 (1.47) 4.38 (1.28) 4.40 (1.27) F(3, 423) = 25.47, p <.001 Study 3b: Effect of acquirer size on consumers’ evaluations of the acquisitions (real publishing brand; N = 400) 21 Acquired by a bigger Acquired by a smaller Not Acquired Acquired by same size 4-cell (acquirer size) company company (N= 96) company (N= 101) (N= 102) (N= 100) 5.76 (.81) 4.31(1.35) 4.59 (1.23) 4.59 (1.21) F(3, 396) = 30.10, p <.001 Study 4: Effect of acquired percentage of shares on consumers’ purchase intention (Fictitious beer brand; N = 424) Not 15% 60% 75% 100% 7-cell (acquired 30% Acquired 45% Acquired Acquired Acquired Acquired Acquired Acquired shares %) (N= 60) (N= 63) (N= 61) (N= 60) (N= 60) (N= 60) (N= 58) 29 5.72 (.92) 5.05 (1.14) 4.74 (1.19) 4.69 (1.27) 3.91 (1.26) 4.55 (1.22) 4.24 (1.55) 30 F(6, 423) = 14.20, p <.001 Study 5: Effect of sequential acquisitions (Fictitious backpack brand; N = 363) 3- cell (time of acquisition) Not Acquired (N = 121) First Time Acquisition (N = 121) Repeated Acquisitions (N = 121) 5.81 (.94) 4.99 (1.19) 4.77 (1.15) F(2, 362) = 29.89, p <.001 Study 6: Effect of leadership continuity (Fictitious backpack brand; N = 360) 3-cells (leadership continuity Not Acquired (N = 121) Leadership Continuity (N = 118) Leadership Change (N = 121) after acquisition) 38 5.45 (.90) 4.36 (1.06) 3.60 (1.44) F(2, 359) = 98.45, p <.001 Study 7: Effect of the acquirer values (Real clothing/accessories brands; N = 361) Not Acquired Acquirer High Values Alignment Acquirer Low Values Alignment 3-cells (values of the acquirer) (N = 122) (N = 119) (N = 120) 5.30 (.98) 5.23 (.90) 4.78 (1.11) F(2, 360) = 9.34, p <.001 Study 8: Moderation effect of the type of values the brand has (Real outdoor clothing brand; N = 504) Not Acquired (N = 254) Acquired (N = 250) 2 (Acquisition type) x 2 (Type 48 Control Growth Control Growth of values) (N = 123) (N = 131) (N = 126) (N = 124) 5.97 (.97) 5.56 (1.06) 4.61 (1.59) 4.92 (1.30) F(1, 503) = 10.36, p <.001 Study 9: Moderation effect of brand age (Fictitious backpack brand; N = 633) Not Acquired (N = 324) Acquired (N = 309) 2 (Acquisition type) x 2 (Brand Older Brand Younger Brand Older Brand Younger Brand age) 54 (N = 164) (N = 160) (N = 149) (N = 160) 6.17 (.93) 5.98 (.78) 3.59 (1.43) 3.96 (1.58) F(1, 632) = 8.52, p =.004 Journal of Marketing 60 Peer Review Version Page 60 of 68 Author Accepted Manuscript WEB APPENDIX F: STIMULI USED IN STUDY 4 [not acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. At the current time, the brewery is still an independent company.” [15% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. 13 In the first three years of operations their net profit reached $220,000. 14 In January 2018, the brewery Fitch Fish Inc acquired 15% of the capital of Rusty Root.” [30% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 30% of the capital of Rusty Root.” [45% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 45% of the capital of Rusty Root.” [60% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 60% of the capital of Rusty Root.” 33 [75% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 75% of the capital of Rusty Root.” [100% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 100% of the capital of Rusty Root” Journal of Marketing 60 Peer Review Version Page 61 of 68 Author Accepted Manuscript WEB APPENDIX G: ADD-ON STUDY (EFFECT ON THE ACQUIRER) Pretzels Inc. is a US-based food manufacturer producing a variety of snacks available in different flavors. Hershey is a US-based food manufacturer, producing a variety of confectionary and savory products. 22 [Acquired] 23 Recently, Hershey showed interest in acquiring Pretzels Inc., a deal that was closed shortly after with the successful acquisition of Pretzels Inc. by Hershey. Due to this deal, Hershey now controls 100% of the Pretzels Inc. company. [Not Acquired] [No info] Participants (N = 211, 39.8% female, MAge = 40.27, MTurk) took part in a study on brand evaluation. We randomly assigned participants to either a not acquired or acquired condition. In both conditions, we presented participants with two real brands: Pretzels Inc (a snack 35 manufacturer) and Hershey (a confectionery manufacturer). We counterbalanced the presentation order of the brands. Next, in the acquired condition, participants read that Hershey recently acquired Pretzels Inc (an acquisition that also happened in reality). In the not acquired condition, participants did not receive any further information. Next, we purchase intention for the two brands (counterbalancing the presentation order) on a 1 to 7 Likert scale from strongly disagree to strongly agree (“I would buy products from Pretzels Inc [Hershey]”; “If I were looking for a snack, I would consider buying the ones made by the Pretzel Inc. [Hershey]brand” all α >.9). The results show that purchase intention for Pretzels Inc. decreased significantly when consumers knew about the acquisition (MNot/acq = 5.51, SD = 1.04 vs. MAcq = 5.06, SD = 1.54, t(209) = 2.47, p = .014). Concerning the acquirer brand (Hershey), the results show a less pronounced (yet significant) decrease on consumers’ purchase intention (M = 5.88, SD = Not/acq .96 vs. M = 5.58, SD = 1.15, t(209) = 2.03, p = .044). Thus, the results suggest that together Acq with a negative effect on the acquired brand, an acquisition can also have a less pronounced negative effect on consumers purchase intention towards the acquirer brand. Specifically, while consumers’ purchase intention dropped by 8.17% for the acquired brand, it dropped by 5.10% in the case of the acquirer brand. Journal of Marketing 60 Peer Review Version Page 62 of 68 Author Accepted Manuscript WEB APPENDIX H: STIMULI USED IN STUDY 5 Pinbag is an American company that produces backpacks. The company originally started the production in 2012 in Pittsburgh, Pennsylvania. All Pinbag’s backpacks are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs, meant for the smart and independent young individuals of today. “Many people carry a backpack every day. We design our backpacks not only for convenience, but also to help people express who they are,” can be read on the company website. All the backpacks are designed and manufactured in the company’s headquarters in Pittsburgh. In July 2019, Pinbag won a quality award for its products. [Acquired first time] Over the years, the firm has grown considerably but had remained independent until earlier this year. In January 2021, Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. [Acquired multiple times] Over the years, the firm has grown considerably but has not remained independent (i.e., control of the firm was transferred, a few years ago, over to another company). More recently, in January 2021, Pinbag was acquired once more after the acquisition of a few years 37 before, this time by Alphatex, another company operating in the textile and apparel industry. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 63 of 68 Author Accepted Manuscript WEB APPENDIX I: FURTHER ANALYSES IN STUDY 5 9 Table W6: ANOVAs and Contrasts: Study 5: Effect of sequential acquisitions (Fictitious backpack brand; N = 363; MTurk) Acquired Multiple Times Not Acquired (N = 121) Acquired First Time (N = 121) (N = 121) DV: Product Quality 5.97 (.90) 5.75 (.96) 5.70 (1.00) F(2, 360) = 2.84, p =.06; Not acquired vs. acquired first time: t(360) = 1.82, p = .07; Not acquired vs. acquired multiple times: t(360) = 2.25, p = .025; Acquired first time vs. acquired multiple times: t(360) = .43, p = .667. Mediation Analyses: An additional multi-categorical mediation analysis (PROCESS MODEL 4; 10,000 bootstrap resampling) proves that values authenticity mediates the effect even if product quality is added as a covariate. The indirect effects remain, in fact, significant (acquired first time: ab = –.31, SE = .08, 95% CI = –.49, – .16; acquired multiple times: ab = –.39, SE = .09, 95% CI = –.57, –.23). The mediating effect of product quality, nevertheless, becomes insignificant when values authenticity is introduced as a covariate (acquired first time: ab = .09, SE = .06, 95% CI = –.04, .21; acquired multiple times: ab = .11, SE = .07, 95% CI = –.02, .25). Overall, the results corroborate the robustness of values authenticity as a key mediating mechanism of the effect, even when we control for perceived product quality. Journal of Marketing 60 Peer Review Version Page 64 of 68 Author Accepted Manuscript WEB APPENDIX J: STIMULI USED IN STUDY 6 Pinbag is an American start-up that produces backpacks. The two founders, Tom Eagles and Ann Richardson, originally started the company in 2010 in Pittsburgh, Pennsylvania. All Pinbag’s backpacks are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs. All the backpacks are designed and manufactured in the company’s headquarters in Pittsburgh. [Acquired leadership continuity] In January 2019, the start-up Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. While negotiating the acquisition, Tom Eagles and Ann Richardson - the two founders – decided to sell the company but to remain in their positions at Pinbag and are still in charge of making decisions about the future of the company. Control over the operations of the company 28 is therefore maintained by the original founders of Pinbag. [Acquired leadership change] In January 2019, the start-up Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. While negotiating the acquisition of the company, Tom Eagles and Ann Richardson - the two founders – decided to sell the company and to leave their positions at Pinbag 35 and they are no longer in charge of making decisions about the future of the company. Control over the 36 operations of the company is therefore transferred from the original founders to Alphatex, the international corporation. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 65 of 68 Author Accepted Manuscript WEB APPENDIX K: FURTHER ANALYSES IN STUDY 6 Table W7: ANOVAs and Contrasts: Study 6: Effect of leadership continuity (Fictitious backpack brand; N = 360; MTurk) 3-cells (leadership continuity Not Acquired (N = 121) Leadership Continuity (N = 118) Leadership Change (N = 121) after acquisition) DV: Product Quality 5.71 (1.00) 5.75 (.97) 5.00 (1.24) Omnibus: F(2, 359) = 18.61, p <.001; Not acquired vs. Leadership Continuity: t(357) = -.239, p = .811; Not acquired vs. Leadership Change: t(357) = 5.17, p <.001 DV: Underdog Effect 5.23 (.94) 4.90 (1.04) 4.22 (1.26) Omnibus: F(2, 359) = 27.18, p <.001; Not acquired vs. Leadership Continuity: t(357) = 2.25, p = .019; Not acquired vs. Leadership Change: t(357) = 7.23, p <.001 Mediation Analyses: An additional multi-categorical mediation analysis (PROCESS MODEL 4; 10,000 bootstrap resampling) proves that values authenticity mediates the effect even if perceived product quality is added as a covariate. The indirect effect remains significant when there is a leadership change (ab = –.55, SE = .13, 95% CI = –.81, – .30), indicating that values authenticity loss mediates the effect on purchase intention over and above the impact perceived product quality has. Similarly, 35 values authenticity remains a significant mediator of the leadership change on purchase intention when the perception of being an underdog is introduced as a covariate (ab = –.87, SE = .15, 95% CI = –1.17, – .61). Notably, the mediating effect remains significant even when both perceived product quality and perception of being an underdog are simultaneously introduced as covariates in the model (ab = –.48, SE = .12, 95% CI = –.73, – .26). Overall, the results support the robustness of values authenticity as a key mediating mechanism of the effect, even when we control for other important factors, such as perceived product quality or perceiving the brand as 43 an underdog. Journal of Marketing 60 Peer Review Version Page 66 of 68 Author Accepted Manuscript WEB APPENDIX L: STIMULI USED IN STUDY 7 Pela is a brand that manufactures sustainable products using different recycled materials. They produce a series of environmentally friendly accessories, including phones and iPad cases, smart watch bands, and a line of screen protectors among others all using materials that are biodegradable or recycled by previously wasted materials. 14 The products come in different sizes and colors and Pela has had a quite good revenue over the last few years. [Acquired by brand High Values Alignment] Recently, the clothing brand Patagonia, acquired 100% of the brand Pela. The founding team of Pela remained, nevertheless, involved in the management of the brand. [Acquired by brand Low Values Alignment] Recently, the clothing brand Supreme, acquired 100% of the brand Pela. The founding team of Pela remained, nevertheless, involved in the management of the brand. [Not acquired] No Info Journal of Marketing 60 Peer Review Version Page 67 of 68 Author Accepted Manuscript WEB APPENDIX M: STIMULI USED IN STUDY 8 Tatonka is an outdoor equipment brand founded by Ollie James. [Growth] Ollie, the founder, said recently in an interview “For me, it is a matter of how many people use my products. At the end of the day, we want lots of people to use and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” 13 In the first three years of operations the net profit of Tatonka reached $400,000. [Control] Ollie, the founder, said recently in an interview “For me, it is not a matter of how many people use my products. It is a matter that the passionate people use and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” In the first three years of operations the net profit of Tatonka reached $400,000.” [Acquired] In January 2018, Tatonka was acquired by another company, Outdoor Tech. The owner of Outdoor Tech described the acquisition as “a great deal”. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 68 of 68 Author Accepted Manuscript WEB APPENDIX N: STIMULI USED IN STUDY 9 [Younger Brand] Pinbag is an American start-up that produces bags. The founder, Tom Eagles, originally started the company in 2010 in Pittsburgh, Pennsylvania. The founder is in control of the company and manages it. When it comes to take up business decisions, he has a commitment to maintain the exact same vision that lead him to found the company in 2010. All Pinbag’s bags are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs, meant for the smart and independent young individuals of today. All the bags are designed and manufactured in the company’s headquarters in Pittsburgh. [Older Brand] 17 Pinbag is an American company that produces bags. The founder, Tom Eagles, originally started the company in 1869 in Pittsburgh, Pennsylvania. After five generations, the company is still under the control of the Eagles’ family. When it comes to take up business decisions, there is a commitment by the family to maintain the exact same vision started from the founder in 1869. All Pinbag’s bags are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs, meant for the smart and independent young individuals of today. All the bags are designed and manufactured in the company’s headquarters in Pittsburgh. [Acquired] In January 2015, Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. After the acquisition the heir of the founder left his positions at Pinbag and he is no longer in charge of making decisions about the future of the company. Control over the operations of the company is therefore transferred from the original founders to Alphatex, the international corporation. [Not acquired] No info Journal of Marketing http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Marketing SAGE

When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account

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Publisher
SAGE
Copyright
© The Author(s) 2023
ISSN
0022-2429
eISSN
1547-7185
DOI
10.1177/00222429221137817
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See Article on Publisher Site

Abstract

Peer Review Version DOI: 10.1177/00222429221137817 Author Accepted Manuscript When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Journal: Journal of Marketing Manuscript ID JM.21.0243.R4 Manuscript Type: Revised Submission Brand/Product Choice, Brand/Product/Category Management, Research Topics: Consumer Behavior/Cognition Methods: Behavioral Experiments Journal of Marketing Peer Review Version Page 1 of 68 Author Accepted Manuscript When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Alessandro Biraglia Associate Professor of Marketing Leeds University Business School, University of Leeds, United Kingdom a.biraglia@leeds.ac.uk 19 Christoph Fuchs Professor of Marketing, Faculty of Business, Economics, and Statistics, University of Vienna, Austria christoph.fuchs@univie.ac.at Elisa Maira UX Research Lead bol.com, The Netherlands emaira@bol.com Stefano Puntoni Sebastian S. Kresge Professor of Marketing The Wharton School University of Pennsylvania USA 42 puntoni@wharton.upenn.edu Journal of Marketing 60 Peer Review Version Page 2 of 68 Author Accepted Manuscript When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Brand acquisitions are a popular growth strategy. However, both anecdotal evidence and initial empirical evidence suggest that acquisitions can harm the acquired brand. This paper proposes and tests a theoretical framework that seeks to explain when and why consumers react negatively toward acquired brands. Across ten studies using different methods, research designs, product categories, and brands, we demonstrate that these negative brand reactions can be explained by the perceived loss of a brand’s unique values. Building on this values authenticity account, we document that the negative effect of acquisitions depends on the acquired brand’s values, brand age, leadership continuity, and the alignment between acquiring and acquired brands. Our findings offer important theoretical and managerial implications, helping managers predict and 31 mitigate the negative effects of acquisitions for brands. Keywords: acquisitions, branding, brand values, values authenticity, authenticity, signaling theory, consumer reactions Journal of Marketing 60 Peer Review Version Page 3 of 68 Author Accepted Manuscript Acquiring firms is one of the most common ways to pursue growth; the global value of acquisitions amounted to $2.3 trillion in 2019 (JP Morgan 2020). Acquisitions are often 8 motivated by the target firm’s brand equity, as well as the market position it has created and nurtured (Bahadir, Bharadwaj, and Srivastava 2008; Kumar and Blomqvist 2004). Despite the importance of brand equity in motivating acquisitions, anecdotal evidence suggests that acquisitions can actually dilute the target firm’s brand value. For example, when Unilever acquired the Italian ice cream maker GROM, 83% of polled consumers described the acquisition as “bad news” (Bottero 2015). Four years later, reduced consumer interest led to the closure of several GROM retail outlets, including the ice cream maker’s first store. Similarly, consumer ratings for cosmetics brand The Body Shop plummeted after L’Oréal acquired it (BBC 2006). These examples show that there can be substantial consumer backlash after an acquisition, even when the acquired company is itself a large corporation; The Body Shop, for instance, was 31 already a global brand with over 2,000 stores at the time of its acquisition. Consumers can learn about brand acquisitions through news reports, exposure to brand communications, or word of mouth. Especially nowadays, with digital media and social networks facilitating the rapid dissemination of information, consumers are often aware that a brand has been acquired. For example, many consumers quickly learned of Amazon’s acquisition of Whole Foods, Unilever’s acquisition of the tea brand Pukka, or Microsoft’s acquisition of Activision Blizzard. Despite the topic’s importance, empirical research on consumer reaction towards acquired brands is scarce. The potential for brand acquisitions to generate negative reactions among consumers is supported by a considerable amount of anecdotal evidence and has also been documented in extant research (Frake 2017). However, little is known about when and why brand Journal of Marketing 60 Peer Review Version Page 4 of 68 Author Accepted Manuscript acquisitions (where one company takes over another) might trigger negative reactions among consumers; our paper aims to fill this research gap. 8 Our manuscript makes several contributions. This study contributes to marketing theory and practice by shedding light on when and how acquisitions can harm consumers’ willingness to buy products from acquired brands. Building on a signaling theory perspective, we introduce a framework based on values authenticity loss that can explain why consumers react negatively to acquired brands. Ten studies (using different product categories, types of brands, and measures of consumer reactions) document that values authenticity loss can explain this negative effect above and beyond alternative explanations. Moreover, we advance previous research on authenticity by demonstrating that a brand’s perceived values authenticity loss materializes independent of the size of the acquiring company; and we show that values authenticity is a more effective process variable than alternative process variables including perceived product quality 31 and underdog status. Building on our values authenticity framework, we identify and empirically document several managerially relevant moderators, including the number of times a brand has already been acquired, the continuity of the brand’s leadership, brand age (i.e., length of time on the market before being acquired), as well as its strategic positioning and the acquirer’s values alignment. Interestingly, our effects also reveal that acquisitions might not only harm the acquired brand (in terms of purchase intentions) but also the acquirer. Our findings lead to a series of actionable recommendations for managing and maintaining brand equity, both before and after acquisitions. More broadly, our findings suggest that managers should consider potential consumer reactions toward the acquired firm’s brand in their due diligence processes before acquisitions. Neglecting the demand-side impact of acquisitions might be one overlooked Journal of Marketing 60 Peer Review Version Page 5 of 68 Author Accepted Manuscript reason why so many acquisitions fall short of expectations (e.g., Christensen et al. 2011; Datta, Pinches, and Narayanan 1992; Dyer, Kale, and Singh 2003; King et al. 2004). Acquisitions and Consumers Acquisitions are transactions where ownership of a firm and its brand is transferred to another firm. Since acquisitions are complex operations involving all areas of both the acquiring and the acquired firm’s activities, the drivers of their success (or failure) have been investigated extensively in finance (e.g., Moeller, Schlingemann and Stulz 2005), economics (e.g., Jensen 1986; Kroll et al. 1997; Ravenscraft and Scherer 1987), organizational behavior (e.g., Larsson and Finkelstein 1999), and strategy research (e.g., Datta, Pinches and Narayanan 1992). In marketing, research on acquisitions has mainly focused on strategic marketing aspects by 31 adopting an internal, corporate view on acquisitions. For example, previous research has examined whether a strategic match between the two firms creates shareholder value (Swaminathan, Murshed, and Hulland 2008; Newmeyer, Swaminathan, and Hulland 2016); how brands, salesforce, and expertise are redeployed after the acquisition (Capron and Hulland 1999); the role of marketing integration in post-acquisition financial performance (Homburg and Bucerius 2005); and salesforce reactions to mergers and acquisitions (Bommaraju et al. 2018). Existing research on how consumers react toward acquired brands is scarce and has mainly explored how consumers evaluate (deliberate) post-acquisition brand changes. For example, Jaju, Joiner, and Reddy (2006) examined consumer reactions to alternative brand name redeployment strategies after an acquisition. Thorbjørnsen and Dahlén (2011) examined consumer reactions to 54 the deletion of the acquired brand and found evidence of consumer reactance: consumers Journal of Marketing 60 Peer Review Version Page 6 of 68 Author Accepted Manuscript develop more negative attitudes toward the acquirer brand and more positive attitudes toward the eliminated brand. This finding is consistent with research pointing to consumer reactance when 8 brands undergo other types of change (e.g., Walsh, Winterich, and Mittal 2010). A relevant line of research is Gaustad et al. (2018) and (2019) who examined how consumers react to brands that strategically changed their image following an acquisition or repositioning. Building on self- identity and self-brand connection research, the authors developed and tested theory about how consumers’ reactions depend on individual differences in self-brand connection. The central finding is that especially consumers with high levels of self-brand connection react negatively when they are informed about changes to important brand associations (e.g., that an acquisition would either dampen or augment the brand image). While investigating how consumers react to specific planned brand changes is relevant for acquisitions, it does not answer our main research questions and shed light on the signaling value of acquisitions on consumers. Specifically, it is 31 unclear what psychological reactions are elicited by learning that a brand has been acquired. Moreover, it is unclear whether acquisitions will have a negative impact on consumers’ intended and actual behavior and, if so, what acquisition-related factors will mitigate this effect. In a different line of research, Umashankar, Bahadir, and Bharadwaj (2021) found that acquisitions can lead to decreased customer satisfaction, most likely because corporate executives shift their attention away from customers to financial issues. In a related study, Frake (2017) analyzed consumer ratings of craft beers before and after they were acquired by large brewing corporations. He compared user ratings of two different platforms—one that disclosed that a craft beer brand was owned by a large corporation and one that did not. Users on the disclosing platform (who might have been more likely to be aware of the acquisition) provided 54 lower overall product ratings but not lower product attribute ratings (e.g., aroma and Journal of Marketing 60 Peer Review Version Page 7 of 68 Author Accepted Manuscript appearance). Yet, it is unclear what exactly underlies this discrepancy in consumer ratings—it is possible that this effect is due to uncontrolled for factors (e.g., user characteristics), a general 8 support for smaller companies documented in the previous literature (Paharia, Avery, Keinan 2014; Vandello et al. 2007), some authenticity-related process as speculated by the author, or some other reason. Our research aims to advance this stream of research. Specifically, we focus on how acquisitions can act as a signal that consumers interpret as jeopardizing the authenticity of the brand values and, in turn, have a negative effect on consumers’ purchases. We also investigate company-related factors (e.g., brand age, leadership continuity, alignment of the brand values of acquirer and acquired) impact consumers’ negative reactions to acquisitions. For the sake of conciseness, we use the broad label “consumer reactions to brand acquisitions” for a variety of marketing-relevant consumer responses, such as purchase intention and choice. Signaling Perspective and Values Authenticity Based on a signal theory perspective (Connelly et al. 2011), we posit that stakeholders interpret acquisitions as signals. Following a brand acquisition, investors or consumers are usually faced with incomplete information and with uncertainty regarding the future actions of the brand. This uncertainty triggers stakeholders to seek out signals—“observable actions that provide information about unobservable attributes and likely outcomes” (Bergh et al., 2014; p. 49 2). We argue that in the absence of “better” information, stakeholders use the mere knowledge that a brand has been acquired as a signal to form brand inferences, which can be positive or negative. For example, investors may view acquisitions as positive signals: an indication that the brand is valuable and desirable. Conversely, as the acquisition process entails transferring control Journal of Marketing 60 Peer Review Version Page 8 of 68 Author Accepted Manuscript to another company, consumers may perceive acquisitions as negative signals because they infer that acquisitions dilute the core values of the brand, or the brand’s values authenticity. 8 Authenticity is a broad concept that entails numerous facets (e.g., Beverland et al. 2008; Carroll 2015; Lehman et al. 2019; Morhart et al. 2015; Newman 2019; Thompson and Kumar 2022) as well as multiple psychological processes, depending on the domain studied (Nunes et al. 2021). We posit that potentially negative consumer reactions to acquisitions are best explained by one particular facet of authenticity: values authenticity. Values authenticity refers to the extent to which an entity’s stated values—abstract representations of desired end-states that serve as guiding principles (Schwartz 1992, Torelli et al. 2012)—are consistent with their actual beliefs and desires as well as their actions (Carroll 2015; Kernis and Goldman 2006; Lehman et al. 2019; Newman and Smith 2016; Newman 2019). Scholars have used different conceptualizations to describe this construct, but their core 31 content is consistent. For example, Beverland et al. (2008) define “moral authenticity” as the extent to which a producer is motivated by a genuine commitment to his or her craft. Dutton (2003, p. 259) defines “expressive authenticity” as the “true expression of an individual’s or a society’s values and beliefs.” Napoli et al. (2014) call this notion of authenticity “sincerity,” defined as the ability to remain true to espoused values. Morhart et al. (2015, p. 202) label this construct “integrity,” defined as “a virtue reflected in the brand’s intentions and in the values it communicates.” Finally, Nunes et al. (2021) also refer to this concept as “integrity,” directly building on the notion of “assessment of values” used by Newman (2019, p.10) to define values authenticity. Consistent with previous definitions of values authenticity and integrity, Nunes et al. (2021, p. 10) define brands having integrity as those “perceived intrinsically motivated and 54 not acting out of one’s own financial interest, while behaving autonomously and consistently Journal of Marketing 60 Peer Review Version Page 9 of 68 Author Accepted Manuscript over time.” The notion of consistency between values and actions is the common denominator across these different definitions, while other components (e.g., morality, intrinsic motivation, 8 craftmanship) tend to vary from definition to definition. Thus, we adopt the term “values authenticity” (Newman and Smith 2016), which has been used in marketing but also in organizational behavior, management, and psychology research to indicate the consistency between an entity’s values and actions (e.g., Lehman et al. 2019, Newman 2019). Predictions We propose that consumers may view an acquisition as a signal that the authenticity of a brand’s values is being disrupted. Specifically, we propose that when brands are acquired, consumers perceive that these brands lose part of their original core values—that is, what guides 31 their actions and makes them unique in the eyes of consumers. Borrowing the notion of core values from the literature on corporate values (Ashforth Rogers, and Corley 2011; Collins and Porras 1996; Collins, Porras, and Porras 2005; Lee, Hwang, and Chen 2017), we focus on brand values as those key principles guiding all business activities (Collins et al. 2005). When a brand is founded, it is usually imbued with a specific set of values by its founders, owners, or management team (Caroll and Wheaton 2009; Lehman et al. 2019)—what the brand’s core priorities and beliefs are and should be (Greyser and Urde 2019). Thus, founders typically establish brands with a set of beliefs and ideas that are internally determined (Newman and Smith 2016), forming the “soul” or DNA of the brand (Ashforth et al., 2011; Lee et al., 2017; Randazzo 1993). These brand values are often openly stated by brands through their 54 communications channels and are embodied by their marketplace decisions (Keller 2021). For Journal of Marketing 60 Peer Review Version Page 10 of 68 Author Accepted Manuscript example, Patagonia’s core values focus on environmental stewardship and Audi’s on technological leadership (Greyser and Urde 2019; see Collins and Porras 1996 for additional 8 examples). Brand values guide a company’s actions and serve as a guideline for the marketing program (Keller 1999). Notably, brand values are different from strategies; strategies tend to adapt to the circumstances of the business environment, whereas values tend to be more stable over time and represent a brand’s essential tenets (Collins and Porras 1996; Collins et al. 2005). Against this background, we argue that consumers perceive acquisitions as the impetus for an abrupt shift in a brand’s value system. An acquisition implies a change in ownership, which in turn raises questions about the continuity of, and control over, the values of the acquired brand. Since the change comes from an external entity (i.e., the acquirer), consumers may develop beliefs regarding the motivations and values of the acquirers, which might be considered at odds with the acquired brand’s original motivations and values. Consumers might assume that the 31 acquirer will exert external pressure to change the values of the acquired brand, in order to align them with its own. In some cases, consumers might suspect the acquirer of introducing new values and ideas to the brand that are inconsistent with its original values and ideas. Thus, irrespective of whether this is really the case, an acquisition may lead consumers to surmise that the acquired brand will lose part of its values authenticity. We find preliminary support for this conjecture in a preregistered study (N = 201; 50.2% female, M = 42.27 years, MTurk; #71441 age | AsPredicted) using real brands in a between-participants experiment (not acquired vs. acquired). After reading the description of a brand (Study 1s, Web Appendix A), participants assessed their perception of brand authenticity by rating the definition of the different dimensions of authenticity by Nunes et al. (2021), our definition of values authenticity, and five 54 items evaluating product quality (adapted by Johar and Simmons 2000). The results show a Journal of Marketing 60 Peer Review Version Page 11 of 68 Author Accepted Manuscript significant drop in the ratings of values authenticity (M = 5.27, SD = 1.06, M = 4.74, SD not acq. acq. = 1.34, t(199) = 3.09, p = .002), but no significant differences for the other dimensions of 8 authenticity or for product quality ratings. In sum, we propose that consumers’ negative reactions towards brand acquisitions (in terms of brand attitudes, purchase intention, and product preference) can be explained by a perceived loss of values authenticity. H1: The negative effect of brand acquisitions on consumer reactions is mediated by perceived loss of values authenticity. We next derive moderator variables that might mitigate the negative effect of acquisitions. These moderators are both managerially relevant and conceptually related to our proposed values authenticity account. Specifically, we predict that values authenticity is eroded 31 by acquisitions unless: (1) the continuity of leadership is explicitly maintained or has been previously severed; (2) the perceived alignment of the acquiring and target brand’s values is high (i.e., acquirer and acquired brand share the same values); (3) consumer expectations of values consistency is high (i.e., values are more malleable due to the young age of the brand or the acquisition is consistent with the core values of the brand). Importantly, these moderator variables represent brand-related information (such as the role of the brand’s founder, the brand values used, or the age of the brand) that is widely accessible to consumers and frequently used in brand marketing communications. As a result, consumers may use this information when forming impressions about brands. 54 Losing Versus Maintaining Core Values: Subsequent Acquisitions and Leadership Journal of Marketing 60 Peer Review Version Page 12 of 68 Author Accepted Manuscript Continuity According to our main prediction, an acquisition serves as a signal that the authenticity of 8 the values upon which the brand has been established is being disrupted. We argue that this disruption affects consumers’ perception of the focal brand’s core values system. In reality, brands are frequently acquired multiple times throughout their lives. Natura Cosméticos, for example, recently acquired The Body Shop, which had previously been acquired by L'Oréal. As a result, consumers may encounter situations in which a brand's value system has undergone multiple shifts because of a change of ownership. While previous research on acquisitions appears to have neglected the role of first versus subsequent acquisitions, we posit that this distinction may play an important role in signaling values authenticity loss. Consumers may interpret the first acquisition as a signal of values authenticity loss. In subsequent acquisitions, however, such set of original values would be considered as already lost, and the acquisition 31 should not serve as a strong signal. Thus, we predict that in case of subsequent acquisitions consumers’ negative reactions would be less severe. This prediction is consistent with previous research showing that people tend to be especially influenced by first (vs. subsequent) impressions, especially when it comes to negative attitudes and experiences (e.g., Tversky and Kahneman 1992). Accordingly, they adjust their subsequent evaluation around the initial impression. Hence, consumers may interpret first acquisitions as strong signals of values authenticity loss, but not subsequent acquisitions. H2: The negative effect of brand acquisitions is attenuated after the first acquisition. At the same time, consumers may evaluate an acquisition less negatively when the acquired brand is seen to protect its core values. We argue that this is possible when the brand Journal of Marketing 60 Peer Review Version Page 13 of 68 Author Accepted Manuscript does not replace the original management team by a new one, as it is often the case with acquisitions (Hellmann and Puri 2002; Boeker and Wiltbank 2005). Consumers see founders and 8 the original team in a brand as embodying the values of the company (Randazzo 1993). Founders shape and establish brands according to the values they envisioned for the company. Hence, their presence signals that a brand is committed to its core values, while their departure signals the opposite. Specifically, the founders’ or management team’s continued presence may constitute a signal of their way of doing business and of the direction the brand is taking. Based on our values authenticity loss account, we thus suggest that retaining the founder(s) of the brand or its management team after an acquisition will mitigate the perceived loss of original brand values and attenuate negative reactions to acquisitions. H3: The negative effect of brand acquisitions is attenuated when there is continuity in the management of the acquired brand. Values Alignment between Acquirer and Acquired Brand Furthermore, we expect that alignment between the values of the acquirer and acquired brands will reduce the negative effect of the acquisition. Existing research maintains that brands 39 can benefit (e.g., in terms of increased network efficiency) when they collaborate with other brands that share similar values and priorities (Bundy et al. 2018). This alignment of values fosters trust, can lead to more meaningful relationships, and reduce potential conflicts. We posit that consumers might evaluate the acquired brand less negatively when the acquirer and acquired brand share similar values, as consumers may evaluate this as a signal that the acquired brand’s values will be preserved after an acquisition. This proposition is consistent with previous research showing that consumers are generally appreciative when brands preserve their core values (Spiggle, Nguyen, and Caravella 2012). However, extant research has not examined the Journal of Marketing 60 Peer Review Version Page 14 of 68 Author Accepted Manuscript effect of an alignment of values between the acquirer and the acquired brand. We argue that consumers will perceive an acquisition more positively when the acquirer’s values are on a par 8 with those of the acquired brand. For example, consumers may not react negatively when a brand founded on the values of sustainability and environmentalism is acquired by another brand with the same values. H4: The negative effect of brand acquisitions is attenuated when the acquiring brand’s values are aligned with the values of the acquired brand Consumer Expectations about Values Consistency Many brands are established to facilitate growth (McKelvie and Wiklund 2010; Nason and Wiklund 2018) which is considered as a core value of many businesses (Frederick 1995); their main ambition is to expand their operations and reach as many customers as possible. For 31 example, Microsoft founder Bill Gates often mentioned his vision to have a “PC on every desk in every home.” Similarly, IKEA’s brand value promise is to “create a better everyday life for the many people.” Sometimes founders invoke growth values as the reason for selling the company. For example, the founder of Dot’s Pretzels explained the acquisition by Hershey's in November 2021 saying that she had “built the business with the idea of sharing them with everyone.” Some start-up brands are even founded with the explicit goal to be “taken over” after reaching a certain level of success (Uy, Foo, and Ilies 2015), and often actively communicate such growth ambitions to the public (Gao, Ritter, and Zhu 2013). We expect that a brand’s growth priorities might affect how consumers react to acquisitions. Based on our values authenticity account, we propose that consumers will react less negatively toward an acquired brand when its core values 54 include the pursuit of growth. Specifically, we expect that when a brand’s values—as reflected in Journal of Marketing 60 Peer Review Version Page 15 of 68 Author Accepted Manuscript their focus on growth—are consistent with said brand’s behavior and decisions (i.e., the brand’s decision to be acquired), such alignment between an entity’s inner beliefs and outer behavior 8 constitutes a signal of authenticity (Newman and Smith 2016). Thus, when a brand has an explicit focus on growth, consumers may not consider an acquisition to be inconsistent with the brand’s authentic values, and we expect the negative effect of an acquisition to be reduced. H5: The negative effect of brand acquisitions is attenuated when the brand is characterized by an explicit focus on growth. Regardless of the specific values they are founded on, brands can maintain leadership continuity and values consistency over a long period of time, even generations. For example, Australian beer manufacturer Cooper’s, established in 1862, proudly state in their communications that the Cooper family is still involved in company management after all these 31 years. Even more starkly, Antinori, one of the preeminent Italian winemakers, states on its website that “The Antinori family has been committed to the art of winemaking for over six centuries.” If loss of values authenticity underlies the proposed negative effect of acquisitions, we further expect that brand age moderates consumer reactions toward acquired brands. Research on historical authenticity suggests that an older age or longer history can positively shape the prestige and monetary value of brands; for example, it is suggested that consumers attribute a higher quality to brands with a strong heritage (Beverland 2005; Boyle 2003; Groves 2001). Previous research also shows how being older can not only imbue a brand with a reputation for craftmanship, but also with values expressed by the company founder (Carroll and Wheaton 2009; Hatch and Schultz 2017). For example, Antinori state that “All throughout its 54 history, 26 generations long, the Antinori family has managed the business directly making Journal of Marketing 60 Peer Review Version Page 16 of 68 Author Accepted Manuscript innovative and sometimes bold decisions while upholding the utmost respect for traditions.” Yet, having a long history and heritage does not necessarily mean that a brand has more integrity 8 (Newman, 2019). For example, the founders of many start-ups have strong personalities and vision, and consumer assessment of values authenticity may not necessarily be contingent on whether the brand was established recently versus long ago. Nevertheless, in the event of an acquisition, consumers might develop expectations regarding a brand’s values. Younger brands might be perceived as “not yet settled,” and still in the process of establishing their value system. Thus, value changes early in a brand’s lifetime may be perceived as more appropriate, similar to when greater allowances are made for young people whose personalities and value systems are more malleable and inconstant (Neel and Lassetter 2015). By contrast, older brands have underlying values that have guided their actions for many years; therefore, if an older brand is acquired, consumers may view the acquisition as a stronger signal of a deviation from these 31 values and evaluate it more severely. In sum, we predict that consumers will react less negatively towards acquired (vs. not acquired) brands when said brands are newer. H6: The negative effect of brand acquisitions is attenuated for younger brands. Overview of Studies We organize the empirical part into two main parts. In the first, we test the predicted negative effect of acquisitions on consumer reactions in terms of brand choice (Study 1) and purchase intentions (Study 2), and provide initial process evidence. We also examine the robustness and generalizability of the effect in light of different sizes of the acquirer (Studies 3a Journal of Marketing 60 Peer Review Version Page 17 of 68 Author Accepted Manuscript and 3b) and of partial acquisitions (Study 4). These studies also provide evidence for our values authenticity loss account and address alternative explanations. 8 The second part tests managerially relevant moderating variables and boundary conditions based on our theoretical account and is organized in three sections. Studies 5 and 6 examine the moderating effect of repeated acquisitions and leadership continuity. Study 7 examines the role of values alignment. Studies 8 and 9 examine consumer expectations about values consistency by testing the effect of growth values and of brand age. In all our studies, we determined sample sizes a priori based on pilot studies and report all conditions and participant exclusions (if any). All the stimuli are available in the Web Appendix. Data are archived at: https://osf.io/kxtdc/?view_only=1b65eec7636f4483944209c779df5f62. The Negative Effect of Acquisitions: Mediation, Robustness, Generalizability (Studies 1-4) As previously stated, many anecdotes and some empirical evidence point to a negative effect of acquisitions on brand preferences. Nevertheless, a systematic and internally valid test of this hypothesis is missing in the literature. We therefore begin our empirical investigation with a series of demonstrations pertaining to the impact of acquisition cues on consumer response to brands (Studies 1-2). In addition, these studies provide initial evidence for our values authenticity loss account (H1). In Study 3a and 3b, we examine the potential role of consumers’ general dislike for large corporations. In Study 4, we examine the robustness of the negative effect of an acquisition on the acquired brand if the brand is only partially acquired. Finally, in an add-on study, we also show that also the acquirer is affected by the negative effect of 54 acquisitions, but to a smaller extent. Journal of Marketing 60 Peer Review Version Page 18 of 68 Author Accepted Manuscript Study 1: Incentive-Compatible Choice Study 1 is an incentive-compatible choice experiment examining whether an acquisition can 8 shift consumers’ preference from an acquired brand in favor of a comparable product from another brand. Method. We recruited 404 US participants (44.8% female, M = 45.75 years, MTurk) age who were randomly assigned to one of two conditions in a preregistered experiment (#72033 | AsPredicted) using an incentive-compatible choice design (see Acar et al. 2021, Meyvis and van Osselaer 2018 for similar designs). We introduced participants to the logos and background descriptions of two chocolate brands, Ghirardelli and Russell Stover (Web Appendix B for full stimuli). Both brands are real US brands that have been acquired by the Swiss chocolate manufacturer Lindt-Sprungli but kept their original brand names. We presented both brands side by side and informed participants that they could win a box of chocolates in a lottery. 31 Specifically, we told participants that we would raffle off boxes of chocolate, and they could choose which brand they would like to receive. We manipulated between participants whether Ghirardelli or Russell Stover was mentioned as having been acquired. Thus, participants in the first condition were informed that Ghirardelli was acquired (and Russell Stover was not), whereas those in the second condition were told that Ghirardelli was not acquired (and Russell Stover was). We randomized the presentation order (whether Ghirardelli [Russell Stover] was displayed before or after) and the acquisition cue (whether Ghirardelli [Russell Stover] was acquired or not). In addition to product choice (our dependent variable), we measured both brands’ values authenticity (our mediator variable) with three items presented in random order: “The brand remains true to its espoused values,” “The brand refuses to compromise the values 54 upon which it was founded,” and “The brand has stuck to its principles” (1 = strongly disagree, 7 Journal of Marketing 60 Peer Review Version Page 19 of 68 Author Accepted Manuscript = strongly agree; α = .95). Upon study completion, we conducted a lottery in which three winners were randomly determined to receive their chosen box of chocolates. 8 Main findings. First, we examined whether acquisition information affected product choice. When Russell Stover was presented as acquired, 80.7% of participants chose the Ghirardelli chocolate (19.3% chose Russell Stover). When Ghirardelli was presented as acquired, only 62.2% of the participants chose the Ghirardelli chocolate (37.8% chose Russell Stover). Thus, providing brand acquisition information resulted in a significant 18.5% change in choice share (χ (1) = 16.92, p < .001). Second, we examined the ratings of values authenticity. Consistent with our expectations, the acquisition cue significantly reduced consumers’ perceptions of values authenticity for both brands (Ghirardelli: M . = 5.67, SD = .95 vs. M = 4.48, SD = 1.39, t(402) = 10.06, p < not acq acq. .001, d = 1.00; Russell Stover: M .= 5.52, SD = 1.01 vs. M = 4.40, SD = 1.41, t(402) = not acq acq. 31 9.15, p < .001, d = .91). We estimated a mediation model to test whether the observed loss in values authenticity mediates the negative effect of the brand acquisition on choice (H1). Results are in line with the hypothesis (ab = .15, SE = .06, 95% CI = .04, .27, PROCESS Model 4, 10,000 bootstrap resamples as in the subsequent studies). Study 1 provides initial evidence for the negative effect of acquisitions on consumer brand preference in an incentive-compatible experiment with real brands. The findings suggest that acquisitions can reduce the acquired brands’ choice shares in favor of competitors. This study also documents the mediating role of values authenticity. Study 2: Field Survey Journal of Marketing 60 Peer Review Version Page 20 of 68 Author Accepted Manuscript Study 2 employs a correlational design with recently acquired real brands to test the proposed negative effect of acquisitions on purchase intentions in the field, and to test whether values 8 authenticity underlies this effect. Specifically, we tested whether consumers’ negative reactions towards acquired brands materialize when consumers do not receive explicit information about the acquisition. For this purpose, we surveyed consumers regarding their willingness to buy or use recently acquired brands, and the latter’s perceived values authenticity. As a proxy measure for consumer acquisition knowledge, we measured the extent to which consumers know that other companies control the brand. We predict that higher consumer acquisition knowledge is associated with reduced purchase intentions. Method. Participants were 359 US consumers (56.5% female, M = 33.74 years, Prolific) age who were randomly assigned to one of six versions of a survey. In each of the six versions, we exposed participants to one of the following recently acquired brands: Wholefoods, Casamigos 31 Tequila, Dr Pepper, LinkedIn, Panera Bread, or Jimmy Choo—all major brands that were acquired in 2017. Participants read a brief description of the brand and product category. In this study, we deliberately refrained from mentioning the recent acquisition of the brand. Instead, as our independent variable, we asked participants to what extent they thought another company controlled the brand (“To the best of my knowledge the brand is… 1 = completely independent, 7 = completely controlled by another company”), which served as a proxy variable of brand acquisition knowledge. As our dependent variable, we measured purchase or usage intention with three items: “If I were going to buy [use] this product [service], the probability of buying We used the measure as proxy measure for awareness of an acquisition. A defining characteristic of an acquisition is the transferal of control (Akhigbe, Madura, and Spencer 2004). We refrained from measuring acquisition awareness directly because of impression management concerns—participants might incorrectly indicate awareness of an acquisition (even though they are not). We randomized the order of the control measure (administering it either at the beginning or at the end of the survey) and showed no significant effects on the results. Journal of Marketing 60 Peer Review Version Page 21 of 68 Author Accepted Manuscript [using] [brand name] is…,” “The probability that I would consider buying [using] products from this brand is…,” and “The likelihood that I would purchase[use] products from this brand 8 is…,”—all on a scale from 1 = very low to 7 = very high; (α = .96). We also measured perceived values authenticity (our proposed mediator variable) with the same items used in Study 1 (α = .85). A factor analysis revealed that the measures load on three factors (see Web Appendix C; the two-factor solution for purchase intention and values authenticity is robust in all subsequent studies). Finally, we asked respondents to fill out a series of demographic variables. Main findings. We conducted a regression analysis using bootstrapping procedures (PROCESS Model 4) with acquisition knowledge as the independent variable, purchase intention as the dependent variable, and values authenticity as the mediating variable. The analysis revealed a significant main effect of acquisition knowledge on purchase intention (b = -.12, SE = .06, p = .028) and on values authenticity (b = -.22, SE = .03, p <.001). This negative and 31 significant relationship supports our prediction that higher perceived external control (i.e., thinking that the brand is controlled by another company) reduces consumers’ purchase intentions and values authenticity ratings. Notably, values authenticity mediated the effect of perceived control on purchase intention (ab: -.05, SE = .02; 95% CI = -.09, -.02), providing converging support for H1. Study 3a and 3b: Robustness to Size of the Acquirer and Product Category The aim of Studies 3a and 3b is to test whether the negative effect of acquisitions materializes only when a large company acquires a smaller brand, as suggested in previous research (Frake 2017). In this case, it is possible that the observed adverse reactions are driven 54 by a general negative attitude towards large corporations (Paharia et al. 2014). In Study 3a and Journal of Marketing 60 Peer Review Version Page 22 of 68 Author Accepted Manuscript 3b, we manipulate the acquirer's size and test the robustness of the main and mediator effects examined in Studies 1-2. If our theoretical account centering on values authenticity loss is 8 correct, we expect the negative acquisition effect to hold irrespective of acquirer size. Method. For Study 3a [respectively 3b] we recruited 424 [400] US participants (47.6% female, M = 38.78 years, [45.8% female, M = 41.45 years] MTurk) and randomly assigned age age them to one of four conditions (not acquired, acquired by a bigger company, acquired by a smaller company, or acquired by a same-size company) in a between-participants design. Participants were first introduced to Rusty Root [Workman], a fictional brewing company [a real book publishing company] and read a brief description about the company and its foundation. In the not acquired condition, participants received no further information. In the bigger smaller, or same-size acquired conditions, participants read that in the brand was acquired by Fitch Fish [Hachette], a brewery [book publisher] which is bigger, smaller, or same-size depending on the 31 condition (see Web Appendix D for full stimuli). A separate test (N = 140) confirmed that our 33 2 manipulation of company size was effective (χ (6) = 200.26, p <.001). Next, we measured purchase intention (α = .96) and values authenticity (α = .94) as before. Main findings. We first compared participants’ purchase intention ratings in the not acquired condition with participants’ combined (average) ratings in the acquisition conditions. 43 Compared to participants in the not acquired brand condition, participants in the acquired conditions rated the brand lower on purchase intention (M = 4.79, SD = 1.48, M = 4.16, not acq. acq. SD = 1.49, F(1, 423) = 14.94, p < .001, d = .38) [M = 5.16, SD = 1.34, M = 4.74, SD = not acq. acq. 1.28, F(1, 399) = 7.82, p = .005, d = .28]. A one-way ANOVA revealed that participants’ purchase intention ratings were not significantly different across the three conditions (M = acq. bigger 4.14, SD = 1.61 vs. M = 4.07, SD = 1.42 vs. M = 4.26, SD = 1.42, F(2, 314) = acq. same size acq. smaller Journal of Marketing 60 Peer Review Version Page 23 of 68 Author Accepted Manuscript .42, p = .659, d = .002), [M = 4.65, SD = 1.41 vs. M = 4.80, SD = 1.28 vs. M acq. bigger acq. same size acq. = 4.78, SD = 1.13, F(2, 302) = .41, p = .661, d = .11]. Importantly, the results were not smaller 8 affected by the size of the acquiring company (individual contrasts: ps > .60, Figure 1). We also obtain consistent results if we repeat these analyses with values authenticity instead of purchase intention as the dependent variable (please see Web Appendix D for the results and contrasts on values authenticity of this study and Web Appendix E for the results on values authenticity of the remaining studies). 20 [Insert Figure 1 about here] A multi-categorical mediation analysis confirmed that the main effect is mediated by perceived values authenticity loss (indirect effect: ab = -.20, SE = .04; 95% CI = -.27, -.13), [ab = -.18, SE = .03; 95% CI = -.23, -.11]. As predicted, being acquired undermines the values authenticity of the acquired brand, with a subsequent negative effect on purchase intentions. If 32 the negative effect of acquisitions was caused by a generally negative disposition towards larger companies buying up smaller brands (e.g., Paharia et al. 2014), participants would have evaluated acquisitions by a smaller or same-size company less negatively. Our findings advance existing research, which has hitherto considered acquisitions inauthentic only when large companies bought smaller ones (Frake 2017). Based on our values authenticity account, we instead argue that acquisitions can reduce authenticity even when the acquiring company is smaller than the acquired company. Apart from providing process insights, this study is managerially relevant. It is not uncommon for companies to try to acquire larger ones (e.g., Porsche attempting to acquire Volkswagen, an automotive giant with far greater revenues, Los Angeles Times 2006, or Heinz-Kraft attempting to acquire Unilever, a company 55 over twice the size, Reuters 2017). Journal of Marketing 60 Peer Review Version Page 24 of 68 Author Accepted Manuscript Study 4: Robustness to Full versus Partial Acquisition The aim of Study 4 is to test whether the negative acquisition effect only materializes when 8 the entire brand is acquired, or if it still exists when smaller shares of the brand are acquired. Acquiring companies have two options: they can either acquire the entire brand, or just a share of it. From a managerial and legal perspective, it is particularly critical whether more than 50% of the shares are controlled by another company (Akhigbe, Madura, and Spencer 2004). We expect consumers to view a complete acquisition as a clear signal that a brand’s value system will change. However, consumers may view even a partial acquisition of a brand as a harbinger of change to the brand’s value system (because of increased external pressure). Therefore, it is conceivable that selling only a small share of the brand is sufficient to dilute a brand’s purchase intentions and values authenticity. Method. We recruited 424 US participants (46.9% female, M = 39.31 years, Prolific) age 31 who were randomly assigned to one of seven conditions of a between-participants design. We introduced participants to the same fictitious brand used in Study 3a (Rusty Root Brewery). In the not acquired condition, participants received no information about the acquisition. In the six acquired conditions, we manipulated the portion of Rusty Root acquired by the Fitch Fish company (either 15%, 30%, 45%, 60%, 75%, or 100%; Web Appendix F). We then measured purchase intention (α = .95) and values authenticity (α = .94) as before. Main findings. First, we compared participants’ purchase intention and values authenticity ratings for the not acquired condition with the aggregated ratings of the acquired conditions. Planned contrasts revealed that, compared to participants in the not acquired condition, participants in the acquired conditions indicated significantly lower purchase intention (M = not acq. 54 4.96, SD = 1.31, M = 4.43, SD =1.35, F(1, 423) = 7.99, p < .01, d = .25). Second, we acq. Journal of Marketing 60 Peer Review Version Page 25 of 68 Author Accepted Manuscript aggregated the acquired conditions into two groups: less than 50% of shares acquired, and more than 50% of shares acquired. Compared to participants in the not acquired condition, these 8 participants indicated reduced purchase intention when the acquirer bought less than the majority or more than the majority of the shares (M = 4.96, SD = 1.31, M = 4.53, SD = 1.41, not acq. acq.<50% M = 4.33, SD = 1.27; F(2, 421) = 5.04, p = .007, d = .39). The latter groups did not differ acq.>50% in terms of purchase intentions. We obtained similar results for values authenticity, with the main difference that the manipulation of acquired shares had a stronger effect on values authenticity. For example, participants already rated the focal brand lower on values authenticity, even when only 15% of the brand was acquired (M = 5.72, SD = .92, M = 5.05, SD = 1.14, t(119) not acq. acq.15% = 3.53, p <.001, d = .32). This was not the case for purchase intention; here, the negative purchase intention effect only started to become significant when more than 30% of the brand was acquired. These findings suggest that the share size of an acquisition has a more sensitive 31 effect on values authenticity than on purchase intention. A multi-categorical mediation analysis on purchase intention demonstrated a significant indirect effect through values authenticity on purchase intention (ab = -.10, SE = .02; 95% CI = -.14, = -.07). These findings suggest that the indirect effect through values authenticity remains robust across acquisition increments. In sum, the results of Studies 1-4 provide converging evidence in support of H1 and document the robustness and generalizability of the negative effect of acquisitions on consumers reactions to acquired brands. Yet, since acquisitions not only involve the acquired brand but also the acquiring company, it might be possible that negative reactions toward the acquired brand spill over to the acquiring company. To test this possibility that acquisitions harm also the acquirer, we conducted an add-on study (see Web Appendix G) in which we used the same basic 54 experimental manipulation as in the previous studies (acquired vs. non-acquired) but asked Journal of Marketing 60 Peer Review Version Page 26 of 68 Author Accepted Manuscript participants to indicate purchase intentions for both the acquired brand and the acquirer. As an empirical context, we introduced participants to two real food producers, Hershey and Pretzels 8 Inc. Consistent with the results in the previous studies, when participants were informed that Hershey purchased Pretzels Inc. (vs. not), they indicated significantly lower purchase intentions for Pretzels Inc. (M = 5.51, SD = 1.04 vs. M = 5.06, SD = 1.54, t(209) = 2.47, p = .014, d not acq, acq. = .34). Interestingly, participants in the acquired condition also indicated significant lower purchase intentions for Hershey, the acquirer (M = 5.88, SD = .96 vs. M = 5.58, SD = not acq, acq. 1.15, t(209) = 2.03, p = .044, d = .28). Taken together, these results suggest that acquisitions not only harm the acquired brand but also, to a lesser extent, the acquirer. The Moderating Effect of Repeated Acquisitions and Leadership Continuity (Studies 5-6) 31 The primary aim of Studies 5 and 6 is to examine of the first set of managerially relevant conditions under which the observed negative main and mediation effect of acquisitions is attenuated. Study 5 examines whether consumers’ negative reactions to an acquisition are attenuated when this was not the first time the brand had been acquired (H2). Study 6 examines the moderating effect of continuity of leadership (H3). Study 5: First versus Subsequent Acquisition Based on our values authenticity account, we expect that the negative acquisition effect is attenuated after the first acquisition of a brand (H2). To test this prediction, we compare two situations: one in which a brand is acquired for the first time, and one where the brand undergoes 54 a subsequent acquisition after the first. Moreover, this study addresses perceived product quality Journal of Marketing 60 Peer Review Version Page 27 of 68 Author Accepted Manuscript as another potential alternative account. Although the mediation results from the previous studies are difficult to explain using this account, it is possible that consumers expect acquisitions to 8 negatively affect product quality, which thereby lowers purchase intentions. Method. We recruited 363 participants (43.0% female, M = 40.38 years, MTurk) and age randomly assigned them to one of three conditions (not acquired, acquired for the first time, or acquired multiple times) in a between-participants design. Participants read information about Pinbag, a (fictitious) company producing backpacks. Participants in the first-time acquired condition read that the company had been recently acquired by another textile company. Participants in the subsequent acquisition condition read that Pinbag had been acquired by a textile company, and then recently acquired again by another textile company. Participants in the not acquired condition did not receive any acquisition-related information (see Web Appendix H for stimuli). A Chi-Square Test (χ (4) = 339.07, p < .001) confirmed that participants correctly 31 identified the brand as having been not acquired, acquired once, and acquired multiple times in the respective conditions. We measured purchase intention and values authenticity as in the previous studies. Furthermore, to examine whether any effect of the acquisition on purchase intention might be affected by product quality perceptions, we asked participants to evaluate product quality using a series of 7-point items adapted from Johar and Simmons (2000): engineering and design, reliability, materials, manufacturing process, and performance (α = .93). Main findings. An ANOVA on purchase intention produced a significant effect (F(2, 362) = 5.97, p = .003). We next conducted a series of planned contrasts. Compared to participants in the not acquired condition, participants in both the first time and subsequent acquisition conditions indicated lower purchase intention (M = 5.24, SD = 1.22 vs. M = 4.89, SD = not acq. first acq. 54 1.51, p = .041, d = .26 ; vs. M = 4.63, SD = 1.60, p = .003, d = .39). Moreover, consistent subseq. acq. Journal of Marketing 60 Peer Review Version Page 28 of 68 Author Accepted Manuscript with H2, we find no difference between the two acquired conditions (F(1,240) = 1.67, p = .198), indicating the negative acquisition effect is attenuated after the first acquisition. 8 The pattern of results for values authenticity are consistent (F(2, 362) = 29.89, p < .001; see Web Appendix I for detailed analyses). We also obtain similar patterns for product quality, even though the effect is weaker and only marginally significant (F(2, 362) = 2.84, p = .06; see Web Appendix I). We ran a multi-categorical parallel mediation analysis (Model 4) with values authenticity and product quality as mediators. The analysis reveals two significant indirect effects; importantly, the effect of values authenticity is significantly stronger (b = -.21, SE = .05) than that of perceived product quality (b = -.07, SE = .03; contrast: b = -.1352, SE = .0534, 95% CI = -.24, -.03). Next, we ran a mediation model with perceived values authenticity as the mediator controlling for product quality. The model reveals an indirect effect of values authenticity, and a non-significant indirect effect of product quality (95% bootstraps CI). These 31 results confirm that values authenticity plays an important role in determining consumers’ negative reactions toward an acquisition, above and beyond product quality perceptions. Study 6: Leadership Continuity Study 6 has two aims. The first is to examine a relevant boundary condition for the negative effect of acquisitions, namely the continuity of founder leadership (H3). The second is to provide further process evidence by measuring the mediating effect of values authenticity, and two potential alternative explanations, namely perceived product quality and “underdog” status. Method. We recruited 360 US participants (43.9% female, M = 41.44 years, MTurk) age who were randomly assigned to one of three conditions (not acquired, acquired/leadership 54 continuity, or acquired/leadership change) in a preregistered experiment (#69990 | AsPredicted) Journal of Marketing 60 Peer Review Version Page 29 of 68 Author Accepted Manuscript using a between-participants design. As in the previous study, participants read information about the backpack brand Pinbag. After reading about the brand and its founders, participants in 8 the not acquired condition received no further information, whereas participants in both acquired conditions read that the firm had been acquired by Alphatex, a fictitious textile and apparel firm. Participants in the acquired/leadership continuity condition read that the two founders maintained their role in the company. Participants in the acquired/leadership change condition read that the two founders left after the acquisition (see Web Appendix J for stimuli). After reading this information, participants indicated their purchase intention (α = .95), perceived values authenticity (α = .95), and product quality (α = .95) using the same scales as before. In addition, we asked participants to indicate the brand’s underdog status (“I think Pinbag is an underdog,” “Pinbag had to overcome obstacles to succeed,” “Pinbag is a brand that has passion for its products”; α = .74, (Acar et al., 2021). 31 Main findings. An ANOVA on purchase intention revealed a significant main effect (F(2, 359) = 17.64, p < .001). Follow-up contrasts revealed lower purchase intentions when the founders were no longer with the acquired brand (M = 4.76 vs. M = 3.87, t(357) not acq. acq./leader. change = 4.77, p < .001, d = .50). When the founders remained with the acquired brand, there was no significant difference in purchase intention between the two conditions (M = 4.76 vs. not acq. M = 4.89, t(357) = -.70, p = .484, d = .07; see Figure 2). acq./leader. cont. [Insert Figure 2 about here] We repeated these analyses with the three potential mediator variables, one at a time. The patterns were consistent for values authenticity, less pronounced for perceived product quality, and not consistent for underdog status (see Web Appendix K for details and contrast analyses). Journal of Marketing 60 Peer Review Version Page 30 of 68 Author Accepted Manuscript Next, we conducted a multi-categorical parallel mediation analysis (with the acquired vs. the acquired-leadership change conditions) and compared the indirect effects of values 8 authenticity with that of perceived product quality and underdog status, two potential alternative explanations. First, we found a strong significant indirect effect through values authenticity (b = - .71, SE = .17, 95% CI = -1.05, -.39). Consistent with the findings of Study 5, we also found a significant but substantially smaller indirect effect through perceived product quality (b = -.35, SE = .09, 95% CI = -.66, -.19). Consistent with the findings of Study 3a-3b, the indirect effect through underdog status was not significant (b = -.02, SE = .07, 95% CI = -.13, .15, see Web Appendix K). We next tested the relative explanatory power of the three potential process variables. We estimated three mediation models, one for each process variable, and entered the two remaining variables as covariates. The first model shows that the indirect effect of values authenticity remains robust, even when controlling for perceived product quality and underdog 31 status (ab = -.48, SE = .12, 95% CI = -.73, -.26). This, however, is not the case for the other two potential alternative explanations. The indirect effect through perceived product quality is not significant when controlling for values authenticity and underdog status (ab = .14, SE = .08, 95% CI = -.01, .32). Similarly, the indirect effect through underdog status is not significant when controlling for values authenticity and perceived product quality (ab = -.001, SE = .02, 95% CI = -.05, .05). These findings further support our theorizing on the key role values authenticity plays in determining consumers’ negative reactions towards an acquisition when the leadership of a brand changes. Journal of Marketing 60 Peer Review Version Page 31 of 68 Author Accepted Manuscript The Moderating Role of Values Alignment (Study 7) 8 The aim of the study in this section is to test a further boundary condition, namely whether consumers perceive the values of the acquirer to be aligned with those of the acquired brand. Study 7: The Role of Values Alignment In Study 7, we predict that consumers will react less negatively to an acquisition when there is stronger alignment between the values of the two brands (H4). Method. We recruited 361 US participants (73.1% female, M = 31.01 years, Prolific) age who were randomly assigned to one of three conditions in a between-participants design (not acquired, acquired/high values alignment, or acquired/low values alignment). For this study, we used Pela, an actual producer of environmentally-friendly phone cases and accessories, as the 31 target brand. The brand’s core values focus on environmentalism. Participants read a short description of the brand (see Web Appendix L for full stimuli). In the not acquired condition, participants did not receive any further information, whereas participants in the two acquisition conditions received acquisition information. In the high values alignment condition, participants were told that Patagonia, a clothing company known for its environmental values, had acquired the target brand Pela; in the low values alignment condition, we told participants that Supreme, a clothing company not known for environmental values, had acquired Pela. We selected these two US brands based on the website goodonyou.eco, which rates the sustainability of clothing producers. Furthermore, we conducted a pre-test with a separate sample of 100 participants wherein participants rated brands in terms of brand attitudes, brand familiarity, perceived quality, 54 and environmentalism as a core corporate value. Patagonia and Supreme only differed in terms Journal of Marketing 60 Peer Review Version Page 32 of 68 Author Accepted Manuscript of environmentalism (p = .017; for the other variables, ps > .30). We used the same scales as in previous studies to measure purchase intention (α = .94) and values authenticity (α = .86). As a 8 manipulation check of values alignment, we included the following item: “As far as you know, how much do the values of the brand Patagonia align with those of the brand Pela?” 1 = not at all, 7 = very much). Manipulation check. Values alignment. As expected, participants rated the values of the target brand (Pela) as more aligned with the values of Patagonia than of Supreme ( M = acq. align. hi 5.08, SD = 1.29 vs. M = 3.68, SD = 1.42, F(1, 238) = 63.56, p < .001). acq. align. lo Main findings. An ANOVA on purchase intention revealed a significant effect (F(2, 358) = 6.43, p = .002) consistent with H4. When the acquired brand had low values alignment (Supreme), participants indicated significantly lower purchase intention when the brand was acquired by Pela (M = 4.71, SD = 1.30, M = 4.08, SD = 1.67, t(358) = 3.44, p < 29 not acq. acq. align. lo .001, d = .36). When the acquired brand had a high values alignment (Patagonia), the difference in purchase intention between the acquired and non-acquired condition was not significant (M not = 4.71, SD = 1.30, M = 4.56, SD = 1.33 t(358) = -.84, p = .404, d = -.08; Figure 3). acq. acq. align. hi [Insert Figure 3 about here] A multi-categorical mediation analysis (Model 4) once again provides support for the mediating effect of values authenticity. The indirect effect through values authenticity is significant for the contrast between the not acquired condition and acquirer with low values alignment condition (b = -.29, SE = .09, 95% CI = -.48, -.13). However, the indirect effect is not significant for the contrast between the acquired and the high values aligned acquirer conditions (b = -.04, SE = .07, 95% CI = -.17, .09). Journal of Marketing 60 Peer Review Version Page 33 of 68 Author Accepted Manuscript The Moderating Effect of Values Consistency (Studies 8-9) In this section we test how values consistency can moderate the effect of acquisition on values authenticity. First, we show how acquisitions harm values authenticity less in the case of a brand established with a growth value orientation, as the acquisition is consistent with the brand’s founding values (Study 8). Second, we show how acquisitions may hurt old brands more as it disrupts values that are set in time (Study 9). Study 8: Growth Orientation of the Acquired Brand Study 8 tests the moderating role of growth orientation, that is, whether the acquired brand has an overarching growth objective. A brand’s growth orientation reflects values that are not 31 inconsistent with the decision to seek an acquisition. Specifically, we test our prediction that the negative effect of acquisition is attenuated when the brand puts a strategic priority on growth (i.e., an intention to reach as many consumers as possible; H6). Method. We recruited 504 US participants (44.5% female, M = 38.11 years, MTurk), 38 age and randomly assigned them to one condition of a 2 (brand: not acquired vs. acquired) x 2 (orientation: control vs. growth) between-participants design. Participants read a paragraph about an actual outdoor equipment brand, Tatonka. In the acquisition conditions, participants read that Tatonka was recently acquired by another company, Outdoor Tech; in the not acquired condition, participants did not receive this information. in the high growth conditions, participants read the following fictitious value statement from the company founder: “It is a 54 matter of how many people use my products. At the end of the day, we want lots of people to use Journal of Marketing 60 Peer Review Version Page 34 of 68 Author Accepted Manuscript and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” Conversely, in the control conditions, participants read: “It is not a matter of 8 how many people use my products. It is a matter that the passionate people use and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” (Web Appendix M for complete stimuli). Participants completed the same purchase intention (α = .95) and values authenticity (α = .92) scales as in the previous studies. Main findings. A 2 x 2 ANOVA produced a significant main effect of the brand acquisition factor on purchase intention (M = 4.80, SD = 1.47, M = 4.36, SD = 1.46, F(1, 503) = not acq. acq. 11.57 p < .001, η = .02), which was qualified by a significant interaction effect (F(1, 503) = 4.85 p = .028 , η = .01) consistent with H5. In the control condition, participants indicated significantly lower purchase intention when the brand was (vs. was not) acquired (M = 5.02, SD = 1.34, M = 4.29, SD = 1.61, F(1, not acq. acq. 31 503) = 11.56, p < .001; Figure 4). This, however, was not the case in the growth condition (M not = 4.58, SD = 1.54, M = 4.42, SD = 1.29, F(1, 503) = .756, p = .385). Moreover, the main acq. acq. effect of growth orientation was not significant (M = 4.50, SD = 1.42, M = 4.66, SD = growth control 1.52; F(1, 503) = 1.57, p = .210, η = .00), indicating that participants were neither more nor less likely to purchase the brand when it pursued a growth strategy. 43 [Insert Figure 4 about here] We found the same pattern of results for values authenticity (main effects: F (1, 503) = acq. 79.76, p < .001, F (1, 503) = .168, p = .682; interaction: F(1, 503) = 10.36 p < .001; see Web growth Appendix E for detailed analyses). A moderated mediation analysis (Model 7) confirms the mediating role of values authenticity (index: b = .21, SE = .07; 95% CI = .08, .35). The indirect effect through values authenticity is significantly stronger in the control condition (b = -.39, SE = Journal of Marketing 60 Peer Review Version Page 35 of 68 Author Accepted Manuscript .06; 95% CI = -.52, -.29) than in the growth condition (b = -.18, SE = .04; 95% CI = -.28, -.10; the two CI do not overlap). The results thus support our theorizing. Study 9: Brand Age Study 9 examines the moderating impact of brand age. We test whether the negative effect of acquisitions is stronger for an acquired brand that has been in the market longer, compared to a more recently established brand (H6). Method. We recruited 633 US participants on MTurk (47.4% females, M = 38.66 years), age who participated in a 2 (brand type: not acquired vs. acquired) x 2 (brand age: old vs. new) between-participants experiment. They were introduced to Pinbag, the fictitious backpack company used in Study 6. Participants in the acquired conditions read that the brand was acquired by a textile and apparel firm, whereas participants in the not acquired condition 31 received no further information. In the old brand condition, participants read that Tom Eagles, the firm’s founder, established his business in Pittsburgh, Pennsylvania, in 1869. In the new brand conditions, participants read the same text but that he established his business in 2010 (see Web Appendix N). Participants then completed the measures for purchase intention (α = .95) and values authenticity (α = .96) as before. Main findings. A 2 x 2 ANOVA on purchase intention produced a significant main effect of acquisition (M = 5.06, SD = 1.31, M = 3.94, SD = 1.47, F(1, 632) = 101.48, p < .001, not acq. acq. 2 2 η = .14) and a non-significant main effect of brand age (F(1, 632) = .019, p = .889, η = .00). In support of H6, the two-way interaction proved significant (F(1, 632) = 4.27, p = .039, η = .01). The negative effect of acquisition on purchase intention was stronger when the brand was old 54 (M = 5.16, SD = 1.23 vs. M = 3.82, SD = 1.50, t(629) = 8.53, p < .001) versus young not acq. old acq. old Journal of Marketing 60 Peer Review Version Page 36 of 68 Author Accepted Manuscript (M = 4.95, SD = 1.38 vs. M = 4.07, SD = 1.43, t(629) = 5.70, p < .001). The not acq. young acq. young same ANOVA on values authenticity displays the same pattern (main effect of acquisition: F(1, 2 2 8 632) = 560.58, p < .001, η = .47, interaction: F(1, 632) = 8.52, p < .01, η = .01). The main 10 2 effect of brand age proves not significant (F(1, 632) = .926, p = .336, η = .00). The results of a moderated mediation analysis (PROCESS Model 7) reveal a significant index of moderated mediation (b = -.14, SE = .05; 95% CI = -.24, -.05). The indirect effect through values authenticity is significantly stronger in the old brand condition (b = -.63, SE = .07; 95% CI = -.76, -.50) than in the young brand condition (b = -.49, SE = .06; 95% CI = -.61, - .38), further supporting our values authenticity loss account. Furthermore, we conducted a post- 25 test using the same stimuli and design as the main study (N = 207) to explore whether product quality could account for our findings. A 2 x 2 ANOVA on perceive product quality revealed a non-significant main effect of brand age (F(1, 206) = .212, p = .645) and a significant main effect of the acquisition factor (F(1, 206) = 16.88, p < .001). However, and in contrast to the previously observed significant interaction effect on values authenticity, the analysis revealed no significant interaction effect on perceived product quality (F(1, 206) = .937, p = .334). It is therefore unlikely, that perceived product quality offers an alternative explanation for the observed moderation effect in this study. General Discussion While extant research in accounting, finance, strategy, and organizational behavior has explored in detail how acquisitions impact organizations, little attention has been paid to how acquisitions impact consumers. Through a survey about real brand acquisitions, and nine Journal of Marketing 60 Peer Review Version Page 37 of 68 Author Accepted Manuscript experiments using both incentive-compatible and attitudinal measures, we shed light on this managerially important yet neglected topic. Building on a signal theory perspective, we propose 8 an account based on loss of values authenticity to contextualize negative consumer reactions toward acquired brands. Drawing on this account, we further predict managerially relevant boundary conditions that will attenuate the negative effect of acquisitions. Specifically, negative consumer responses to acquisitions are reduced when (a) brands have been acquired before (Study 5); (b) the original leadership remains involved in the company (Study 6); (c) the acquirer has values that align with the values of the acquired brand (Study 7); (d) acquired brands position themselves as having an orientation towards growth (Study 8); and (e) brands are younger (Study 9). In sum, our studies provide converging support for a values authenticity loss account regarding the negative effect of acquisitions on consumer response to brands. The very asset which often motivates them—the brand—can be endangered by acquisitions, by undermining the 31 authenticity of the brand’s values. Thus, more speculatively, our findings suggest a possible reason why so many acquisitions fail to meet commercial objectives (e.g., Christensen et al. 2011). Theoretical Implications Our research advances the current body of academic work on acquisitions by documenting when and why consumers react negatively to acquisition news. Specifically, we demonstrate the importance of values authenticity (relative to other accounts including perceived product quality and underdog status) in explaining negative reactions. Further, we show perceived loss of values authenticity is more relevant for certain brands (i.e., older brands that have been on the market Journal of Marketing 60 Peer Review Version Page 38 of 68 Author Accepted Manuscript longer; brands professing niche-oriented values) than for others (i.e., newer brands that have only been on the market for a short time; brands professing values related to growth). 8 More broadly, our results reveal that consumers react not only to marketing tactics, but also to high-level strategic actions of firms, such as acquisitions. Such actions constitute a signal that consumer can interpret and rely on in judgments and decision making. We demonstrate that a study of consumer behavior can be informative for corporate strategy decisions and illustrate how marketing strategy and consumer behavior intersect as streams of research. Thus, our work bridges consumer behavior with marketing strategy and corporate management research. By examining brand acquisitions through the theoretical framework of values authenticity, our moderating effects also contribute to the literature on values authenticity. As Newman (2019) points out while calling for further research in this area, values authenticity contains nuances that deserve more attention; our work unravels some of these nuances. First, we find that individuals’ 31 assessment of values authenticity is sensitive to even partial changes in ownership. In Study 4, consumer perception of authenticity dropped significantly after the acquisition, even when the acquirer bought only a small share of the company. In an add-on study, we also document that negative consumer reactions can also spill over to the acquirer, reducing consumers’ purchase intention. Second, we demonstrate that brand age per se does not influence consumers’ view of the genuineness of company values (Study 9). Yet, when an external agent or event seemingly interferes with those values, brand age becomes a factor in shaping consumer perception in this regard. Third, our study contributes to the literature by looking at how the alignment between the acquirer’s values and those of the acquired brand reduces potential negative consumer reaction (Study 7) because signaling alignment of core values helps brands preserve their authenticity. Journal of Marketing 60 Peer Review Version Page 39 of 68 Author Accepted Manuscript Moreover, we enrich the theory on values authenticity by demonstrating how a growth orientation can be considered authentic if the actions taken are consistently guided by such 8 values (Study 8). This finding also indicates that overtly conveying disinterest in the wider commercial market, as many “indie” or “hipster” brands do, might backfire if the founders decide to sell their company. By showing when growth-oriented values can be perceived as authentic, our research also helps shift the focus of studies on values authenticity, which have heretofore been mainly centered on small companies and craft market categories (Silver, Newman, and Small 2020). Finally, our studies rule out several alternative accounts. One such candidate process relates to a natural characteristic of acquisitions: that is, most acquisitions involve a large acquirer and a smaller acquired firm. Company size could therefore be seen as a potential confounding factor and provides an account grounded in greater sympathy overall for small (vs. large) firms. Research in social psychology and consumer behavior (e.g., Paharia et al. 31 2014) finds that when people witness competition, they tend to support the disadvantaged party. In Study 3a and 3b, we rule out such an account by demonstrating that consumers consider an acquired company less authentic, regardless of the size of the acquirer (bigger, same size, or smaller). Our study also shows that the values authenticity loss is independent of the acquirer’s size (which therefore revises previous suggestions in the literature, Frake 2017). Additionally, in Study 6 we empirically rule out the possibility that our findings are determined by an underdog effect, showing how values authenticity accounts for the mediating effect over and above other factors. We also address the possibility that acquisitions lead to a perceived loss of quality in the acquired brands. While our studies show that acquisitions may have a (slight) negative effect on product quality perceptions, values authenticity accounts for the effect on purchase intention 54 over and beyond product quality, as shown in Studies 5 and 6. It is important to acknowledge, Journal of Marketing 60 Peer Review Version Page 40 of 68 Author Accepted Manuscript however, that alternative explanations such as product quality perceptions and underdog status may be useful in explaining consumer reactions to acquisitions in particular contexts (e.g., 8 specific industries or consumer segments). Implications for Managerial Practice Despite their increasing popularity in the corporate world, between 60% and 80% of all acquisitions have reportedly failed to create value (Christensen et al. 2011; Dyer, Kale, and Singh 2003). Although explaining the reasons behind such high failure rates is beyond the scope of this research, our findings suggest that consumer discontent following an acquisition might play a role. Therefore, our research encourages managers to consider possible negative consumer reactions when evaluating the appeal of a new acquisition. Our findings are illuminating for brand managers because they reveal contexts where acquisitions are more (versus less) likely to 31 damage the brand. In particular, our results offer a word of caution with respect to acquiring firms operating in domains where authenticity is a key asset to brands (for example in sectors where symbolic value of products is important such as for “craft” or “artisanal” products). In addition to pointing out consumers’ negative feelings after acquisitions, our results offer valuable insights as to why acquisitions are often viewed unfavorably. The mechanism of values authenticity loss presented in this paper highlights the delicate nature of brand identity. While acquirers might think they have secured a stable and valuable asset by acquiring the target brand, our findings show that brand authenticity is easily tarnished by an acquisition. What can managers do to avoid this outcome? Our findings suggest that a series of considerations can be made, both before and after the acquisition process takes place. Journal of Marketing 60 Peer Review Version Page 41 of 68 Author Accepted Manuscript Before the acquisition. Managers can examine the target brand’s communications and identify whether the vision statement, advertising, social media accounts, and other forms of 8 branding contain any references to growth or reaching a broader range of customers. Such cues may make the acquisition process more favorable in the eyes of consumers (Study 8). Moreover, an alignment of values between the acquirer and acquired brands reduces potentially negative reactions (Study 7). Targeting brands aligned with the acquiring company’s core values and making this alignment salient can benefit the acquisition process. Similarly, the acquiring company could consider brand age a key factor. Consumers view the acquisition of a newer brand as less harmful (Study 9). Scouting for young, promising brands could prove beneficial, potentially giving the acquirer an aura of patronage and a reputation for investing in nascent businesses. Our findings in Study 5 reveal that negative consumer reactions are reduced in cases where brands have a history of being taken over. Accordingly, brands that have undergone 31 previous acquisitions should be an attractive acquisition target. After the acquisition. Our findings suggest that managers should carefully plan how to effectively frame announcements communicating acquisitions. For example, Study 6 shows that when consumers are made aware of management continuity, the negative effect of the acquisition is attenuated. This type of communication could be especially effective in the case of older brands. If the founders/original owners will not be involved with the company after its acquisition, managers may want to consider retaining long-term employees and highlighting this action in their communications. Similarly, maintaining a connection with the founders/original owners could prove beneficial to brands that are more oriented towards niche values (e.g., passion and craftsmanship); the presence of founders/original owners could act as an authenticity 54 proxy for these values, mitigating the negative impressions consumers may develop. In the case Journal of Marketing 60 Peer Review Version Page 42 of 68 Author Accepted Manuscript of companies with growth-oriented values or a newer brand, continuity of leadership could be positioned as an investment by the acquirer towards the brand, to nurture its potential and 8 develop its capabilities. Similarly, when the acquirer has values that align with those of the acquired brand, highlighting this can boost perceptions of the acquisition and nurture the brand. In sum, while forming expectations regarding the outcome of an acquisition, managers should carefully evaluate the characteristics of the brand they want to acquire and the values that drive the brand’s actions in the marketplace. Based on our findings, Figure 5 provides a checklist for managers involved in the acquisition process. [Insert Figure 5 about here] Directions for Future Research We focused on the negative effects of acquisitions because these are especially crucial from a practical point of view. However, more research is needed to investigate the potential positive 32 effects of acquisitions. For example, it is conceivable that information about acquisitions could also strengthen perceptions of firms. Acquisitions might signal that a firm is in demand, and consumers might accordingly infer that the target firm (and its products) is somehow “good,” because it would not have been acquired otherwise (Kardes, Posavac and Cronley 2004). While we identified a series of factors mitigating the negative effect of acquisitions, there are might also factors that could boost consumers’ reactions to acquisitions. For example, it is possible that acquired brands might also benefit from acquisitions in the eyes of consumers when the acquired brands fall short of having the (marketing) capabilities necessary to succeed in a competitive environment (e.g., R&D facilities, a strong distribution network, marketing intelligence for the analysis of competitors, and advertising resources to name a few). Similarly, when considering Journal of Marketing 60 Peer Review Version Page 43 of 68 Author Accepted Manuscript the continuity of management, consumers may actually be relieved and view acquirers in a more positive light when they take over a brand with poor or controversial management. 8 Another area that deserves further research is the dynamic acquisition process itself. In our experiments, as in most real-life situations, consumer cognizance of a brand acquisition occupies one moment in time, when in actual fact the acquisition may be a very long process. Examining the longitudinal effect of the acquisition process on consumer reaction could shed light on how consumers form thoughts on the buyout process over time. Additionally, it could speak to aspects of our suggestions for managerial practice that we could not address. Future research could also test the long-term effects of acquisitions and examine if the negative effect we identify changes over time. Future studies could unravel how acquisitions impact revenues by considering additional factors that could cause a potential drop in sales (for example, looking at the acquired brand’s previous performance or level of technological innovation). Overall, our findings should 31 help decision-makers to better manage the acquisition of firms and avoid negative consumer reactions. Journal of Marketing 60 Peer Review Version Page 44 of 68 Author Accepted Manuscript References Acar, Oguz A., Darren W. 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Journal of Marketing 60 Peer Review Version Page 50 of 68 Author Accepted Manuscript Figure 1. Study 3a and 3b: Effects of Acquirer Size on Purchase Intention Study 3a (beers) Study 3b (books) Notes: †p >.05; ***p <.001. Error bars = +/- 1 SE. 25 Figure 2. Study 6: Effects of Leadership Continuity on Purchase Intention Notes: †p >.05; *p<.05; ***p <.001. Error bars = +/- 1 SE. Journal of Marketing 60 Peer Review Version Page 51 of 68 Author Accepted Manuscript Figure 3: Study 7: Effects of Values Alignment on Purchase Intention Notes: †p >.05; ***p <.001. Error bars = +/- 1 SE. Figure 4: Study 8: Effects of Growth Orientation on Purchase Intention Notes: †p >.05; ***p <.001. Error bars = +/- 1 SE. Journal of Marketing 60 Peer Review Version Page 52 of 68 Author Accepted Manuscript Figure 5: Checklist for Managers Situation Recommendations YES Highlight the reputation of the brand. The brand has undergone previous acquisitions in the past. Develop ad-hoc communication strategies to explain how the values of the acquirer align with those NO of the acquired brand. YES Highlight continuity and the maintenance of the original values of the brand. The previous management (e.g., founders) will be left in charge after the acquisition. Involve individuals in the management who are close to the original ownership (e.g., promote long- NO term employees) and profile these individuals externally (e.g., feature them on the website). Highlight the alignment of the values and communicate the acquisition as an opportunity for the YES 19 acquired brand to strengthen and develop. The acquirer brand has values similar to those of the acquired brand (i.e., values alignment) Find an alternative common factor aside from the core values to explain the acquisition (e.g., NO possibilities for R&D and product quality). YES Communicate the acquisition as an act of patronage towards a promising, talented business. The brand is "young" (i.e., it has been on the market for a relatively short period of time). NO Emphasize the continuing involvement of the founders or other key personnel. YES Highlight the acquisition as an investment to develop the brand's capabilities and fulfill its vision. The brand was funded with a strategic growth goal (i.e., the founders wanted to expand since the very beginning) and communicates it. Highlight the acquirer's commitment to the passion and quality of the brand. Emphasize the continuing NO involvement of the founders or other key personnel. Journal of Marketing 60 Peer Review Version Page 53 of 68 Author Accepted Manuscript WEB APPENDIX When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account Alessandro Biraglia (a.biraglia@leeds.ac.uk) Christoph Fuchs (christoph.fuchs@univie.ac.at) Elisa Maira (emaira@bol.com) Stefano Puntoni (puntoni@wharton.upenn.edu) Journal of Marketing 60 Peer Review Version Page 54 of 68 Author Accepted Manuscript TABLE OF CONTENTS WEB APPENDIX A: STIMULI AND RESULTS FOR STUDY 1S ............................................ 3 Table W1: Results from Study 1S ............................................................................................... 3 WEB APPENDIX B: STIMULI USED IN STUDY 1 ................................................................... 4 WEB APPENDIX C: FACTOR ANALYSIS IN STUDY 2 .......................................................... 5 Table W2: Total Variance Explained .......................................................................................... 5 Table W3: Component Matrix .................................................................................................... 5 Table W4: Rotated Component Matrix ....................................................................................... 5 WEB APPENDIX D: STIMULI USED IN STUDY 3A AND 3B ................................................ 6 Table W5: ANOVA and Contrasts for Values Authenticity in Studies 3A and 3B .................... 6 WEB APPENDIX E: RESULTS FOR VALUES AUTHENTICITY ACROSS STUDIES .......... 7 WEB APPENDIX F: STIMULI USED IN STUDY 4 ................................................................... 8 WEB APPENDIX G: ADD-ON STUDY (EFFECT ON THE ACQUIRER) ................................ 9 WEB APPENDIX H: STIMULI USED IN STUDY 5 ................................................................. 10 WEB APPENDIX I: FURTHER ANALYSES IN STUDY 5 ...................................................... 11 Table W6: ANOVAs and Contrasts: ......................................................................................... 11 Mediation Analyses: .................................................................................................................. 11 WEB APPENDIX J: STIMULI USED IN STUDY 6 .................................................................. 12 35 WEB APPENDIX K: FURTHER ANALYSES IN STUDY 6 .................................................... 13 Table W7: ANOVAs and Contrasts: ......................................................................................... 13 Mediation Analyses: .................................................................................................................. 13 40 WEB APPENDIX L: STIMULI USED IN STUDY 7 ................................................................. 14 WEB APPENDIX M: STIMULI USED IN STUDY 8 ................................................................ 15 WEB APPENDIX N: STIMULI USED IN STUDY 9 ................................................................. 16 These materials have been supplied by the authors to aid in the understanding of their paper. The AMA is sharing these materials at the request of the authors Journal of Marketing 60 Peer Review Version Page 55 of 68 Author Accepted Manuscript WEB APPENDIX A: STIMULI AND RESULTS FOR STUDY 1S High Sierra is an apparel company manufacturing a range of bags, backpacks, and other luggage accessories targeted to a wider consumer segment. The company has, in fact, different product lines, from 25 school backpacks to sports bags, from laptop bags to bigger pieces of luggage for traveling. [Acquired] Recently another company, Samsonite, showed interest in buying out High Sierra, a deal that was closed shortly after with the successful acquisition of High Sierra by Samsonite. Due to this deal, Samsonite now controls 100% of the High Sierra brand. [Not Acquired] No info Table W1: Results from Study 1S Not Acquired Acquired t df p Values Authenticity 5.27 (1.06) 4.74 (1.34) 3.092 199 .002 Authenticity (Connectedness) 4.96 (1.41) 4.76 (1.37) 1.006 199 .316 Authenticity (Legitimacy) 5.42 (1.19) 5.38 (1.07) .275 199 .784 Authenticity (Originality) 5.14 (1.29) 4.85 (1.36) 1.545 199 .124 Authenticity (Proficiency) 5.57 (0.97) 5.58 (1.16) -.094 199 .925 Authenticity (Accuracy) 5.11 (1.11) 5.13 (1.21) -.114 199 .909 50 Product Quality 5.60 (0.98) 5.67 (0.95) -.539 199 .591 Journal of Marketing 60 Peer Review Version Page 56 of 68 Author Accepted Manuscript WEB APPENDIX B: STIMULI USED IN STUDY 1 Ghirardelli [Russell Stover] is a confectionery company manufacturing a diverse range of chocolate products. The company has, in fact, different product lines, from chocolate squares and bars to truffles, 17 from cocoa powder for hot chocolate to a line of products for cakes and other home baking preparations. Over the years, the company has been in good financial condition, with good revenues. [Acquired] Recently, another company operating in the confectionary market showed interest in acquiring Ghirardelli [Russell Stover], a deal that was concluded shortly after with the successful acquisition of Russell Stover. As a result, the acquiring company now owns 100% of the Ghirardelli [Russel Stover] brand. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 57 of 68 Author Accepted Manuscript WEB APPENDIX C: FACTOR ANALYSIS IN STUDY 2 Table W2: Total Variance Explained Extraction Sums of Rotation Sums 9 Component Initial Eigenvalues Squared Loadings of Squared Loadings % of Cumulative % of % Cumulative Total Total Total Variance % Variance of Variance % 1 3.26 46.61 46.61 3.26 53.47 2.81 40.14 40.15 1.94 27.78 74.38 2 1.94 31.93 2.31 33.12 73.27 3 .92 13.19 87.57 .92 13.94 1.00 14.30 87.57 4 .53 7.61 95.19 18 5 .14 2.06 97.25 6 .13 1.78 100.00 Table W3: Component Matrix Component 1 2 3 Purchase Intention 1 .854 -.460 27 Purchase Intention 2 .828 -.479 28 Purchase Intention 3 .852 -.469 Values Authenticity 1 .647 .650 Values Authenticity 2 .465 .628 Values Authenticity 3 .641 .645 Perceived Control .930 Extraction Method: Principal Component Analysis. Table W4: Rotated Component Matrix Component 1 2 3 Purchase Intention 1 .961 Purchase Intention 2 .952 Purchase Intention 3 .965 Values Authenticity 1 .918 Values Authenticity 2 .767 Values Authenticity 3 .914 Perceived Control .985 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 4 iterations. Journal of Marketing 60 Peer Review Version Page 58 of 68 Author Accepted Manuscript WEB APPENDIX D: STIMULI USED IN STUDY 3A AND 3B Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. At the current time, the brewery is still an independent company. {Workman was founded as an independent book publisher in 1968. They publish different types of books including novels, essays on culture and music, as well as cooking books, travel guides, and calendars. 13 On average, Workman's yearly net profit reached $520,000.00. 14 At the current time, Workman is still an independent company.} [not acquired] No info [acquired by a bigger company] In January 2018, the brewery was acquired by Fitch Fish Inc, a brewery which is much bigger in size and production. 23 {In January 2022, Workman was acquired by Hachette, a publisher which is much bigger in size and 24 production} [acquired by a smaller company] In January 2018, the brewery was acquired by Fitch Fish Inc, a brewery which is much smaller in size and production. {In January 2022, Workman was acquired by Hachette, a publisher which is much smaller in size and production.} 33 [acquired by a same size company] 34 In January 2018, the brewery was acquired by Fitch Fish Inc, a brewery which is the same in size and production. {In January 2022, Workman was acquired by Hachette, a publisher which is the same in size and production} Table W5: ANOVA and Contrasts for Values Authenticity in Studies 3A and 3B Acquired by a bigger Acquired by a smaller Not Acquired Acquired by same size 43 company company company (N= 101) Study 3a 5.54 (1.08) 4.15 (1.47) 4.38 (1.28) 4.40 (1.27) F(3, 423) = 25.47, p <.001 Study 3b 5.76 (.81) 4.31(1.35) 4.59 (1.23) 4.59 (1.21) F(3, 396) = 30.10, p <.001 Study 3a contrasts: M = 5.54, SD = 1.08, M = 4.31, SD = 1.35, F(1, 423) = 73.90, p < .001; M = 4.15, SD = 1.46 vs. M = not acq. acq. acq. bigger acq same_size 4.38, SD = 1.28 vs. M = 4.40, SD = 1.27, F(1, 423) = 1.11, p = .331 acq. by smaller Study 3b contrasts: M = 5.76, SD = .81, M = 4.50, SD = 1.25, F(1, 399) = 85.90, p < .001; M = 4.31, SD = 1.35 vs. M = not acq. acq. acq. bigger acq same_size 4.59, SD = 1.23 vs. M = 4.59, SD = 1.21, F(1, 399) = 1.72, p = .182 acq. by smaller Journal of Marketing 60 Peer Review Version Page 59 of 68 Author Accepted Manuscript WEB APPENDIX E: RESULTS FOR VALUES AUTHENTICITY ACROSS STUDIES Study 1: Effect of acquisition on consumers’ choice of a chocolate brand (Chocolate brands; N = 404) Ghirardelli Russell Stover Choice study between two Not Acquired Acquired Not Acquired Acquired chocolate brands (N = 202) (N = 201) (N = 201) (N = 202) 5.67 (.95) 4.48 (1.39) 5.52 (1.01) 4.40 (1.41) F(1, 403) = 101.20, p <.001 F(1, 403) = 83.72, p <.001 Study 2: Field survey with brands (Various product/service categories; N = 359) 12 Perception that the brand is controlled by another company (1 = completely independent – 7 = completely Survey with real brands controlled by another company) b = −.22, (SE = .03), p <.001 Study 3a: Effect of acquirer size on consumers’ evaluations of the acquisitions (Fictitious beer brand; N = 424) Acquired by a bigger Acquired by a smaller Not Acquired Acquired by same size 4-cell (acquirer size) company company (N= 109) company (N= 106) (N= 106) (N= 103) 5.54 (1.08) 4.15 (1.47) 4.38 (1.28) 4.40 (1.27) F(3, 423) = 25.47, p <.001 Study 3b: Effect of acquirer size on consumers’ evaluations of the acquisitions (real publishing brand; N = 400) 21 Acquired by a bigger Acquired by a smaller Not Acquired Acquired by same size 4-cell (acquirer size) company company (N= 96) company (N= 101) (N= 102) (N= 100) 5.76 (.81) 4.31(1.35) 4.59 (1.23) 4.59 (1.21) F(3, 396) = 30.10, p <.001 Study 4: Effect of acquired percentage of shares on consumers’ purchase intention (Fictitious beer brand; N = 424) Not 15% 60% 75% 100% 7-cell (acquired 30% Acquired 45% Acquired Acquired Acquired Acquired Acquired Acquired shares %) (N= 60) (N= 63) (N= 61) (N= 60) (N= 60) (N= 60) (N= 58) 29 5.72 (.92) 5.05 (1.14) 4.74 (1.19) 4.69 (1.27) 3.91 (1.26) 4.55 (1.22) 4.24 (1.55) 30 F(6, 423) = 14.20, p <.001 Study 5: Effect of sequential acquisitions (Fictitious backpack brand; N = 363) 3- cell (time of acquisition) Not Acquired (N = 121) First Time Acquisition (N = 121) Repeated Acquisitions (N = 121) 5.81 (.94) 4.99 (1.19) 4.77 (1.15) F(2, 362) = 29.89, p <.001 Study 6: Effect of leadership continuity (Fictitious backpack brand; N = 360) 3-cells (leadership continuity Not Acquired (N = 121) Leadership Continuity (N = 118) Leadership Change (N = 121) after acquisition) 38 5.45 (.90) 4.36 (1.06) 3.60 (1.44) F(2, 359) = 98.45, p <.001 Study 7: Effect of the acquirer values (Real clothing/accessories brands; N = 361) Not Acquired Acquirer High Values Alignment Acquirer Low Values Alignment 3-cells (values of the acquirer) (N = 122) (N = 119) (N = 120) 5.30 (.98) 5.23 (.90) 4.78 (1.11) F(2, 360) = 9.34, p <.001 Study 8: Moderation effect of the type of values the brand has (Real outdoor clothing brand; N = 504) Not Acquired (N = 254) Acquired (N = 250) 2 (Acquisition type) x 2 (Type 48 Control Growth Control Growth of values) (N = 123) (N = 131) (N = 126) (N = 124) 5.97 (.97) 5.56 (1.06) 4.61 (1.59) 4.92 (1.30) F(1, 503) = 10.36, p <.001 Study 9: Moderation effect of brand age (Fictitious backpack brand; N = 633) Not Acquired (N = 324) Acquired (N = 309) 2 (Acquisition type) x 2 (Brand Older Brand Younger Brand Older Brand Younger Brand age) 54 (N = 164) (N = 160) (N = 149) (N = 160) 6.17 (.93) 5.98 (.78) 3.59 (1.43) 3.96 (1.58) F(1, 632) = 8.52, p =.004 Journal of Marketing 60 Peer Review Version Page 60 of 68 Author Accepted Manuscript WEB APPENDIX F: STIMULI USED IN STUDY 4 [not acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. At the current time, the brewery is still an independent company.” [15% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. 13 In the first three years of operations their net profit reached $220,000. 14 In January 2018, the brewery Fitch Fish Inc acquired 15% of the capital of Rusty Root.” [30% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 30% of the capital of Rusty Root.” [45% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 45% of the capital of Rusty Root.” [60% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 60% of the capital of Rusty Root.” 33 [75% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 75% of the capital of Rusty Root.” [100% acquired] “Rusty Root Brewing was founded as an independent craft beer brewery in 2001. In the first three years of operations their net profit reached $220,000. In January 2018, the brewery Fitch Fish Inc acquired 100% of the capital of Rusty Root” Journal of Marketing 60 Peer Review Version Page 61 of 68 Author Accepted Manuscript WEB APPENDIX G: ADD-ON STUDY (EFFECT ON THE ACQUIRER) Pretzels Inc. is a US-based food manufacturer producing a variety of snacks available in different flavors. Hershey is a US-based food manufacturer, producing a variety of confectionary and savory products. 22 [Acquired] 23 Recently, Hershey showed interest in acquiring Pretzels Inc., a deal that was closed shortly after with the successful acquisition of Pretzels Inc. by Hershey. Due to this deal, Hershey now controls 100% of the Pretzels Inc. company. [Not Acquired] [No info] Participants (N = 211, 39.8% female, MAge = 40.27, MTurk) took part in a study on brand evaluation. We randomly assigned participants to either a not acquired or acquired condition. In both conditions, we presented participants with two real brands: Pretzels Inc (a snack 35 manufacturer) and Hershey (a confectionery manufacturer). We counterbalanced the presentation order of the brands. Next, in the acquired condition, participants read that Hershey recently acquired Pretzels Inc (an acquisition that also happened in reality). In the not acquired condition, participants did not receive any further information. Next, we purchase intention for the two brands (counterbalancing the presentation order) on a 1 to 7 Likert scale from strongly disagree to strongly agree (“I would buy products from Pretzels Inc [Hershey]”; “If I were looking for a snack, I would consider buying the ones made by the Pretzel Inc. [Hershey]brand” all α >.9). The results show that purchase intention for Pretzels Inc. decreased significantly when consumers knew about the acquisition (MNot/acq = 5.51, SD = 1.04 vs. MAcq = 5.06, SD = 1.54, t(209) = 2.47, p = .014). Concerning the acquirer brand (Hershey), the results show a less pronounced (yet significant) decrease on consumers’ purchase intention (M = 5.88, SD = Not/acq .96 vs. M = 5.58, SD = 1.15, t(209) = 2.03, p = .044). Thus, the results suggest that together Acq with a negative effect on the acquired brand, an acquisition can also have a less pronounced negative effect on consumers purchase intention towards the acquirer brand. Specifically, while consumers’ purchase intention dropped by 8.17% for the acquired brand, it dropped by 5.10% in the case of the acquirer brand. Journal of Marketing 60 Peer Review Version Page 62 of 68 Author Accepted Manuscript WEB APPENDIX H: STIMULI USED IN STUDY 5 Pinbag is an American company that produces backpacks. The company originally started the production in 2012 in Pittsburgh, Pennsylvania. All Pinbag’s backpacks are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs, meant for the smart and independent young individuals of today. “Many people carry a backpack every day. We design our backpacks not only for convenience, but also to help people express who they are,” can be read on the company website. All the backpacks are designed and manufactured in the company’s headquarters in Pittsburgh. In July 2019, Pinbag won a quality award for its products. [Acquired first time] Over the years, the firm has grown considerably but had remained independent until earlier this year. In January 2021, Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. [Acquired multiple times] Over the years, the firm has grown considerably but has not remained independent (i.e., control of the firm was transferred, a few years ago, over to another company). More recently, in January 2021, Pinbag was acquired once more after the acquisition of a few years 37 before, this time by Alphatex, another company operating in the textile and apparel industry. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 63 of 68 Author Accepted Manuscript WEB APPENDIX I: FURTHER ANALYSES IN STUDY 5 9 Table W6: ANOVAs and Contrasts: Study 5: Effect of sequential acquisitions (Fictitious backpack brand; N = 363; MTurk) Acquired Multiple Times Not Acquired (N = 121) Acquired First Time (N = 121) (N = 121) DV: Product Quality 5.97 (.90) 5.75 (.96) 5.70 (1.00) F(2, 360) = 2.84, p =.06; Not acquired vs. acquired first time: t(360) = 1.82, p = .07; Not acquired vs. acquired multiple times: t(360) = 2.25, p = .025; Acquired first time vs. acquired multiple times: t(360) = .43, p = .667. Mediation Analyses: An additional multi-categorical mediation analysis (PROCESS MODEL 4; 10,000 bootstrap resampling) proves that values authenticity mediates the effect even if product quality is added as a covariate. The indirect effects remain, in fact, significant (acquired first time: ab = –.31, SE = .08, 95% CI = –.49, – .16; acquired multiple times: ab = –.39, SE = .09, 95% CI = –.57, –.23). The mediating effect of product quality, nevertheless, becomes insignificant when values authenticity is introduced as a covariate (acquired first time: ab = .09, SE = .06, 95% CI = –.04, .21; acquired multiple times: ab = .11, SE = .07, 95% CI = –.02, .25). Overall, the results corroborate the robustness of values authenticity as a key mediating mechanism of the effect, even when we control for perceived product quality. Journal of Marketing 60 Peer Review Version Page 64 of 68 Author Accepted Manuscript WEB APPENDIX J: STIMULI USED IN STUDY 6 Pinbag is an American start-up that produces backpacks. The two founders, Tom Eagles and Ann Richardson, originally started the company in 2010 in Pittsburgh, Pennsylvania. All Pinbag’s backpacks are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs. All the backpacks are designed and manufactured in the company’s headquarters in Pittsburgh. [Acquired leadership continuity] In January 2019, the start-up Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. While negotiating the acquisition, Tom Eagles and Ann Richardson - the two founders – decided to sell the company but to remain in their positions at Pinbag and are still in charge of making decisions about the future of the company. Control over the operations of the company 28 is therefore maintained by the original founders of Pinbag. [Acquired leadership change] In January 2019, the start-up Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. While negotiating the acquisition of the company, Tom Eagles and Ann Richardson - the two founders – decided to sell the company and to leave their positions at Pinbag 35 and they are no longer in charge of making decisions about the future of the company. Control over the 36 operations of the company is therefore transferred from the original founders to Alphatex, the international corporation. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 65 of 68 Author Accepted Manuscript WEB APPENDIX K: FURTHER ANALYSES IN STUDY 6 Table W7: ANOVAs and Contrasts: Study 6: Effect of leadership continuity (Fictitious backpack brand; N = 360; MTurk) 3-cells (leadership continuity Not Acquired (N = 121) Leadership Continuity (N = 118) Leadership Change (N = 121) after acquisition) DV: Product Quality 5.71 (1.00) 5.75 (.97) 5.00 (1.24) Omnibus: F(2, 359) = 18.61, p <.001; Not acquired vs. Leadership Continuity: t(357) = -.239, p = .811; Not acquired vs. Leadership Change: t(357) = 5.17, p <.001 DV: Underdog Effect 5.23 (.94) 4.90 (1.04) 4.22 (1.26) Omnibus: F(2, 359) = 27.18, p <.001; Not acquired vs. Leadership Continuity: t(357) = 2.25, p = .019; Not acquired vs. Leadership Change: t(357) = 7.23, p <.001 Mediation Analyses: An additional multi-categorical mediation analysis (PROCESS MODEL 4; 10,000 bootstrap resampling) proves that values authenticity mediates the effect even if perceived product quality is added as a covariate. The indirect effect remains significant when there is a leadership change (ab = –.55, SE = .13, 95% CI = –.81, – .30), indicating that values authenticity loss mediates the effect on purchase intention over and above the impact perceived product quality has. Similarly, 35 values authenticity remains a significant mediator of the leadership change on purchase intention when the perception of being an underdog is introduced as a covariate (ab = –.87, SE = .15, 95% CI = –1.17, – .61). Notably, the mediating effect remains significant even when both perceived product quality and perception of being an underdog are simultaneously introduced as covariates in the model (ab = –.48, SE = .12, 95% CI = –.73, – .26). Overall, the results support the robustness of values authenticity as a key mediating mechanism of the effect, even when we control for other important factors, such as perceived product quality or perceiving the brand as 43 an underdog. Journal of Marketing 60 Peer Review Version Page 66 of 68 Author Accepted Manuscript WEB APPENDIX L: STIMULI USED IN STUDY 7 Pela is a brand that manufactures sustainable products using different recycled materials. They produce a series of environmentally friendly accessories, including phones and iPad cases, smart watch bands, and a line of screen protectors among others all using materials that are biodegradable or recycled by previously wasted materials. 14 The products come in different sizes and colors and Pela has had a quite good revenue over the last few years. [Acquired by brand High Values Alignment] Recently, the clothing brand Patagonia, acquired 100% of the brand Pela. The founding team of Pela remained, nevertheless, involved in the management of the brand. [Acquired by brand Low Values Alignment] Recently, the clothing brand Supreme, acquired 100% of the brand Pela. The founding team of Pela remained, nevertheless, involved in the management of the brand. [Not acquired] No Info Journal of Marketing 60 Peer Review Version Page 67 of 68 Author Accepted Manuscript WEB APPENDIX M: STIMULI USED IN STUDY 8 Tatonka is an outdoor equipment brand founded by Ollie James. [Growth] Ollie, the founder, said recently in an interview “For me, it is a matter of how many people use my products. At the end of the day, we want lots of people to use and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” 13 In the first three years of operations the net profit of Tatonka reached $400,000. [Control] Ollie, the founder, said recently in an interview “For me, it is not a matter of how many people use my products. It is a matter that the passionate people use and appreciate them. I started the company keeping this value in my mind and I am trying my best to pursue it.” In the first three years of operations the net profit of Tatonka reached $400,000.” [Acquired] In January 2018, Tatonka was acquired by another company, Outdoor Tech. The owner of Outdoor Tech described the acquisition as “a great deal”. [Not acquired] No info Journal of Marketing 60 Peer Review Version Page 68 of 68 Author Accepted Manuscript WEB APPENDIX N: STIMULI USED IN STUDY 9 [Younger Brand] Pinbag is an American start-up that produces bags. The founder, Tom Eagles, originally started the company in 2010 in Pittsburgh, Pennsylvania. The founder is in control of the company and manages it. When it comes to take up business decisions, he has a commitment to maintain the exact same vision that lead him to found the company in 2010. All Pinbag’s bags are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs, meant for the smart and independent young individuals of today. All the bags are designed and manufactured in the company’s headquarters in Pittsburgh. [Older Brand] 17 Pinbag is an American company that produces bags. The founder, Tom Eagles, originally started the company in 1869 in Pittsburgh, Pennsylvania. After five generations, the company is still under the control of the Eagles’ family. When it comes to take up business decisions, there is a commitment by the family to maintain the exact same vision started from the founder in 1869. All Pinbag’s bags are manufactured using heavy-duty canvas. The brand has established a reputation for its eye-catching yet sleek designs, meant for the smart and independent young individuals of today. All the bags are designed and manufactured in the company’s headquarters in Pittsburgh. [Acquired] In January 2015, Pinbag was acquired by Alphatex, an international corporation operating in the textile and apparel industry. After the acquisition the heir of the founder left his positions at Pinbag and he is no longer in charge of making decisions about the future of the company. Control over the operations of the company is therefore transferred from the original founders to Alphatex, the international corporation. [Not acquired] No info Journal of Marketing

Journal

Journal of MarketingSAGE

Published: Jul 1, 2023

Keywords: acquisitions; branding; brand values; values authenticity; authenticity; signaling theory; consumer reactions

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