Impact of Distance on Acquisitions by Family Firms: Evidence from India

The purpose of this paper is to examine the impact of distance on acquisitions by family firms in India. Strategic decisions like mergers and acquisitions have a spatial dimension, since firms seek information and choose among geographically scattered alternatives. Using a logit regression model, this study examines the moderating effect of family firm characteristics (prior acquisition experience, acquirer size and generation) on the distance and probability of acquisitions by family firm relationship in a sample of 924 acquisitions by 405 Indian chemical manufacturing firms. We find family firms are less willing to undertake M&A over longer distances. However they are able to overcome the distance barrier in M&A, if A) They have prior M&A experience; B) They are bigger in size; C) The target is urban; and D) It is a first generation family firm. This study adds to the literature on the strategic choices adopted by family firms as too little is known about the effect of family business characteristics on mergers & acquisitions in emerging markets such as India.