Merger & Acquisition by Family Firms: The Effect of Distance

This paper looks at the merger and acquisition (M&A) behavior of family firms, in particular their spatial strategy. Existing research on M&A by family firms have looked at the performance implications of M&A by family firms (Basu, Dimitrova, & Paeglis, 2009; Bauguess & Stegemoller, 2008) and found that family firms prefer generic expansion compared to growth through M&A (Caprio, Croci, & Del Giudice, 2011; Shim & Okamuro, 2011). However this literature has overlooked the spatial dimension of M&A strategies. Firms have to seek information and choose among geographically distributed alternatives (Dicken, 1971). Previous studies have pointed out that, the difficulty of search increases with distance (Chakrabarti & Mitchell, 2014). However what is less well known is the impact of geographical distance on search for specific ownership categories like family firms. There is also limited understanding of the factors that exacerbate or ease the impact of geographic distance for family businesses when they seek new resources. This lack of understanding of the spatial strategy adopted by family businesses in acquisitions is because “there are few empirical articles on M&As [mergers and acquisitions] involving family firms” (Mickelson & Worley, 2003: 252) in the first place.