[4]. Disentangling the Performance Effects of Efficiency and Bargaining Power in Horizontal Growth Strategies: An Empirical Investigation in the Global Retail Industry

Valerie Moatti, Charlotte R. Ren, Jay Anand and Pierre Dussauge

M&A and organic growth are two common strategies for firms to achieve horizontal growth. In this study, we disentangle two distinct sources of firm performance corresponding to different theoretical perspectives on firm size: firms’ bargaining power with respect to suppliers and customers, and operating efficiency arising from scale economies. We conceptually argue and empirically show that relatively, M&A enhance bargaining power while organic growth enhances operating efficiency. We also find that M&A’s disadvantage on operating efficiency persists over time. In order to disaggregate these effects, we use accounting rather than financial or managerial data and test our predictions in the global retail industry over a 20 year period. We examine implications of these results for sustainability of size-based competitive advantages.

Strategic Management Journal, 2015, 36(5): 745-757.

Click here for the paper: Moatti-Ren-Anand-Dussauge 2015SMJ