Does Experience Improve Acquisition Performance? It’s Complicated, and That Is When It Helps Most

Abstract

Across social science the observation that experience in X increases performance in X is broadly established. The empirical literature on quantifying the effect of acquisition experience on the performance of future acquisitions is an anomaly—only half the studies published in top management journals report such a positive association. We meta-analyze this literature. Our study contributes three primary discoveries: (1) We robustly establish the positive relationship between acquirer experience and performance after accounting for the statistical quality of each study. Just as this result is non-obvious to academic observers of this conversation, it is also apparently non-obvious to investors—the effect size from studies using stock market reaction as a proxy for performance is indistinguishable from zero in all specifications and significantly less than from those using accounting-based measures. (2) The positive association of experience to performance strengthens in study settings is characterized by a moderator previously explored among industrial workers: Complexity. In particular, experience is more positively associated with performance in cross-border and multi-industry settings as well as those where the performance metrics reflect information more available to insiders than outsiders. (3) We document the considerable discord in this literature and highlight its probable sources and remedies.