Abstract

Studying the value created by web-related acquisitions is important from at least two perspectives. First, acquisitions have become a popular strategy for corporate growth for firms engaged in e-commerce initiatives. Surprisingly, there is little empirical research examining the viability of acquisitions as a mode of corporate growth. A second reason for studying the linkages between acquisitions and firm value comes from the growing literature on the resource-based theory of firm. According to this view, acquisitions lead to redeployment of resources across the firm, leading to more productive uses of resources and capabilities of the firm. Firm-specific assets and capabilities residing in one organization are merged and combined with those in another organization in an effort to improve the overall productivity of combined resources. This is all the more important in the context of firms engaged in e-commerce initiatives as they are under pressure to gain resources and capabilities before their competitors. For traditional brick and mortar firms as well as Internet firms trying to establish an online presence, acquisitions offer an opportunity to gain quicker access to resources and technological expertise that would accelerate their plans for online expansion. For Internet firms facing intense competition and resource constraints, acquisitions also provide a viable exit strategy, simultaneously satisfying the wealth maximizing objectives of their entrepreneurs. Acquisitions also help in meeting the critical resource requirements faced by several Internet firms that are in the early stages of business development. Evaluating the value created through acquisitions will throw light on the resource synergies that are expected to be generated through the acquisitions.

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