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Maturing, Technology-Based, Born-Global

Companies: Surviving Through Mergers and
Acquisitions
ARTICLE in MANAGEMENT INTERNATIONAL REVIEW AUGUST 2014
Impact Factor: 0.75 DOI: 10.1007/s11575-014-0212-9

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Maturing, Technology-Based, Born-Global

Companies: Surviving Through Mergers
and Acquisitions
Tamar Almor, Shlomo Y.Tarba & Avital
Margalit

Management International Review

Journal of International Business
ISSN 0938-8249
Volume 54
Number 4
Manag Int Rev (2014) 54:421-444
DOI 10.1007/s11575-014-0212-9

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Manag Int Rev (2014) 54:421444
DOI 10.1007/s11575-014-0212-9
RESEARCH ARTICLE

Maturing, Technology-Based, Born-Global Companies:

Surviving Through Mergers and Acquisitions
Tamar Almor Shlomo Y. Tarba Avital Margalit

Received: 15 February 2013 / Revised: 25 September 2013 / Accepted: 27 March 2014 /

Published online: 23 July 2014
 Springer-Verlag Berlin Heidelberg 2014

Abstract To date, there has been little research about the corporate growth of
born-global companies and relatively little data exist about their maturation, survival as independent companies (or failure to do so) and their international strategies. The present paper is based on an empirical study of Israeli technology-based
companies that were identified in the late 1990s as born global. We collected data
about the continuing development of these firms for the decade spanning
20002009. Our findings show that maturing technology-based, born-global companies can increase their chances of survival by acquiring other firms. Although
such acquisitions do not increase profits, they allow born-global firms to continue
increasing their sales and to expand and upgrade their product line, which in turn
increases their chances of remaining independent. The data also show that if the
firms prefer to merge with another company, they are in a better position if they do
not acquire any other firms beforehand. Finally, our data show that although the
majority of born-global companies can continue operations if they survived the first
decade, they are not highly successful on the measures of growth and shareholder
wealth. One of the recommendations of this study is that for maturing, technologybased, born-global companies to remain successful, they must be more aggressive in
their M&A strategy than they are at the moment.
Keywords Maturing born-global companies
Israeli high-tech
Mergers and
acquisitions
T. Almor (&)
School of Business Administration, College of Management, Rishon LeZion, Israel
e-mail: talmor@colman.ac.il
S. Y. Tarba
Management School, University of Sheffield, Sheffield, UK
A. Margalit
U Conduit Ltd., Ness Ziyona, Israel

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1 Introduction
The emergence of small entrepreneurial companies that internationalize rapidly at the
early stages of their existence has been reported in different countries since the end of the
twentieth century (e.g., Almor 2011; Autio et al. 2000; Knight and Cavusgil 2004; Oviatt
and McDougall 1994, 1997; Zahra et al. 2000). Most empirical papers about born-global
companies examine firms that exist for less than a decade. Moreover, the studies are
concerned primarily with questions of the initial survival and growth of these companies
(Hashai and Almor 2004; Jones and Coviello 2005; Rialp-Criado et al. 2010). Incidental
case studies published in newspapers, however, have suggested that at least some of
these born-global companies have now been in existence for about two decades, are
maturing, and have been addressing issues that differ from those encountered by the
young companies. The maturing of born-global companies seems to be a relatively new
phenomenon that has not yet been researched to date, and therefore few questions have
been raised regarding their maturation process. As a result, relatively little data exist
about maturing born-global companies, whether or not they have survived as
independent companies, and what international strategies they use.
The present paper aims to explore the ongoing development of technology-based,
born-global companies after they have experienced initial success, in the first decade of
their operation, by focusing specifically on mergers and acquisitions as a means of
surviving and organizational growth. Growth in the international arena is part and parcel
of the continuing success of technology-based, born-global companies, which are funded
mostly by external capital and must show continuing growth in sales and profits in order
to remain attractive to investors (Almor 2013). Although there are many examples of
born-global, technology-based companies that have been acquired by larger technologybased firms and have been merged into the larger businesses (e.g., IVC Research Centers
Report on Exits 2012; Levi 2005; Shelah 2006; Weber and Tarba 2011; Weber et al.
2012a, b), there are relatively few that have survived as independent companies.
In the present paper we argue that despite their relatively young age, small size,
and scarcity of resources and capabilities compared to large technology-based
multinational enterprises, born-global companies must use mergers and acquisitions
(M&As) to survive and succeed in a competitive global environment. We examine
the use of M&As by born-global companies empirically and examine whether this
strategy is pertinent to the survival of these companies after their initial success in
the first decade of their operation. We further examine the relationship between the
use of M&As and the financial data of born-global companies.
The paper is organized as follows: we begin by presenting a conceptual framework
that addresses the growth of born-global companies by means of M&A strategies, and
the derived hypotheses. Next, we describe the methods of data acquisition and present
the results. Finally, we discuss the results and present the conclusions.

2 Conceptual Framework
Rapidly internationalizing, entrepreneurial companies seem to emerge more
frequently in small countries with advanced economies, such as Israel, than in

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larger economies such as the US (Efrat and Shoham 2012; Gabrielsson and
Kirpalani 2004; Moen and Servais 2002), and are often referred to in literature as
born-global companies (Autio et al. 2000; Bell et al. 2003; Hashai 2011;
Hewerdine and Welch 2013; Melen and Nordman 2009). Born-global companies
are frequently characterized as having the ability to create innovative, selfdeveloped, technology-based products that are sold internationally from the start of
their existence (Bell 1995; Bloodgood et al. 1996; Coviello and Munro 1997; Dana
et al. 1999; Knight and Cavusgil 2004; Nordman and Melen 2008; Oviatt and
McDougall 1994, 1997; Rennie 1993; Rugman and Wright 1999; Zahra et al. 2000).
In this paper, born-global companies are defined as business organizations that from
the time of their founding or shortly thereafter seek superior international business
performance, by creating knowledge-based resources and capabilities in which form
the basis for sales in various countries (Almor 2013; Gabrielsson and Kirpalani
2004; Knight and Cavusgil 2004; Oviatt and McDougall 1994).
Technology-based born-global companies are often characterized by their
proprietary technologies and innovations, which they use to differentiate themselves
from other competitors (Aspelund and Moen 2001; Hashai and Almor 2004;
Coviello and Munro 1995; Jones 1999; Knight and Cavusgil 2004; Lewin and
Massini 2003; Oviatt and McDougall 1994; Rialp-Criado et al. 2002). These unique
technologies and innovations often have a limited home market, especially when the
firm originates in a small country; therefore, born-global companies are driven to
international markets early in their organizational existence in order to exploit first
mover advantages and monopolistic gains (Acs et al. 1997; Amin and Thrift 1994;
Keeble et al. 1998; McNaughton 2000). This strategy, however, creates a problem
that is not easily solved. Technology-driven companies need to stay in close contact
with their customers, not only to protect their proprietary know-how but also to
receive feedback regarding their technology through the processes of distribution
and after-sale services (Almor and Hirsch 1995; Hirsch 1989). This type of
interaction can lead to further technological innovations and also create customer
loyalty and a strong client base. But born-global companies are usually young,
small, and have relatively few resources, which limits their ability to serve a broad
segment of the international markets and large numbers of customers without
resorting to strategic alliances, which, however, may place their relationship with
customers and their technological innovations at risk (Almor and Hashai 2004).
Many technology-based, born-global companies cope with this quandary by
focusing on global niches in which they typically serve a small number of
organizational customers that create a high added value (Freeman and Cavusgil
2007; Rasmussen and Madsen 2002; Rennie 1993; Rialp-Criado et al. 2002). In this
way, the need for a substantial marketing infrastructure is reduced and a modest
marketing entity may suffice.
Although global focus-differentiation allows the technology-based, born-global
company to grow initially, it also creates dependence upon a highly specific product
life cycle. Although technology products can be upgraded and updated, they still
belong to a single industry, which eventually declines when it is challenged by new
industries that produce technologically superior substitute products (Christensen
1997; Hill and Jones 2004; Foster 1986). This problem is becoming increasingly

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acute because product and industry life cycles are becoming compressed. For
example, various Internet-based industries have progressed from initial introduction
to apparent maturity within a few years (Cusumano and Yoffie 1998).
Furthermore, technology-based, born-global companies frequently finance their
initial growth by means of external capital, floating the company publicly by
venture capital or private investments, and therefore they need to continue their
growth in order to remain attractive to investors (Barrow et al. 2005; Manigart and
Sapienza 1999). Therefore, technology-based, born-global companies are expected
not to remain complacent and not to behave like typical niche companies that
remain small. Instead, after they become established in their global niches they must
examine different options for continued growth.
One option is to sell the company to another, usually larger technology-based
company. This strategy is commonly used by many high-tech entrepreneurial
companies, and it is considered common among born-global companies as well
(PriceWaterhouseCoopers Israel Hi-Tech Exit Report 2012; Senor and Singer
2009). Another option is to grow the company at a relatively high pace. In this paper
we focus on maturing born-global companies that use acquisitions as a means to
survive and remain independent.
2.1 Continuing Growth of the Independent Born-Global Company
Innovation is an important source of value creation in many industries. In the first
decade of the twenty-first century, innovation occurs faster and novel solutions
appear at a more rapid pace than in the previous century, especially in hightechnology industries (King et al. 2008; Uhlenbruck et al. 2006; Makri et al. 2010).
As a result, firms must invest many resources in quick innovation of products and
processes that will allow them to remain competitive over time.
Born-global companies function in fast-changing technological environments
and must find ways to access new technologies and their associated resources
rapidly. The literature shows that large firms have turned to M&As as a strategy for
obtaining the knowledge needed to create innovations at the required speed and at
the rate needed to either maintain a competitive advantage or to build a new one
(Chaudhuri and Tabrizi 1999; King et al. 2008; Tarba et al. 2012; Uhlenbruck et al.
2006; Yurov et al. 2013). Acquisition of external technologies is an accepted
method for firms to increase their technical capabilities, expand their products, tap
into new markets, enhance their market power, and achieve strategic renewal
(Agarwal and Helfat 2009; Almor et al. 2009; Eisenhardt and Martin 2000; Gomes
et al. 2013). Therefore, acquisition is a prominent strategy used by many technology
firms to grow and leverage their capabilities (Sorkin 2009; Weber et al. 2011a).
Internal development is more expensive and time consuming than an M&A
strategy, and rather problematic for firms that initially have relatively few resources
such as researchers, engineers, managers, laboratories, knowledge, and experience.
Although this does not mean that these firms do not invest in internal development
at all, but the data show that internal product development can take at least
13 years for such firms (Barkema and Vermeulen 1998; Brouthers and Brouthers
2000; Hennart and Park 1993). Moreover, internal development does not guarantee

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success and increases the level of uncertainty for the firm (Slangen 2013; Slangen
and Hennart 2007, 2008). As resources are usually scant, most of these firms cannot
invest simultaneously in upgrading existing products and technologies on one hand
and in new R&D on the other (Gomes et al. 2011). Acquiring a startup with the
needed technological development or product, and with the professionals who
accompany this technology, allows much quicker expansion of the product line and
entry into additional markets for the technology-based, born-global company, while
simultaneously lowering the level of uncertainty associated with R&D processes
(Puranam et al. 2003, 2006; Weber and Tarba 2011; Weber et al. 2012a, b).
Therefore, we hypothesize that:
Hypothesis 1: Technology-based born-global companies that choose to use an
M&A strategy increase their chances to survive and remain independent
relative to companies that do not use an M&A strategy.
In its early years, the typical born-global company is characterized by a narrow
product scope and focused on a narrow geographical market. Literature posits that
growth paths traditionally lie along two axes: product scope and geographical scope
(Ansoff 1957; Delios and Beamish 1999; Geringer et al. 1989, 2000; Grant et al.
1988; Hitt et al. 1994, 1997; Palich et al. 2000). Together, these two axes create
various growth options. Successful technology-based, born-global companies,
however, frequently adhere to a single growth path rather than combine different
options (Hashai 2011) because they have relatively scarce resources, which are
specific to certain applications, therefore their ability to transfer resources between
applications is greatly constrained (Montgomery and Wernerfelt 1988). Scarcity of
resources confines a company in the scope of expansion activities it can pursue in a
given time period because of limitations of physical as well as intangible assets such
as management time (Penrose 1956). Therefore, it will select the expansion route
that matches its resources best (Montgomery and Wernerfelt 1988).
Because maturation of the product life cycle and even of the industry life cycle is
quickening and industry life cycles are becoming more compressed, especially in
high-tech industries (Weber and Tarba 2011; Weber et al. 2012a, b), technologybased companies must frequently upgrade their products, as newer technologies and
interfaces appear, creating a need for continually upgrading and updating the
product line. Thus, we argue that to remain independent, technology-based, bornglobal companies must invest their resources first and foremost in extending their
product line offerings, upgrades, and updates, and must increase the number of
products they offer. These products may be complementary to their existing product
line, related to their core products, or provide different solutions, unrelated to their
core products.
Large high-tech firms frequently use an M&A strategy to expand their product
lines (Deloitte 2011). We suggest that the current high speed of innovation and
technological change encourages born-global, technology-based firms to use a
similar strategy in order to survive in a competitive environment. Born-global
companies can use acquisitions to extend, enhance, and broaden their resources and
capabilities similarly to large technology-based firms (Agarwal and Helfat 2009;
Eisenhardt and Martin 2000; King et al. 2008). As noted, young born-global

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companies tend to focus on global niches where they offer a highly specific product.
As product life cycles contract, focused born-global companies are looking for ways
to survive and continue growing by extending their product lines; M&As enable
relatively small firms to acquire technical skills and technological capabilities that
they do not possess, enabling them to obtain faster access to resources needed to
continue developing additional technologies and products (Capron 1999; Graebner
2004; Graebner and Eisenhardt 2004; Graebner and Sjolander 1990; Mowery et al.
1996). This leads us to the following hypothesis:
Hypothesis 2: Born-global companies use an M&A strategy foremost in order
to extend their product lines.
We hypothesize that an M&A strategy allows technology-based, born-global
companies to mature independently, but other studies have pointed out problems
with this strategy. Paruchuri et al. (2006) found that post-acquisition integration is
highly disruptive for inventors and entrepreneurs, who incur a great loss in social
status and centrality after their company is acquired, leading to severe drops in their
productivity. Because knowledge is difficult to transfer, a high level of postacquisition integration may be required to realize the expected benefits of these
acquisitions (Puranam et al. 2003, 2006). But a high level of integration may
eventually result in cultural clashes, destruction of the knowledge-based resources
of the acquired firm due to senior management and key employee turnover, and
disruption of organizational routines (Ahammad et al. 2012; Puranam et al. 2003,
2006, 2009; Puranam and Srikanth 2007; Weber et al. 2012a, b).
Several comprehensive studies that examined the most frequently used variables
in recent research were not able to establish clear predictors for M&A success or
failure (Stahl and Voight 2008; Haleblian et al. 2009). Moreover, there is no
consistent confirmation that M&A strategy enhances the financial wealth of the
acquiring company because the findings of the studies are often inconsistent, mixed,
and even contradictory (Gomes et al. 2011; Papadakis and Thanos 2010;
Schoenberg 2006; Thanos and Papadakis 2012; Weber et al. 2011b). King et al.
(2004) were among the first to examine both stock and accounting measures of postacquisition performance among conglomerate firms. They argued that frequently
used rationales for M&A activity are based on the concept that the sum of merging
two firms is greater than their individual parts. The authors measured the
performance of acquiring firms over a series of time periods, ranging from days
to years. For each of the event windows, the stock and accounting measures used for
the acquisition of firms, including return on assets (ROA), return on equity (ROE)
and return on sales (ROS), were either insignificant or negative. To conclude, the
meta-analysis conducted by King et al. (2004) found that none of the strategic and
financial variables studied are significant in explaining the variance in postacquisition performance.
At the same time, evidence exists that acquisitions do create synergies, increase a
firms market and bargaining power, and improve risk diversification (Hitt et al.
1998; Tuch and OSullivan 2007). Moreover, Hitt et al. (2009) argued that firms that
search for targets with complementary capabilities and mechanisms that facilitate
their learning from the acquired firm are more likely to build new capabilities and

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enhance their competitive position in the market. Thus, as Ranft (2006) and Ranft
and Lord (2000, 2002) found, the use of acquisitions to gain new technologies and
capabilities seems to remain a durable and important feature of M&As in the hightech sectors.
Although the literature indicates that M&A strategy does not always seem to be
the best way for a company to gain financial profit (King et al. 2004), established
firms gain access to new technologies and know-how when they acquire startups
(Benson and Ziedonis 2009). Indeed, studies show that M&A strategy can succeed
if the acquirer identifies and monitors the technological activities when acquiring a
startup (Benson and Ziedonis 2009), if the two firms are similar in their business
focus, technology, and culture, and if they manage correctly the post-acquisition
process. Studies further show that if a buyer is larger than the acquired firm the
chances of financial gain increase (Homberg et al. 2009).
In the present paper we assume that technology-based, born-global companies
acquire relatively small startups that are also technology-based and have similar
business focus and cultures. In many instances, the workforce of both the bornglobal company and of the acquired startup consists of a high percentage of
engineers who have similar education, experience, and backgrounds. Moreover, the
acquired startups are frequently looking to exit by means of an M&A and
therefore experience lower levels of resentment. Although we assume that an M&A
strategy has a relatively high chance of enabling the born-global firm to remain
independent by enhancing its strategic abilities, we hypothesize that the use of
M&As does not increase shareholders wealth.
Hypothesis 3a: Technology-based, born-global companies that use an M&A
strategy do not experience a significant change in their level of profits and
shareholder wealth.
Graebner et al. (2010) noted that company executives hope to accomplish three
main goals when they implement an M&A strategy: (a) to harness the innovative
power of acquired firms and access complex knowledge, (b) to expand their market
footprint to new geographic regions or customer groups and to eliminate both
current and potential rivals; and (c) to create opportunities for resource reconfiguration and recombination of technologies.
Studies that examined whether and how the number of M&As affects a
companys competitive advantage report mixed findings. For example, Haywards
study (2002), based on a sample of 214 acquisitions made by 120 firms in 6
industries between 1990 and 1995, found that a firms focal acquisition performance
correlates positively with prior acquisition experience. But based on an analysis of
the most active acquirers in seven industry sectors in the US in the 1990s, Laamanen
and Keil (2008) found that although both a high rate of acquisitions and high
variability of the rate correlate negatively with the performance of the acquiring
firms, the acquisition experience moderates the afore-mentioned relationship by
weakening the negative effects. Zollo and Singh (2004), however, using a sample of
228 acquisitions in the US banking industry, reached the conclusion that the
accumulation of experience by the acquiring firms does not affect acquisition
performance.

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Technology-based, born-global companies frequently need to grow fast because

of the speed of innovation and the possible obsolescence of their product and of its
underlying technologies. Moreover, it is important for relatively young technologybased companies to continue increasing their sales, at times even more so than
creating high profits. In many cases, growth in sales is a better indicator of the worth
of such a company than profits are.
If the number of M&As does not necessarily affect the success of the firm,
cumulative experience in managing the post-acquisition process does enhance the
chances for success. Firms that are experienced in the management of the postacquisition process usually develop methodologies that help them manage the
process, which increases their chances of long-term survival and growth (Almor
et al. 2009; Cording et al. 2008; Ellis et al. 2009, 2012; Junni and Sarala 2011,
2013a, b; Schoenberg 2004; Vaara et al. 2012; Weber et al. 2011a).
We expect technology-based, born-global companies that have managed the
post-acquisition process more than once over the period of a decade to grow quicker
than companies that have experienced the post-acquisition process only once.
Hypothesis 3b: The volume of sales of technology-based, born-global
companies that have acquired more than one firm increases over a decade
more than the volume of sales of companies that have acquired only one other
firm.

3 Method and Sample

3.1 Population: Israeli Technology-Based Born-Global Companies
Israel is poor in natural resources but rich in human capital. It has a high proportion
of scientists and engineers in the population, with approximately 130 scientists and
engineers for every 10,000 workers (Chorev and Anderson 2006), compared with 80
in the US and 75 in Japan. Israel has the greatest R&D expenditure in the world as a
percentage of GDP (Traston et al. 2002) and the highest number of startups in the
world relative to population size. In the last decades, Israel has emerged as an
important global center of innovation and entrepreneurship, which has brought
about prosperity for a large part of its population (Bank and Almor 2013; Engel and
del-Palacio 2011). Knowledge-intensive industries, as well as private and public
venture capital, have helped industry and service sectors flourish and hundreds of
born-global companies to be established (Economist 2008; Zilber 2006).
Since the beginning of the 1990s, the government of Israel has created an
environment conducive to entrepreneurship. It established dozens of incubators,
enabling entrepreneurs to start out in a protected environment. Simultaneously, the
government stimulated the establishment of a venture capital industry to encourage
financial investments in the budding start-ups. It also set aside a significant budget
for the Chief Scientist Office, which allocates funds to subsidize the development of
new applications and technologies. But as most of these growing companies focus
on markets outside Israel, they attempt to list their companies as quickly as possible

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on foreign stock exchanges to signal to their foreign clients that they are serious
even though they are young, small, and originate in Israel, located in a region not
known for its stability (Blass and Yafeh 1998). Thus, in the past two decades,
hundreds of Israeli firms have been listed (and de-listed) on NASDAQ, an American
stock exchange which specializes in high-tech companies. Israeli born-global
companies have also been listed on other foreign stock exchanges (Avnimelech and
Teubal 2006; Senor and Singer 2009). Although a focus on listed companies may
skew the results, this is the only way to collect financial and other data regarding
born-global companies. In sum, Israel presents a good case for studying maturing
technology-based, born-global companies.
To examine the extent to which maturing technology-based, born-global
companies survive and grow by means of M&As, we collected data for the years
20002009 from firms that (a) were defined as born-global firms, (b) were part of
the Information and Communication Technology (ICT) sector in the year 1999, and
(c) originated in Israel. The ICT sector includes the software, hardware, and
electronics industries.
During the 1990s, thousands of startups were established in Israel, and a few
hundred of them became born-global companies. At the time, ICT, bio-tech, and
medical devices were leading Israeli industries in which startups developed. But
startups in the bio-tech industry traditionally have a very long ramp-up period, and
many of them are maturing only in the second decade of the twenty-first century.
Many startups specializing in medical devices disappeared during the high-tech
crisis at the turn of the twenty-first century. As a result, a large portion of the
maturing born-global firms in Israel are found in the ICT industry. At the end of the
1990s, about 150 small Israeli high-tech firms were trading on NASDAQ, half of
which were born-global firms. This number was unmatched by other countries,
making Israel into the second most-traded foreign country on NASDAQ, after
Canada, at the beginning of the twenty-first century.
3.2 Sample
The sample of the population that was examined empirically in this study was based
on a previous sample of 75 Israeli, technology-based, born-global companies that
existed before the year 2000 and were publicly traded at that time, mostly on
NASDAQ but also on other foreign stock exchanges (Hashai and Almor 2004). In
the present study we went back to the original sample and tracked all the firms since
1999. The current study is based on those born-global firms that were in existence in
the year 2000 and continued to exist independently until at least the year 2010.
The current study focuses on 57 firms from the original sample that belonged to
the ICT industry. Data for the years 2000 and 2009 were collected for these firms.
All ICT firms that were part of the original 1999 sample were traced, and their
annual reports were examined for the years 20002009. The sample for the current
study was created as follows:
1.

Initially we focused on 57 born-global companies in the ICT sector that existed

in the year 2000 and were included in the previous study.

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2.
3.

4.

T. Almor et al.

Data showed that 40 of these firms had survived independently until 2009, 16
were acquired, and one ceased to exist.
Of the 40 firms that survived, 33 had acquired at least one other company
during that decade, but only 28 of these survived after the year 2009. The
follow-up study was conducted in 2012, and after exhaustive and careful
research, annual data were found for only 28 maturing, born-global companies
that acquired at least one company during the years 20002009.
The 28 maturing, born-global, ICT firms had acquired 110 other firms during
the decade under examination. The 110 acquisitions that took place in the
period 20002009 formed the basis for part of this study.

By focusing on firms that are traded publicly, we were able to examine the
historical development of firms with a proven track record of business activity and
use public data such as annual financial reports, analyst reports, newspaper articles,
etc., which allowed us to conduct a content analysis of the development of these
firms between 20002009.
Information regarding the acquisitions was found in the annual statements of
each company. Because these companies are publicly traded, the acquiring
company must specify the details of the acquisition in a section within the annual
report. This section includes the name of the acquired firm, the acquisition price,
and reasons for the action, product type, and type of integration. In some cases,
we used other sources as well, such as the firms official website and press
releases.
Descriptive statistics show that the 28 firms in the sample were relatively small in
2000 (sales median of approximately $65 M and fewer than 1,000 employees) and
had a very strong international orientation: only 8 % of their revenues on average
were generated in the Israeli market. The firms were young, established on average
in 1990 (between the years 19821996), and started selling their first product
outside Israel on average within 2 years after their establishment. In 2009, sales had
grown to a median of $87 M.
The data collected for each M&A included the acquirer firm, acquired firm, year
of acquisition, location of the acquired firm, acquisition price, the primary reason
for the M&A (based on quotations from the official websites of the firms, annual
statements, or financial websites), and the type of product (complementary or
competitor).
Descriptive statistics show that the 110 M&As created by the 28 firms in the
sample generally occurred for complementary product purposes (80 %), which
allowed the companies to continue developing their current product line and expand
it with related products. The average acquisition price of these 110 M&As was
$20 M, indicating that most acquisitions were of small firms.
Figure 1 shows that 47 % of all acquisitions were of US-based companies.
The E.U. and Israel share second place, each representing 22 % of all
acquisitions in the sample. Together, these three geographic locations represent
91 % of the countries of origin of the firms acquired by the Israeli born-global
firms.

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Asia, 4, 3%
Australia, 1, 1%
Canada, 4, 4%

Europe, 24,
22%
USA, 51, 47%

South America,
1, 1%

Israel, 24,
22%

Fig. 1 Geographic location of the acquired firms

3.3 Data and Measures

A company was defined as independent if during the period 20002009 all three
conditions existed:

it continued publishing its annual report;

its stock was traded on a stock market;
it had an official website that specified the businesses and activities of the
company at least until the end of 2009.

A company was defined as acquired if during the studied period:

there were no annual reports, or not all were found;

its stock stopped being traded on a stock market at some point during the period
studied;
its official website could not be found;
Internet search results indicated that the company was acquired by another
company;
the acquirers official website provided information about its acquisition
(acquired company, year of acquisition, price, and reasons);
the original product name still existed, but the name was acquired by another
company.

A company was defined as ceased to exist if:

no annual reports were published anymore;

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its stock was no longer traded on a stock market;

its official website could not be found;
Internet search results indicated that the company ceased to exist;
no indication existed that it merged with another company.

No single measure captures all the dimensions of financial performance

(Graebner et al. 2010; Zollo and Meier 2008). Commonly used measures in
M&A studies are accounting measures such as sales, profit, shareholders equity, and
ROE derived from financial statements (King et al. 2004; Homberg et al. 2009;
Benson and Ziedonis 2009). In the present study, we used three groups of financial
parameters calculated from the balance sheets, the P&L statements, and from data
gathered on stock prices in order to measure financial performance:

growth in sales between the years 20002009;

change in profitability, i.e., gross profit, operating profit, and net profit between
20002009;
change in profitability to shareholders, i.e., earnings per share (EPS) and return
on equity (ROE) between 20002009.

To determine the reason for the acquisition, we reviewed the companies annual
reports before and after the acquisition, as well as sources such as the official
website of the company and press releases published close to the time of the
acquisition announcement about the location of the acquired firm, acquisition price,
product line, type of integration, and the reason for the acquisition. Next, we
performed a content analysis. Three experts reviewed the veracity of the data and
the categorization of the reason for the acquisition for each of the 110 acquisitions.
In 85 % of the cases there was unequivocal agreement between the three experts; in
case of disagreement, the information was reexamined and discussed, and a decision
was reached by the most experienced expert, with the agreement of the other two.

4 Results
To test the first hypothesis (that technology-based, born-global companies that
choose an M&A strategy increase their chances of surviving and remaining
independent compared with companies that do not pursue such a strategy), we
created a database in SPSS (PASW Statistics 18) consisting of two columns: (a) a
numeric variable that specified whether a firm did or did not perform an M&A, and
(b) a numeric variable that specified whether after 10 years a firm survived and
remained independent, was acquired by another firm, or ceased to exist. As noted,
57 firms participated in this test. A Chi square test was used to determine whether a
relationship exists between the two categorical variables, and in particular whether
one or both variables have more than two levels (IsM&A has 2 levels: Yes and No,
and IsSurvived has 3 levels: Yes, Acquired, and Ceased to Exist).
Table 1 presents the joint frequency distribution of the 57 companies examined.
Findings show that 39 (68 %) acquired other firms during 20002009. Moreover, 40
(70 %) of the companies remained independent after a decade, 16 (28 %) were

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Table 1 Frequency of M&A activity, the status of 57 companies after a decade and Chi square test of
differences in status
Status after a decade

Total

Survived

Acquired

Ceased to exist

11

Used M&A
No
Count

18

% within used M&A

38.9 %

61.1 %

0.0 %

100.0 %

% within status after a decade

17.5 %

68.8 %

0.0 %

31.6 %

% of total

12.3 %

19.3 %

0.0 %

31.6 %

Count

33

39

% within used M&A

84.6 %

12.8 %

2.6 %

100.0 %

% within status after a decade

82.5 %

31.3 %

100.0 %

68.4 %

% of total

57.9 %

8.8 %

1.8 %

68.4 %

Count

40

16

57

% within used M&A

70.2 %

28.1 %

1.8 %

100.0 %

% within status after a decade

100.0 %

100.0 %

100.0 %

100.0 %

% of total

70.2 %

28.1 %

1.8 %

100.0 %

Yes

Total

Value

df

Asymp. Sig. (2-sided)

Pearson Chi square

14.363

0.001

Likelihood ratio

14.124

0.001

Linear-by-linear association

8.975

0.003

N of valid cases

57

acquired, and 1 company (2 %) ceased to exist. When examining only the 40

companies that survived after a decade, 33 (82.5 %) acquired other firms and only 7
(17.5 %) did not. The Chi Square Test show that a statistically significant
relationship (P \ 0.05) exists between the decision to use an M&A strategy and the
ability to remain independent (v2 (2, N = 57) = 14.363, P = 0.001), supporting
Hypothesis 1 that technology-based, born-global companies that use M&As
increase their chance of surviving and remaining independent. Findings further
show a negative correlation between being acquired and acquiring. In other words,
if a company prefers to be acquired by another company, it should not acquire other
firms; but if it prefers to remain independent, it should use an M&A strategy and
acquire other firms.
Our second hypothesis concerned the reason why a maturing, born-global
company would acquire another firm, and we suggested that an M&A strategy is
used more frequently in order to expand the scope of the product line than for other
purposes. Overall, the results showed that the purpose of 80 % of M&As was to
access complementary products. Statistics about the purpose of the acquisition show

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Table 2 One-proportion z test for 110 M&As performed by 28 companies for the years 20002009 when
expected value is equal and Chi square for proportions
Purpose of M&A

Observed N

Expected N

Residual

Product

75

15.7

59.3

Country

14

15.7

-1.7

Customer

15.7

-10.7

Product and country

15.7

-9.7

Product and customer

15.7

-9.7

Country and customer

15.7

-12.7

15.7

-14.7

Product and country and customer

Total

110

Chi square

267.236

df

Asymp. Sig.

0.000

that 75 of the examined acquisitions (68 %) were reported to expand product scope,
14 (13 %) to expand into additional geographic markets, 5 (4.5 %) to reach new
types of customers, 6 (5.5 %) to expand both the product and country scope, 6
(5.5 %) to expand product and customer scope, 3 (3 %) to expand country and
customer scope, and 1 (1 %) to expand product, country, and customer scope.
Table 2 presents the one-proportion z-test used to test the purpose of the 110 M&As
in the sample. The one-proportion z test indicates that there is a statistically
significant difference (P \ 0.05) between the decision to expand the product scope
and to grow along each of the other paths (v2 (6, N = 110) = 267.236, P = 0.000),
when the expected value is equal for all paths of growth. Thus, we can conclude that
acquisitions made by the firms in this sample most frequently serve the purpose of
product line extension, supporting Hypothesis 2.
Hypotheses 3a and 3b refer to the relationship between the use of an M&A
strategy and financial performance. We posed that technology-based, born-global
companies that use an M&A strategy do not experience a significant increase in
long-term financial performance, and that companies that acquire more than one
firm increase their sales volume over time more than those that acquire only one
firm.
To study these hypotheses, we focused on the 28 companies that acquired other
firms between the years 20002009 and remained independent during these years.
Financial data from the annual reports regarding growth in sales, profitability, and
share price were compared for the first and the last year of the decade studied. We
used the Wilcoxon signed-rank sum test for the comparison because we could not
assume that the difference between the two variables was interval-based and
normally distributed, but we did assume that the difference was ordinal. The
Wilcoxon signed-rank sum test is the non-parametric version of a paired samples
t test.

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Table 3 Descriptive statistics and the Wilcoxon signed-rank test of the difference in stock price for the
years 2000 and 2009 for 28 companies that used M&As
Stock price (US$) 2000

Stock price (US$) 2009

26

28

Mean

Median

52.22

9.60

Std. Deviation

11.75

4.30

Minimum

111.27

13.59

Maximum

1.03

0.10
Stock price (1,000 US$) 2000 and 2009

Z
Exact Sig. (2-tailed)

-3.111
0.001

Table 3 shows that the Wilcoxon signed-rank test indicated a statistically

significant difference in long-term stock price between the years 20002009 for the
28 companies studied (Z = -3.111, P = 0.0001), however data showed that over a
period of a decade, stock price was inversely related to M&A strategy, in other
words, acquisitions correlated negatively with the long-term stock prices of the
acquiring company. In addition, the Z statistics for all the other financial measures
in this study were insignificant. Taken together, the results indicate that there M&A
strategy is not related to increase long-term stock price and profit, supporting
hypothesis 3a.
To test hypothesis 3b, we examined the relationship between the number of
acquisitions and the financial performance of the firms over a 10-year period. To
this end, we divided the 28 companies that acquired other firms between the years
20002009 into two groups: 9 companies that acquired only one firm during in last
decade and 19 companies that acquired two or more firms during the same period.
Results presented in Table 4 show that the mean volume of sales for companies
that acquired only one firm decreased by 20 % (from $104,199 in 2000 to $83,582
in 2009) and the median volume of sales decreased by 12 % (from $48,463 in 2000
to $42,535 in 2009). By contrast, the mean of volume of sales for companies that
acquired two or more firms during that same time period increased by 168 % (from
$211,475 in 2000 to 567,328 in 2009) and the median volume of sales increased by
75 % (from $71,798 in 2000 to $125,894 in 2009).
The Wilcoxon signed-rank test indicates that there is a statistically significant
difference (P \ 0.05) in long term sales performance between companies that
acquired two or more firms and those that acquired only one firm (Z = -2.777,
P = 0.004). But there is no statistically significant difference (P \ 0.05) in longterm sales performance among companies that acquired only one firm (Z = -1.244,
P = 0.25). Results further show that 15 of the companies (79 %) that were involved
in two or more M&As during the tested period increased their sales volume,
whereas 7 (78 %) of the companies that acquired only one firm during the same
period experienced a decline in sales volume. Based on these findings we conclude

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Table 4 Descriptive statistics and Wilcoxcon signed-rank test of the difference in sales for 28 companies
for the years 2000 and 2009 divided into two groups (one M&A and two or more M&As)
Number of M&As

Sales (1,000 US$) 2000

Sales (1,000 US$) 2009

One M&A
N
Mean

Median
Std. deviation

104,191

83,582.3

48,463

42,535

153,172

104,743

Minimum

10,626

2,277

Maximum

504,562

298,812

19

19

211,475

567,328

N
Two or more M&As
Mean
Median
Std. deviation

71,798

125,894

304,704

903,343

Minimum

13,077

6,400

Maximum

1,118,320

2,862,607

Number of M&As

Sales (1,000 US$) 2000 and 2009

One M&A
Z

-1.24

Exact Sig. (2-tailed)

0.25

Two or more M&As

Z

-2.77

Exact Sig. (2-tailed)

0.004

that the companies that acquired two or more firms significantly increased their sales
volume, supporting Hypothesis 3b.
Further analyses showed that Z statistics for sales, gross profit, and operating
profit were low and significant, whereas values for net income, EPS, ROE, and
shareholders wealth were high and insignificant. Similarly to results reported in
other studies (King et al. 2004; Benson and Ziedonis 2009), the stock price
decreased consistently during the decade studied for all the companies that acquired
at least one other firm.

5 Discussion and Conclusions

Israel has become one of the global entrepreneurial hubs, with thousands of
technology-based startups and hundreds of technology-based born-global companies established since the 1990s. Popular literature and newspapers address mostly
the exits that such companies frequently make. By contrast, the present article
focused on the companies that continue to exist independently in the second decade
of their organizational lives and rely on mergers and acquisitions for their survival.

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Our findings show that maturing technology-based, born-global companies that

survive independently can increase their chances of doing so by acquiring other
firms. Our results show that an M&A strategy, although it decreases stock price
value, increases significantly the chance of the firm to remain independent, mostly
by expanding its product line. The data also show, however, that if the owners prefer
to exit by selling the company, their chances of doing so are better if they do not
acquire other firms. This finding has not been reported in previous studies and
suggests that acquiring firms prefer to buy a firm that has not gone through a
previous merger process. Several explanations can be offered for this finding.
Existing research has shown that mergers of technology-based firms pose a high risk
because knowledge is difficult to transfer and requires a high level of postacquisition integration (Puranam et al. 2003, 2006). Such a high level of integration,
however, can result in the destruction of the acquired firms knowledge-based
resources due to senior management and key employee turnover and to the
disruption of organizational routines (Ahammad et al. 2012; Puranam et al. 2003,
2006; Puranam and Srikanth 2007; Puranam et al. 2009; Weber et al. 2012a, b).
When acquiring a firm that is experiencing such processes, the probability of a
successful post-acquisition integration decreases even further, causing acquiring
firms to prefer companies that are not themselves entangled in post-acquisition
merger processes.
Our findings also show that most of the surviving companies in the sample used
M&As, in contrast to those that did not survive independently. Moreover, the
acquisition of more than one company during the last decade correlates positively
with increase in sales volume and in gross and operating profits, but it is not related
to other measures of profitability such as ROE, EPS, and shareholder wealth. This
finding is similar to those reported in the literature, indicating that M&As are most
likely used to survive rather than to increase shareholders wealth. It seems that
technology-based, born-global companies need to increase their sales volume above
and beyond their organic growth, and that M&As allow them to do so. But the firms
in our sample were not able to create synergies at a level required to increase
significantly shareholder wealth. The findings show that the performance of these
maturing, technology-based, born-global companies is disappointing. Growth in
sales volume levels off in the second decade of their lives despite the fact that they
acquire other firms. The sales volume of firms that acquired only one company
decreased, and the sales volume of 40 % of the firms that acquired more than one
company also decreased. Stock price performed even more poorly and decreased for
all firms that acquired at least one other firm.
Taken together, the findings do not seem encouraging for investors and
entrepreneurs, as both groups experienced a decline in their investment over time.
Moreover, the findings raise questions about the efficacy and business success of
these companies over time, as the figures seem to suggest that most maturing,
technology-based, born-global companies that start out as rising stars show
diminishing performance in the second decade of their operation. After two decades,
the firms in the sample still have a median sales volume of less than $100 M
although they sell their products and technologies in tens of countries worldwide. It
seems, therefore, that for technology-based, born-global companies to succeed and

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grow at a pace that is reflected in their share price, they need to be much more
aggressive in their M&A strategy than they are currently, and to emphasize
continuing growth in sales.
The results also suggest that born-global firms that are not able to continue growing
aggressively should seek a larger company into which they can merge. In this case,
however, the born-global company should do so in the first decade of its organizational
life in order to maximize its worth, rather than pursue an M&A strategy.
The present study has several limitations. Because of its focus on Israeli,
maturing, born-global companies that belong to the ICT industry, it is not clear
whether our findings are applicable to born-global companies from other countries
and industries as well. Moreover, we studied companies that are traded on stock
markets, which may create a specific set of stakeholders and expectations. But
because most technology-based, born-global firms are funded by external capital,
examining firms traded on a stock exchange may be a good proxy for all
technology-based, born-global firms. Furthermore, in-depth interviews conducted at
the times when decisions were made could have added much understanding about
the strategic choices made by these companies. By using only secondary materials,
we were not privy to the variables that were taken into account when deciding how
to continue to manage the growth process of the companies in the sample.
Moreover, we have no knowledge of whether some of the independent companies in
the sample are independent out of choice or out of necessity, i.e. whether they were
willing to exit but did not receive offers of interest and were therefore forced to
continue independently.
We recommend continuing to collect data about maturing, technology-based,
born-global companies in different parts of the world that would allow comparing
firms that use an M&A strategies with those that do not use such strategies, and
firms that use an intensive M&A strategy with those that acquire fewer firms. Case
studies and in-depth interviews can help shed light also on this relatively new
phenomenon to help us predict the future success of these companies.

6 The Papers of This Focused Issue

As editors of this focused issue, we believe that were able to create a thoughtprovoking set of articles that examine different aspects of maturing born global firms.
Thus, this focused issue aims to explore how successful born global firms can continue
their process of growth over time. The underlying assumption is that international
growth of these firms eventually also provides an engine of growth at the national
level. Hence, the question of continuous growth of born global firms is not only
important at the firm level but also at the national level and is worthwhile to address.
The first paper by Almor, Tarba and Margalit investigates the growth of Israeli born
global companies and shows that maturing technology-based companies can increase
their chances of survival by acquiring other firms. Although such acquisitions do not
increase profits, they allow born-global firms to continue increasing their sales and to
expand and upgrade their product line, which in turn increases their chances of
remaining independent. One of the recommendations of this study is that for maturing,

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technology-based, born-global companies to remain successful, they must be more

aggressive in their M&A strategy than they are at the moment.
The paper that follows, by Gabrielsson, Gabrielsson, and Dimitrados, employs
the concept of International Entrepreneurial Culture (IEC) and is based a
longitudinal case study of four Finnish international new ventures (INVs) as they
grow over time. Their findings suggest that various IEC dimensions affect the
growth of INVs across their different phases. Although international motivation,
innovation propensity, risk attitude, market orientation and pro-activeness positively
affect advancement through the early INV growth phases, their effect is negative in
the later phases. This study suggests that the nature and intensity of the
entrepreneurialness of INVs change during their growth.
The next paper, by Glaister, Liu, Sahadev, and Gomes examines the HR practices
of mature born-global firms from 29 emerging economies. Through an examination
of large scale survey data the paper questions the extent to which firm size impacts
the employment of temporary workers, the employment of skilled workers and the
extent of employee training. The paper highlights how born-global firms are able to
shift away from externalized, market-based approaches towards more internalized,
commitment-based approaches in order to survive, adapt and grow.
In the fourth paper, Hagen and Zucchella develop and discuss a conceptual framework
and a model that captures the variables that affect born global firms evolution in a holistic
perspective. This paper shows that the openness of the founders and the early
preparation for growth determine both the extent of organizational learning and the speed
at which it is developed and used. Thus learning and its speed in development are the
underlying, necessary mechanism of sustained high growth.
In the fifth paper, Nummela, Saarenketo, Jokela & Loane extend current understanding of international growth processes of born global firms from the perspective of
strategic decision-making. Based on data collected from three software companies in
Finland, Ireland and Israel both in real-time and retrospectively, and applying a
longitudinal approach, this study captures the dynamics of the post-entry international
growth processes and the critical events that act as decision-making triggers.
Finally, Trugden and Freeman, drawing on international entrepreneurship theory
and based on data that were collected primarily through in-depth, face-to-face
interviews with senior managers from Australian born global firms and with
industry experts, found that the performance measures are dependent, in part, on the
born globals phase of development. The rapidity of internationalisation and the
psychic distance of initial markets have impact on the duration of each phase.
Last, but not least, as guest co-editors we would like to thank the reviewers for
this focused issue for their invaluable help.
Acknowledgments The authors wish to thank The Research Unit of the School of Business
Administration at the College of Management Academic Studies for the financial support of this study.

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