Monday, March 31, 2014
Merger regulation, firms, and the co‐evolutionary process: An empirical study of internationalisation in the UK alcoholic beverages industry 1985‐2005
Julie Bower, Birmingham Business School and Howard Cox, Queen Mary are brewing Merger regulation, firms, and the co‐evolutionary process: An empirical study of internationalisation in the UK alcoholic beverages industry 1985‐2005.
ABSTRACT: We present an historic industry study of the consolidation of the UK alcoholic beverages firms to inform debates in organisation studies relating to co‐evolution and the dynamics of internationalisation. Given the constraints imposed on merger strategies by competition policy, once merger opportunities are exhausted at home firms are motivated to embark on international consolidation in order to continue a growth trajectory. This brings them into contact with unfamiliar and more complex institutional interactions. The ability to interact successfully with key agents in the institutional environment is likely to be an important source of firm competitive advantage. Our article conceptualises this process with reference to co‐evolutionary theory. We distinguish behavioural and structural co‐evolutionary factors in firms’ strategic intent, mirroring the two types of remedies that competition authorities can impose on merging firms. We test this theoretical construct in an empirical investigation of the consolidating UK alcoholic beverages firms between 1985 and 2005. In this era Diageo was formed from the landmark merger of Grand Metropolitan and Guinness. Subsequently Diageo acquired the former international spirits empire of Seagram in partnership with a major competitor. Successful implementation of Diageo’s merger strategy owed much to an ability to navigate the evolving multi‐jurisdictional co‐ordinated oversight of cross‐border mergers and acquisitions. The formation of novel deal structures as well as cooperation with competitors to circumvent policy intervention were significant co‐evolutionary mechanisms that have featured more generally in subsequent international mergers as others have copied these deal structures to achieve similar regulatory outcomes.