There is an increasing trend towards global financial consolidation. Empirical evidence has shown that though consolidation can increase market efficiency, it can also increase systemic risk. Therefore, understanding the effects of company mergers on the global economy is an increasingly pertinent issue. The research presented in this thesis aims to explore the effects that mergers can have on interconnected markets. It will also suggest potentially stabilising market conditions that can reduce the risks associated with competitive production. An agent-based model of endogenous merger formation in a simulated market is developed. The dynamics of the model are investigated, and the conditions are identified under which market competition is sufficiently disrupted to prompt extended periods during which mergers are desirable. The model is used to demonstrate how merger waves can be created through industry shocks and firm overconfidence. This single-market model is then extended to one of multiple markets connected through supply chains. The conditions under which merger waves can spread along these pathways are found. The effect of introducing inter-market dependencies on market behaviour is also investigated. Finally, the model is developed into a closed system in which agents react to changes in demand by varying their production quantities. Although this is found to increase the average market profitability, it has a significant effect on market behaviour.

In three papers, I employ parametric and nonparametric methods in order to further examine the determinants of value creation in M&A deals financed with contingent earnout payments. The first paper investigates the short-run wealth effects of earnouts in deals in which financial advisors are counseling the acquiring firms. The results suggest that relative to using non-earnout payments, acquirers enjoy higher abnormal returns from earnout use only when consulting financial advisors. Specifically, once accounting for potential selection bias, advised earnout-financed deals significantly outperform deals that are financed with: (a) earnouts without the involvement of financial advisors and (b) non-earnouts regardless of the involvement of financial advisors. Thus, the likely ability of financial advisors to efficiently address the inherent complexities of the design of earnouts leads to greater acquirer gains. The second paper examines the impact of the acquiring firm's informational environment on the announcement period wealth effects of earnout-financing. The results suggest that under increased information asymmetry over the acquiring firm, the market's reaction to an earnout-financed deal mainly reflects its inference that the acquirer's stock is underpriced, rather than the deal's synergy potential. To this end, earnout acquirers are illustrated to be relatively undervalued prior to the deal's announcement. In contrast, the selection of earnouts by big acquirers with low information asymmetry sends a strong signal for value creation that also prevents market participants from inducing a size-related discount. Lastly, the third paper investigates the wealth effects of earnouts in international changes of corporate control. The results suggest that when firms choose to join a multinational network through the acquisition of a foreign company earnout-financing offers a major value-creating opportunity yielding greater announcement period abnormal returns to acquirers relative to domestic and remaining cross-border deals. In contrast, the likely presence of agency problems and monitoring costs appears to deteriorate the expected synergy gains from non-initial earnout-financed international M&As.

The research, informed by the knowledge based view of the firm, explores the relation between pre-acquisition alliances between acquirer and target and post-acquisition innovation performance. Pre-acquisition alliances are a rare event and the work draws on an original dataset, incorporating financial, mergers and acquisitions, patents, and business news databases. The sample consists of 269 high technology M&As with pre-acquisition alliances, which is then compared with a matched sample of acquisitions without prior alliances. The research adopts ‘doubly robust’ matching and average treatment effect models to observe the causal effect of acquisitions with pre-acquisition alliances on innovation performance. The results show that acquisitions following pre-acquisition alliance between acquirer and target differ substantially from the pool of acquisitions without any pre-acquisition alliances. Further, the study looks into the variety of knowledge motivations in pre-acquisition alliances, such as: alliances motivated by exploration and exploitation with different levels of intensity. The result reveals that a distinction between the intensity of exploration and exploitation better explains the result. The study also focuses on knowledge relatedness (in particular, technology similarity and complementarity) between firms involved in acquisitions both with and without pre-acquisition alliances and the role it plays in post-acquisition innovation performance. The result shows that the presence of technology similarity in firms involved in acquisitions with pre-acquisition alliances makes the integration process smoother and more efficient. Therefore, the performance outcome can be observed more rapidly in such cases than that of acquisitions without pre-acquisition alliances. Conversely, in cases with technology complementary between firms engaged in acquisitions with pre-acquisition alliances, we observe less negative impact on post-acquisition innovation performance. This research contributes towards bringing strategic management and the knowledge based view of the firm closer together by focusing on the role of knowledge as motivation for acquisition in pre-acquisition alliances. The results illustrate a better understanding of the relation and effectiveness of pre-acquisition alliances and innovation performance, and a clearer operationalisation of concepts of post-acquisition innovation performance. The study findings suggest that managers developing both acquisitions and alliances, should also consider pre-acquisition alliances, and bear in mind the different nature and levels of intensity in knowledge motivations and knowledge relatedness between acquirer and target as a factor influencing innovation performance.

The cumulative output of these papers emphasise that modelling organisational evolution and change from a complex systems perspective makes a significant contribution to organisational studies and brings new insight and understandings both to theory and practice. It is also true that the studies and modelling presented in these papers has pushed forward the boundaries of complex systems science, again both in theory and practice. The papers have made new findings and understandings of the processes, drivers and outcomes of the evolution of social systems and organisations through the development of new evolutionary models and frameworks that contribute both to organisational and complexity sciences. They have through a number of innovations based in complexity science addressed questions in organisational science concerning the importance of knowledge and learning, together with questions about the evolution and survival of organisations and industries. These innovations have played back into and developed complexity science.

Mergers and acquisitions are gaining a lot of prominence in global corporate dynamics as a strategic way for organizations to grow and diversify rapidly. The significance of post-merger integration cannot be overstated (Shrivastava, 1986). Although the main purpose behind organizational mergers and acquisitions is “One plus one makes three”, most post-merger integration studies focus upon failures (Dutta, Dutta, and Das, 2011). This research study is based in the context of post-merger integration between two competing firms and presents an empirical Action Research study focusing on “synergy realization”. This research study builds upon Clayton’s (2010) work on Complex Adaptive System (CAS) (Stacey, 2011) for realizing synergies amidst post-merger integration. CAS has been complemented by Complexity Leadership Theory (Uhl-Bien, Marion and McKelvey, 2007) which provides some control over the otherwise unpredictable nature of CAS. This study also attempts to utilize proven methodologies and methods oriented around organizational behavior, change management, emergence, co-evolution, and other leadership concepts that are anchored in Mode 2 research. The research methods, as well as the issues related to the research context, have continuously evolved while conducting this research study due to reflections offered by the double loop learning process. Although the primary focus of this study was to identify synergy realizations during the merger integration phase, the research study also explored the underpinning issues, problems, and challenges faced by organizational members while adjusting to or reconciling the different ways of functioning and behaving that were affecting synergy realizations. This study therefore also includes findings associated with organizational merger associated concerns such as interpersonal issues, human resource, knowledge management, communication, organizational management, leadership, and organizational ethos. This study makes 3 main contributions. First, this research study presents innovative insights towards resolving some of the mysteries attached with organizational mergers, by focusing upon positive merger objectives through synergy realizations by heeding to Clayton’s (2010) appeal for scholars and practitioners to go beyond traditional M&A methodologies. Second, this study presents an empirical account of some of the Mode 2 knowledge creation concepts such as Action Research, CAS, CLT, SSM and LiC, which has the potential of inspiring similar experimentation in organizational learning and management research. And third, this study demonstrates how researching practitioners can make an impact on successful adaptations to organizational change management situations such as the ones presented by organizational mergers by bridging the gap between theory and practice, and building upon research-oriented knowledge through AR and professional doctorate programmes.

This thesis examines three important issues in the financial literature strand of M&As. The first analysis regards the field of acquisition target prediction (ATP) and the construction of profitable investment strategies based on identifying prospective targets and investing in their stock. The study introduces novel predictors, which connect market conditions to individual firm targetiveness, but the prediction accuracy does not seem to materially improve when compared to the literature. However, the investment performance of predicted targets is firmly positive, resembling the performance magnitude of actual targets. In a novel construct of rolling estimation, the model seems to have low intertemporality, suggesting opportunistic performance in both prediction accuracy and importance of predicting factors. The second analysis regards the effect of CEO deal experience on deal performance. Based on manually collected data, the CEO experience at the time of the appointment in the firm seems to be insignificant for the returns around the announcement, but long-run returns form an inverse U-shaped relationship with experience, suggesting positive effects from modest experience and exponentially decreasing effects for more experienced CEOs. The significance only for long-run returns suggests that investors have yet to account for the effects of experience on deal performance. As for the relationship pattern, the shift is attributed to the different behaviour expected by CEOs with different levels of experience. Inexperienced CEOs are alert and cautious, deliberating on the appropriate course of action, while more experienced CEOs may rely on their past experience, ignoring the special circumstances of each deal and applying their intuition indiscriminately. The latter behaviour can be classified as overconfident and hubristic. The third analysis focuses on the value creation of large deals (> $500 mil) in the aftermath of the 2008 crisis. For the first time in academic literature, the general population of deals creates positive and significant wealth for acquirer shareholders. This outcome stands contrary to the status quo of the several decades leading up to the crisis, when the average deal was value-destroying for the acquirer. The improvement in returns holds for any type of deal that has been reported to lead to adverse stock performance. This market-wide shift connects to the recent financial crisis of 2008. The economic meltdown brought a stream of regulations in the U.S. market in an attempt to prevent the re-enactment of a similar crisis. The Dodd-Frank act improved several aspects of reporting and accountability for listed firms. The stunning improvement in corporate governance metrics and the ample testing for the effect of different factors suggest that superior corporate governance is the main factor for the new deal-performance standard.

This thesis uses an enactment perspective to critique and develop the concept of organisational capability. It approaches organisational capability from an interpretivist angle and inquires how organisations actually develop and renew their capabilities for sustainable competitive advantage. As a consequence of adopting the enactment perspective, the thesis reveals that organisational capabilities are much more context based and variable than the positivist and predictive representation of the concept in the extant literature. It also proposes that organizational design and learning processes play a key role in the development of organisational capabilities. The research uses qualitative interviews within a case study research design. It studies six medium-sized, mature organisations operating successfully in a variety of industries with diverse market dynamism. In order to move away from a linear representation of organisational capability, the study particularly focuses on the organisational antecedents of capability development in these organisations by relying on participants’ accounts to describe how the firm coped with external environmental changes throughout its history. Based on inductive theorising from intra- and cross-industry analysis, the study observes certain discrepancies in the way existing theories conceptualise organisational capabilities as well as confirms some of their suppositions. Regarding the antecedents of organisational capabilities, the empirical evidence concludes that the development and evolution of organisational capabilities are not only determined by the level of industry dynamism (Eisenhardt and Martin, 2000; Zollo and Winter, 2002); on the contrary, internal endogenous factors seem to matter as much as exogenous shocks. In terms of endogenous antecedents the study reveals a broad contrast between two distinct organisational learning mindsets – learning to innovate and innovating to learn – that influence how external industry factors are interpreted and translated into internal actions. The thesis confirms existing theories which claim that it is possible to decompose organisational capabilities into distinct, sequenced, hierarchically-ordered levels. But contrary to the literature which claims that only firms with higher-order ‘dynamic’ capabilities can succeed in changing environments, the thesis shows that multiple levels of capabilities can yield successful competitive performance for many years. Lastly, the thesis applies the concept of organisational learning mechanisms (Popper and Lipshitz, 2000) to investigate the process of capability development and argues that the structural and social facets, such as agent participation patterns and valuation of knowledge, are of particular importance in producing higher-levels of capabilities and more extensive organisational learning. The thesis contributes to the literature by showing that organisational capabilities are context-bound and idiosyncratic. They are a by-product of organisational life which comes not only through external factors and internal resources, but more importantly through managerial enactment, organisational mindset and learning mechanisms. It critiques existing theories based on the idea of organisation-environment alignment and proposes to introduce the idea of ‘envelopment’ which redefines the relationship between the organisation and its environment. The key idea is that within the same external environment, it is possible to have varying levels of firm dynamism and still to be able to maintain competitive advantage, without necessarily aiming for organisation-environment fit. This thesis contributes to the debates about the development and evolution of organisational capabilities by providing empirical support for the proposition of Zollo and Winter (2002) that there is a relationship between learning mechanisms and capabilities. As a result, it provides alternative insights into the genesis of organisational capabilities and the consequences of learning processes.

This thesis examines in depth the work of four associate lecturers at the Open University. Given that they see colleagues infrequently, it explores how they resource their practice, in what has been termed a dispersed community that lacks the social interaction associated with more traditional lecturing. This research identifies what knowledge resources and professional practices are used, and what the relationships are between these and the process of occupational identity-building. It also identifies other important facets of the working environment, such as the institution, faculty and department. The context of working as a part-time lecturer with the Open University is examined, and comparisons are made with other lecturing posts. Based on four in-depth case studies, the research considers the major components of a community of practice, such as participation and the negotiation of meaning. Given the dispersed nature of this community, the thesis further explores how routines and reifications of practice take on a more individualistic nature, not established within a social vacuum but in a social world where the organisation and students play a more important role than co-workers. Using activity system theory, network theory and power relationships, the research comes to a deeper and more integrated picture of associate lecturers. It concludes with postulations on how individual agency is an important aspect of practice in such a dispersed community.

This thesis examines whether worker co-operatives are able to construct institutions of work which improve the control and security of individuals in an otherwise insecure liberal capitalist environment, drawing together literature on the viability of co-operatives, work within co-operatives and the 'developmental freedom' approach. This would be manifest in an increase in members' control over working life, an increase in economic security for individuals, and more meaningful work. The thesis extends upon the established theoretical foundations of the 'developmental freedom' understanding of work, which values control over work and control over time, by applying it to the worker co-operative. The thesis engages in a review of the theoretical and empirical literature on such organisations from economic and political perspectives, and original qualitative empirical evidence is provided by interviews at four case study co-operatives from the UK. The thesis concludes firstly that co-operatives offer an experience of work governed by social bonds of reciprocity and solidarity; secondly that they are beneficial for control over time for individuals in both the short and long term; and finally such firms are able to survive and develop in liberal capitalist economies, in part due to the embedded relationships of control within them, but under strain due to the constraints of such a system which in turn inhibit control.

Despite ample research on corporate financing decisions, there is a growing interest in deepening our understanding of how firms structure their financing needs. In this dissertation, we build upon previous work on capital structure by examining the impact of firm-specific and macroeconomic risks on the capital structure of UK manufacturing firms. In particular, the dissertation consists of three separate, yet related essays. Each essay intends to serve a specific objective. The essays, in the order in which they appear, are entitled as follows: Essay I: The Response of Firms' Leverage to Risks: Evidence from UK Public versus Non-Public Firms Essay II: Capital Structure Adjustments: Do Macroeconomic and Business Risks Matter? Essay III: Macroeconomic Dynamics, Idiosyncratic Risk, and Firms' Security Issuance Decisions: An Empirical Investigation of UK Manufacturing Firms In the first essay, we empirically investigate whether the sensitivity of leverage to firm-specific (idiosyncratic) and macroeconomic risk differs across publicly listed and privately owned firms. We also study the implications of cash reserves-risk interactions for firms' leverage decisions. Using data from the Financial Analysis Made Easy (FAME) database, the analysis is carried out for a large panel of UK manufacturing firms over the period 1999-2008. The results provide significant evidence that UK manufacturing firms use less short-term debt in their capital structure during periods of high risk. This finding holds for both types of risk. The results on the differential effects of risk across public and non-public firms indicate that while the leverage of non-public firms is more sensitive to firm-specific risk in comparison to their public counterparts, the effects of macroeconomic risk on leverage are similar for both types of firms. The results of the indirect effects of risk show that firms with high levels of cash holdings are more (less) likely to reduce their leverage in periods when firm-specific (macroeconomic) is risk. On the whole, the results that we document in this essay provide strong evidence of the heterogenous sensitivities of leverage to risk across both types of firms and across different levels of firms' cash holdings. Essay II examines how risk affects firms' leverage adjustment decisions. Specifically, in this essay, we study the impact of risk about firms' own business activity and macroeconomic conditions on the speed with which firms adjust their capital structure toward their specific leverage targets. In doing this, we use an annual panel data obtained from the WorldScope file via DataStream for a fairly large sample of quoted UK manufacturing, covering the period 1981-2009. The results suggest that the adjustment is asymmetric and it depends on the magnitude of risk, the type of risk, and whether firms' actual leverage is above or below the target. Further, we find that firms with financial surpluses and above-target leverage adjust their leverage faster when firm-specific risk is low and when macroeconomic risk is high. In contrast, firms with financial deficits and below-target leverage are more likely to align their leverage toward their target in periods when both types of risk are low. Taken as a whole, our results suggest that firms adjust their leverage toward the target very asymmetrically across different levels and types of risk. This finding holds true even when we take into account several firm characteristics known to affect firms' adjustment speeds. The third essay analyzes how risk about firms' own business activity and macroeconomic conditions influences the security issuance decisions of listed UK manufacturing firms appeared on the WorldScope database during the period from 1981-2009. Estimating dynamic panel models using the system GMM estimator, we show that the issuance of new debt is significantly negatively related to idiosyncratic risk while both the issuance of new equity and the use of internally generated funds (retained earnings) are positively related to the risk. In contrast, we find that all these three sources of financing are significantly negatively associated with macroeconomic risk. Nevertheless, our results suggest that the aggregate dynamics of firms' target leverage are significantly negatively linked with these two types of risk. The results, from the debt-equity choice regression, indicate that the effect of both firm-specific and macroeconomic risk is significant and negative, implying that firms are likely to have low debt-equity ratio in periods when either type of risk is high.