When Individual Locations Affect the Choice of Multi-Location Acquisition Targets

When examining how geographic location affects acquisitions, existing research has largely overlooked that many acquired firms operate in multiple locations. We examine the role of inter-firm and intra-firm agglomeration effects through the use of acquisitions of multi-location targets in knowledge-intensive industries, focusing on the importance of knowledge transfer. We argue that in such settings, acquirers value specific location characteristics of multi-location firms and not aggregate location characteristics. We hypothesize that in knowledge-intensive industries, an acquirer is more likely to select a multi-location target the higher the knowledge intensity of its most knowledge-intensive location. We also hypothesize that in knowledge-intensive industries, an acquirer is more likely to select a multi-location target the more locations their operations overlap because it facilitates internal knowledge transfer in the combined firm. Using a sample of multi-location acquisitions of US manufacturing firms between 2002 and 2004 and employing a discrete choice methodology, we find support for these predictions. Our results highlight the importance that specific locations play in the choice of multi-location acquisition targets