Microfoundations of Strategic Decision Rationality in M&A : A Dyadic Investigation between Germany and China

Mergers and acquisitions (M&A) have become one of the primary strategies to increase corporate wealth but often fail to reach expected targets. While the notion of the bounded-rational man has been emphasised, the microfoundations of executives` factual decision-making processing, cognition and behaviour remain a source of debate. Extant research presents scattered, mostly unilateral studies and leaves a bridge to further explore and connect the disparate determinants that effect executives` level of rationality and organisational judgement in the complex realm of M&A. Data was collected from a sample of 30 senior M&A executives and consultants from Germany and China through semi-structured interviews. Within the post-positivist paradigm, the qualitative study employs a phenomenological approach and extends the theoretical framework with data from the lived experiences of these strategic decision-makers. Executives` mental and observable characteristics become explicit in the interfering circumstances and dependencies of M&A decision specifics in which these are deployed. In the dyadic perspective, findings highlight an experience-intuitive, a socio-structural, and a risk-dynamic path as significant in executives` strategic decisions, where ego becomes the enemy of rationality and societal norms its friend. A dynamic typology of behavioural momentum is then developed, proposing seven dimensions that direct non-rational behaviour in strategic M&A decision-making. This framework, grounded in system theory and dual-process models, summarises the relevant cues that affect the ease of perception and evaluation of realities which subsequently promote the relative dominance of cognition over rationale in such decisions. The conclusions emphasise that SDM models would be more complete when considering the underlying microfoundations of executive`s (inter-)actions in a content- and context-sensitive manner pertaining to the environment, organisation, target, decision practices and their interdependencies. It is also argued that conscious reflection of experiential perspectives becomes a necessary competence of decision-makers and top management teams (TMTs) to improve their business practice