EURO 2024 Copenhagen
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588. The role of timing in the firm's decision to grow internally or by acquisition

Invited abstract in session MC-8: Applications of knowledge and innovation in finance, stream AI & Innovation in Sustainable Finance.

Monday, 12:30-14:00
Room: 1020 (building: 202)

Authors (first author is the speaker)

1. Januj Juneja
San Diego State University

Abstract

We investigate patterns in the optimal timing of the firm's strategic decision for growth internally or by acquisition. Using tools from spectral analysis, and based upon the Fourier series, we devise an algorithm that monitors the timing of key firm policy decisions. We apply this
algorithm to the firm's decision to invest in three intangible assets related to the firm's organization capital for the purpose of generating financial performance. We assess it using five measures and through the construction of three hypotheses tied to the time horizon for the return
on each investment, its effect on the capacity in the industry and economy, and the degree to which each form of investment is dependent upon the capital market for its mode of financing. Our results imply that there is variation in the timing of each form of investment and interpret
that this variation owes to it taking longer for managers to realize gains when investments are made through mergers and acquisitions relative to internal growth. Managers experience an effect delay in this realization owing to delays in the procurement and application of intangible
investments obtained from mergers and acquisitions that require transfer of technical expertise whereas the smaller effect delay for internal growth reflects the faster ability of knowledge-based firms to turn the knowledge already contained inhouse into financial performance outcomes. Suggestions for future research are provided.

Keywords

Status: accepted

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