Overbidding in cross-border acquisitions: Misperceptions in assessing and valuing knowledge

Many firms competing across borders use acquisitions to gain the knowledge and capabilities that reside in target firms. Assessing and valuing knowledge in the international context is complex and frequently error-prone. The international acquisition literature has not adequately addressed the difficulties of valuing knowledge, the costs associated with acquiring knowledge, the factors behind escalating bids to acquire knowledge, and the impact of knowledge acquisitions on returns. We conceptually explore several key dimensions that influence the assessment and valuation of knowledge and develop propositions positing the effects of predictor variables and moderators on knowledge assessment and valuation in cross-border acquisitions.