Building on social identity theory, we investigate the likelihood and subsequent performance of mergers between firms based on their owners’ social identity. We identify three possible pairings of merging firms: (a) two family firms, (b) two nonfamily firms and (c) a family firm and a nonfamily firm. We contribute to the social identity theory by theorizing and finding better post merger performance for combinations with a common family owners’ social identity. We also contribute to the M&A literature by examining the contingency role of industry dissimilarity and suggest that family owners’ common social identity allows them to develop complementarities associated with industry differences, whereas nonfamily owners are better able to seek synergy to capitalize on economies associated with industry similarities. This is important because a common family firm identity reduces the underperformance often associated with unrelated merger combinations, allowing potential complementarities to be more fully exploited while maintaining the family owner identity of merging partners. The quantitative results from a comprehensive longitudinal sample of private Swedish firms support our arguments that two-family firms outperform other combinations in unrelated mergers.
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