Abstract
This study examines
the herding behavior of software companies when they merge and acquire
(M&A) SaaS firms to compete in the market. Through an empirical analysis of
71 companies in SIC 737 industries from 2003- 2017, we find that firms try to
imitate their peer competitors’ M&A activities and their imitation
decisions are contingent on the resources and capabilities. Specifically, firms
with more slack resources are more likely to develop SaaS products and services
by themselves instead of acquiring an existing SaaS firm. Creating their own
SaaS products could bring more stable and reliable profits in the long term,
even though firms may have low profit margins in the short term. Thus, these
firms do not consider acquiring the developing process through M&A. Our
findings have managerial implications for on-premises companies in their
transformation to cloud-based businesses.
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IJBMS by IPRPD is licensed under a Creative Commons Attribution 4.0 International License.