LEMONS & CHERRIES: THE IMPACT OF FOREIGN ACQUISITIONS ON THE REGIONAL EMBEDDEDNESS OF SMALL AND MEDIUM SIZED ENTERPRISES IN TERMS OF SOURCING PRACTICES

Abstract: Prior research has highlighted that the highest performing SMEs (cherries) and the lowest performing SMEs (lemons) are most susceptible to be acquired by foreign MNCs, who then often invest in the acquired SME to fulfill a specific motive. However, there has been little research conducted as to how the regional activity and embeddedness of these SMEs is then impacted by these acquisitions, particularly in terms of their sourcing patterns. This study has sought to address this gap in theory by investigating the effects of a foreign acquisition of an SME on the SME’s regional embeddedness through its sourcing operations. This was executed via a multiple case study of eight Swedish SMEs, in various industries, that had been acquired by a foreign entity over the period 2014-2019. Firstly, the results indicate that while an SME's regional embeddedness can be affected without any changes to its local sourcing patterns, when such changes do occur, positive or negative, the effect on the regional embeddedness of the SME is also positive or negative respectively. Additionally, the MNC's company culture and motives for acquiring are integral in determining the operational changes, particularly in sourcing, of the SME post-acquisition. Lastly, the amount of time that had passed since the SME was acquired was found to play no significant role in these changes, which are instead facilitated largely through the SME's motivation to sell, the MNC's motivation to acquire, and the MNC's company culture which informs the execution.