Copyright Academy of Management Learning and Education

Under tremendous pressure to grow, the decision makers for many firms pursue a variety of growth paths for their organizations including internal development, alliances, and mergers and acquisitions (M&A's). Despite significant investments and efforts, the outcome of many of these endeavors is dismal-around 70% of M&A's fail and, though somewhat less known, the fate of the other growth strategies is not much better, with failure rates ranging from 60%-70% for alliances (Hughes & Weiss, 2007), and from 45%-60% for internal development projects even if they are adjacent to the firm's existing product portfolio (Day, 2007). These numbers pose a challenge to both academics and practitioners. How can we work to improve the performance of firm growth strategies? One obvious solution is to work harder to improve the performance of each individual growth path. Yet, an alternative solution, which is often overlooked but perhaps more fundamental, is that firms can simply rotate their growth paths. Consider a simple thought experiment: suppose 15% of the alliances should have been acquisitions, 15% of the internal development should have been acquisitions, and 15% of acquisitions should have been alliances. If firms switch to the right choices, without making any additional investments, the failure rate will decrease by 15% across the board.