Abstract

Purpose: This study examines the impact of digitalization on M&A investment activities, focusing on distribution processes and the moderating role of top management team (TMT) overconfidence. Based on Transaction Cost Economics (TCE) and Upper Echelons Theory, we analyze how digital technologies influence M&A decisions and how managerial cognitive biases affect this relationship. Research Design, Methodology, and Approach: We argue that digitalization enhances distribution efficiency by improving supply chain communication, streamlining operations, integrating advanced analytics, reducing transaction costs, and enabling better information processing. This can lead to improved M&A investments. Using a sample of U.S. manufacturing firms from 1994 to 2015, partial least squares structural equation modeling (PLS-SEM) was employed. Results: The findings show that digitalization positively affects M&A investments and distribution efficiency. However, overconfident TMTs weaken this positive effect. Conclusions: Our study highlights the importance of considering distribution and managerial traits in M&A decisions during the digital era. We acknowledge the limitation of not directly measuring distribution advantages due to a focus on manufacturing firms and suggest future research in settings where distribution effects are clearer.