Merger as a response to organizational interdependence

Merger is examined as one possible strategy for an organization to employ in managing environmental interdependence. Three types of merger are identified: 1) merger to reduce symbiotic interdependence; 2) merger to reduce commensal is tic or competitive interdependence; and 3) merger to diversify, and avoid previous interdependencies. Patterns of industrial merger behavior are examined, and it is seen that there Is a strong association between patterns of resource exchange and patterns of merger activity. Competitive mergers, and diversification are also considered, and it is seen that the analysis of merger activity also permits explanation of variations in the profitability of acquired firms prior to acquisition. MERGER AS A RESPONSE TO ORGANIZATIONAL INTERDEPENDENCE The operations and decisions of organizations are inextricably bound up with the conditions of their relevant environments. Cyert and March (1963), in their simulation of a duopoly, trace the mutual adjustment of one organization to the other one, and as part of their behavioral theory of the firm, note that organizations attempt to establish a negotiated environment. Hazard (1961) has also commented on the fact that businessmen, at least, seek certainty, and how this is incompatible with some of the requirements of the anti-trust laws. The impact of the environment on the organization has been widely noted (Thompson and McEwen, 1958; Katz and Kahn, 1966; Buckley, 1967; Evan, 1966; Dill, 1958; Thompson, 1967). Thompson (1967, Ch. 3) has postulated that organizations attempt to manage their external dependencies, or to control the relevant environment. Writing from an open systems perspective also, Hawley (1950) recognized the tendency for organisms to attempt to control their environments, and he suggested that they employed a growth strategy. Katz and Kahn (1966) speak of a growth dynamic, and relate this to the organization's requirements for certainty and survival, which are postulated to be enhanced through growth. And Starbuck (1965) has also proposed that organizations operate on their environments to make them more munificent. We have, then, three distinct issues. First, there are the propositions by Thompson, Cyert and M^rch, Katz and Kahn and Starbuck (among others) that organizations take actions to control or manage their environments, or at least their dependency on the environment. Secondly,