Deliberate learning in corporate acquisitions: post‐acquisition strategies and integration capability in U.S. bank mergers

This paper introduces a knowledge-based view of corporate acquisitions and tests the post-acquisition consequences on performance of integration decisions and capability-building mechanisms. In our model, the acquiring firm decides both how much to integrate the acquired firm and the extent to which it replaces this firm's top management team. It can also learn to manage the post-acquisition integration process by tacitly accumulating acquisition experience and explicitly codifying it in manuals, systems, and other acquisition-specific tools. Using a sample of 228 acquisitions in the U.S. banking industry, we find that knowledge codification strongly and positively influences acquisition performance, while experience accumulation does not. Furthermore, increasing levels of post-acquisition integration strengthen the positive effect of codification. Finally, the level of integration between the two merged firms significantly enhances performance, while replacing top managers in the acquired firm negatively impacts performance, all else being equal. Implications are drawn for both organizational learning theory and a knowledge-based approach to corporate strategy research. Copyright © 2004 John Wiley & Sons, Ltd.

[1]  K. Weick.  FROM SENSEMAKING IN ORGANIZATIONS , 2021, The New Economic Sociology.

[2]  Richard S. Ruback,et al.  The Market for Corporate Control: The Scientific Evidence , 2002 .

[3]  Jeffrey H. Dyer,et al.  Alliance capability, stock market response, and long‐term alliance success: the role of the alliance function , 2002 .

[4]  Maurizio Zollo,et al.  Deliberate Learning and the Evolution of Dynamic Capabilities , 2002 .

[5]  L. Empson.  Fear of Exploitation and Fear of Contamination: Impediments to Knowledge Transfer in Mergers between Professional Service Firms , 2001 .

[6]  Luk N. Van Wassenhove,et al.  Behind the Learning Curve: Linking Learning Activities to Waste Reduction , 2000 .

[7]  Daniel A. Levinthal,et al.  Looking Forward and Looking Backward: Cognitive and Experiential Search , 2000 .

[8]  J. Jaffe,et al.  The Post-Merger Performance Puzzle , 1999 .

[9]  L. Capron.  The long‐term performance of horizontal acquisitions , 1999 .

[10]  S. Finkelstein,et al.  The Influence of Organizational Acquisition Experience on Acquisition Performance: A Behavioral Learning Perspective , 1999 .

[11]  D. Teece,et al.  DYNAMIC CAPABILITIES AND STRATEGIC MANAGEMENT , 1997 .

[12]  W. Ocasio.  TOWARDS AN ATTENTION-BASED VIEW OF THE FIRM , 1997 .

[13]  Harbir Singh,et al.  Asset redeployment, acquisitions and corporate strategy in declining industries , 1997 .

[14]  Hema A. Krishnan,et al.  DIVERSIFICATION AND TOP MANAGEMENT TEAM COMPLEMENTARITY: IS PERFORMANCE IMPROVED BY MERGING SIMILAR OR DISSIMILAR TEAMS? , 1997 .

[15]  R. Grant.  Toward a Knowledge-Based Theory of the Firm,” Strategic Management Journal (17), pp. , 1996 .

[16]  Ron Sanchez,et al.  Modularity, flexibility, and knowledge management in product and organization design , 1996 .

[17]  Gabriel Szulanski.  Exploring internal stickiness: Impediments to the transfer of best practice within the firm , 1996 .

[18]  Amy L. Pablo,et al.  Acquisition Decision-Making Processes: The Central Role of Risk , 1996 .

[19]  P. Adler,et al.  Two Types of Bureaucracy: Enabling and Coercive , 1996 .

[20]  M. Gordon,et al.  PUBLICATION RECORDS AND TENURE DECISIONS IN THE FIELD OF STRATEGIC MANAGEMENT , 1996 .

[21]  Sidney G. Winter,et al.  FOUR Rs OF PROFITABILITY: RENTS, RESOURCES, ROUTINES, AND REPLICATION , 1995 .

[22]  Cynthia A. Montgomery,et al.  Conglomerates and LBO Associations: A Comparison of Organizational Forms , 1994 .

[23]  Michael X Cohen,et al.  Organizational Routines Are Stored as Procedural Memory: Evidence from a Laboratory Study , 1994 .

[24]  Margaret A. White,et al.  Performance of Acquisitions of Distressed Firms , 1994 .

[25]  Amy L. Pablo.  Determinants of acquisition integration level: A decision-making perspective. , 1994 .

[26]  Harry G. Barkema,et al.  Organizational Learning and diversification , 1994 .

[27]  I. Nonaka.  A Dynamic Theory of Organizational Knowledge Creation , 1994 .

[28]  Donald C. Hambrick,et al.  Effects of executive departures on the performance of acquired firms , 1993 .

[29]  Heather A. Haveman.  Organizational size and change: Diversification in the savings and loan industry after deregulation , 1993 .

[30]  J. L. Naman,et al.  Entrepreneurship and the concept of fit: A model and empirical tests , 1993 .

[31]  G. Mandelker,et al.  The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly , 1992 .

[32]  B. Kogut,et al.  Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology , 1992 .

[33]  M. Lubatkin,et al.  CULTURAL DIFFERENCES AND SHAREHOLDER VALUE IN RELATED MERGERS: LINKING EQUITY AND HUMAN CAPITAL , 1992 .

[34]  Heather A. Haveman.  Between a rock and a hard place: Organizational change and performance under conditions of fundamental environmental transformation , 1992 .

[35]  Kenneth J. Martin,et al.  Postacquisition performance of acquiring firms , 1992 .

[36]  Robert S. Harris,et al.  The postmerger share-price performance of acquiring firms , 1991 .

[37]  James P. Walsh,et al.  Mergers, acquisitions, and the pruning of managerial deadwood , 1991 .

[38]  Gabriel A. Hawawini,et al.  Mergers and Acquisitions in the U.S. Banking Industry: Evidence from the Capital Markets , 1991 .

[39]  Linda Argote,et al.  Organizational Learning Curves: A Method for Investigating Intra-Plant Transfer of Knowledge Acquired Through Learning by Doing , 1991 .

[40]  James G. March,et al.  Learning from samples of one or fewer* , 1991 .

[41]  A. Seth.  Sources of value creation in acquisitions: An empirical investigation , 1990 .

[42]  W. P. Barnett,et al.  Resetting the Clock: The Dynamics of Organizational Change and Failure. , 1990 .

[43]  Richard S. Ruback,et al.  Does Corporate Performance Improve after Mergers? , 1990 .

[44]  Kim B. Clark,et al.  Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of , 1990 .

[45]  Deepak K. Datta,et al.  Relationships Between Type of Acquisition, The Autonomy Given to the Acquired Firm, and Acquisition Success: An Empirical Analysis , 1990 .

[46]  A. Seth.  Value creation in acquisitions: A re‐examination of performance issues , 1990 .

[47]  Karel Cool,et al.  Asset stock accumulation and sustainability of competitive advantage , 1989 .

[48]  K. Fowler,et al.  Determinants of tender offer post-acquisition financial performance , 1989 .

[49]  Jay B. Barney,et al.  Returns to bidding firms in mergers and acquisitions: Reconsidering the relatedness hypothesis , 1988 .

[50]  J. Walsh.  Top management turnover following mergers and acquisitions , 1988 .

[51]  James A. Brickley,et al.  The Market for Corporate Control: The Empirical Evidence Since 1980 , 1988 .

[52]  Cynthia A. Montgomery,et al.  Corporate acquisition strategies and economic performance , 1987 .

[53]  John M. Ivancevich,et al.  Executive Actions For Managing Human Resources Before And After Acquisition , 1987 .

[54]  J. Barney.  Strategic Factor Markets: Expectations, Luck, and Business Strategy , 1986 .

[55]  Sayan Chatterjee,et al.  Types of Synergy and Economic Value: The Impact of Acquisitions on Merging and Rival Firms , 1986 .

[56]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[57]  J. Dutton,et al.  Treating Progress Functions as a Managerial Opportunity , 1984 .

[58]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[59]  Michael C. Jensen,et al.  The market for corporate control , 1983 .

[60]  Louis E. Yelle.  THE LEARNING CURVE: HISTORICAL REVIEW AND COMPREHENSIVE SURVEY , 1979 .

[61]  V. Barnett,et al.  Applied Linear Statistical Models , 1975 .

[62]  R. Rumelt.  Strategy, structure, and economic performance , 1974 .

[63]  H. Manne,et al.  Mergers and the Market for Corporate Control , 1965, Journal of Political Economy.

[64]  M. Polanyi.  Personal Knowledge: Towards a post-critical philosophy , 1959 .

[65]  Mathew L. A. Hayward.  When do firms learn from their acquisition experience? Evidence from 1990 to 1995 , 2002 .

[66]  Maurizio Zollo,et al.  Knowledge Codification, Process Routinization and the Creation of Organizational Capabilities: Post-Acquisition Management in the US Banking Industry , 1998 .

[67]  Michael X Cohen,et al.  Routines and Other Recurring Action Patterns of Organizations: Contemporary Research Issues , 1996 .

[68]  I. Nonaka,et al.  The Knowledge Creating Company , 2008 .

[69]  S. Rhoades,et al.  A summary of merger performance studies in banking, 1980-93, and an assessment of the "operating performance" and "event study" methodologies , 1994 .

[70]  Mark Shanley,et al.  Determinants and Consequences of Post-Acquisition Change , 1994 .

[71]  J. Astrachan.  Mergers, Acquisitions, and Employee Anxiety: A Study of Separation Anxiety in a Corporate Context , 1990 .

[72]  A. Buono.  The human side of mergers and acquisitions , 1989 .

[73]  S. Cormier,et al.  Transfer of learning: Contemporary research and applications. , 1987 .

[74]  Michael Lubatkin,et al.  Merger strategies and stockholder value , 1987 .

[75]  S. Winter.  Knowledge and Competence as Strategic Assets , 1987 .

[76]  Keith J. Holyoak,et al.  The cognitive basis of knowledge transfer. , 1987 .

[77]  S. Sitkin,et al.  Corporate Acquisitions: A Process Perspective , 1986 .

[78]  Philip H. Mirvis,et al.  Negotiations after the sale: The roots and ramifications of conflict in an acquisition , 1985 .

[79]  R. Rumelt.  Towards a Strategic Theory of the Firm , 1984 .

[80]  S. Lippman,et al.  Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition , 1982 .

[81]  James D. Thompson.  Organizations in Action , 1967 .

[82]  M. Polanyi.  Chapter 7 – The Tacit Dimension , 1997 .