Acquiring New Technologies and Capabilities: A Grounded Model of Acquisition Implementation

Abstract

In this study, we explore seven in-depth cases of high-technology acquisitions and develop an empirically grounded model of technology and capability transfer during acquisition implementation. We assess how the nature of the acquired firms' knowledge-based resources, as well as multiple dimensions of acquisition implementation, have both independent and interactive effects on the successful appropriation of technologies and capabilities by the acquirer. Our inquiry contributes to the growing body of research examining the transfer of knowledge both between and within organizations. Propositions are developed to help guide further inquiry into the dynamics of acquisition implementation processes in general and, more specifically, the process of acquiring new technologies and capabilities from other firms.

Integrating Acquired Capabilities: When Structural Integration is (Un)Necessary

“…Change can cause disruption, independent of any improvements brought about by a new configuration of organizational attributes (Amburgey, Kelley& Barnett, 1993;Hannan & Freeman, 1984). Such changes can alter valuable organizational routines within the acquired firm, and in doing so can undermine its innovative capabilities (Benner & Tushman, 2003;Leonard-Barton, 1992;Ranft & Lord, 2002). These adverse consequences for motivation and organizational routines can significantly and permanently damage innovation capabilities in acquired firms (Paruchuri, Nerkar& Hambrick, Forthcoming;Puranam et al, 2006).…”

“…Zollo and Singh, 2004;Puranam, Singh and Zollo, 2006;Paruchuri, Nerkar and Hambrick, 2006), with some providing rich case based insights into mechanisms that can alleviate the disruptive consequences of integration (eg. Ranft andLord, 2002, Graebner, 2004;Schweizer, 2005). To the extent that any of these studies note any positive performance consequences for integration mechanisms, they may be said to point (at least implicitly) to the benefits of integration.…”

“…Prominent among such strategies is the acquisition of small technology based firms by large established firms (Granstrand & Sjolander, 1990). However, in such technology acquisitions, acquirers often discover that post merger integration can destroy those same innovative capabilities that made the acquired organization attractive in the first place (Birkinshaw, Bresman& Hakanson, 2000;Chaudhuri & Tabrizi, 1999;Graebner, 2004;Puranam, Singh& Zollo, 2003;Ranft & Lord, 2002). Why do acquirers integrate such acquisitions, despite the well-known disruptive effects of post merger integration?…”

“…Discrete decisions about grouping units together within common organizational boundaries, are different from, and precede non-discrete decisions about the use of "linking" mechanisms between organizational units (such as the alignment and standardization of processes and systems, common hierarchical control, cross-unit teams and integrating managers) both temporally and in importance (Galbraith, 1977;Nadler & Tushman, 1998;Thompson, 1967). Scholars who study acquisition implementation describe the choice between complete absorption and preservation of autonomous organizational status as an important initial decision that shapes further fine-grained integration actions (Haspeslagh & Jemison, 1991;Pablo, 1994;Ranft & Lord, 2002;Zollo & Singh, 2004a) Viewing structural integration in terms of the gains from coordination it generates, offers insights about the conditions under which such integration is necessary as well as when it can be avoided. We argue that despite its disruptive consequences, structural integration generates a powerful coordination effect between acquirer and target firms, which is particularly valuable in the presence of significant interdependence between them (Thompson, 1967).…”

“…Through both large sample studies (Chakrabarti, Hauschildt& Suverkrup, 1994;Gerpott, 1995;Puranam, Singh& Zollo, 2006) as well as in depth cases (Graebner, 2004;Ranft & Lord, 2002), several scholars have investigated the implementation and performance implications of integration practices in acquisitions. However, explicit analysis of the antecedents of integration decisions remains rare, despite the recognition of the critical role that interdependence can play in them.…”