Institutional, Industry and Power Effects on Integration in Cross-border Acquisitions

Abstract

Drawing on comparative institutional theory, this paper examines post-acquisition integration in international acquisitions, which has seldom been examined through this perspective. Based on a longitudinal and comparative study of three blue-chip French acquirers in the UK that shared similar integration intentions but realized those to varying degrees, this paper theorizes this variation in integration outcomes as a dynamic interplay of institutional distance, market structure and power dependencies. Whilst all important, those effects do not equally explain integration outcomes and can only be understood in conjunction with one another. Thus, contrary to a core assumption of institutional theory that institutional distance is consistently a dominant influence on multinational firms' behaviour, the study shows that its effect is varied. It will only become extremely constraining when the market structure is highly localized, and both dynamics combine to make the acquirer largely dependent on the target firm. The study's first contribution is to provide a fuller conceptual understanding of post-acquisition integration. Secondly, it introduces the role of market structure into a politico-institutional framework and, thirdly, it demonstrates complex relationships among three effects located at multiple levels. The results have important implications for the debate about environmental determinism vs multinationals' agency at host-country level.

The Challenge of Integration: A Review of the M&A Integration Literature

“…), contingent upon the asset management strategy applied (Daniliuc et al . ), as well as the degree to which the firms depend on each other (Mtar ). A pre‐deal alliance between acquirer and target is only positive when the target is loosely integrated.…”

“…Ranft and Lord (2002) found that differences in size and performance limit communication between the firms involved in an integration, increase the autonomy of the smaller firm and improve employee retention. Regarding market relatedness, overlaps between the firms involved seem to benefit integration success (Ellis et al 2009), contingent upon the asset management strategy applied (Daniliuc et al 2014), as well as the degree to which the firms depend on each other (Mtar 2010). A pre-deal alliance between acquirer and target is only positive when the target is loosely integrated.…”

Neo-Institutional Theory and Organization Studies: A Mid-Life Crisis?

“…Continuing the heterodox tradition of Organization Studies , there have remained a few studies which have proposed alternative conceptions of institutions based on entirely different theoretical traditions such as actor network theory (Czarniawska, 2009), comparative institutional theory (Mtar, 2010), studies of total institutions (Clegg, e Cunha, & Rego, 2012), process theory and notions of becoming (Bjerregaard & Jonasson, 2014) and Luhmann’s systems theory (Deroy & Clegg, 2015).…”

Do Family Firms Have Higher or Lower Deal Valuations? A Contextual Analysis

“…Foreign acquisitions are influenced by country-specific determinants, such as, institutional, regulatory, and political environments, as well as the level of corruption (Xie et al, 2017). The “National Institutional Distance” (NID) between the countries of the acquirers and the target can alter the intended integration strategy, as well as integration outcomes (Kostova, 1999; Mtar, 2010). The incremental costs and risks associated with a target that operates under poor public governance need to be taken into account ex ante, that is, when the firm valuates the target.…”