Research Note—Parenting New Acquisitions: Acquirers’ Digital Resource Redeployment and Targets’ Performance Improvement in the U.S. Hospital Industry

Abstract

This paper examines how information technology (IT) can contribute to value creation in horizontal acquisitions. We propose that acquisition value can be created when an acquirer redeploys its digital resources to its newly acquired businesses and consequently improves their operations. However, not all acquirers are equally capable of redeploying their digital resources. In this study, we propose two enabling factors pertaining to an acquirer’s IT resource base: IT extensiveness and IT standardization. We argue that the magnitude of digital resource redeployment increases when the acquirer has had extensive use of IT systems within its existing business units and has standardized IT systems across its business units. Moreover, the relative strength of the IT resources of the acquirer, as compared to those of the acquired business, also affects the reuse of the acquirer’s IT resources in its digital resource redeployment activities. We empirically test these hypotheses by tracking the IT and performance changes in 108 U.S. hospitals before and after they were acquired across a seven-year study timeframe.

A Review of Information System Integration in Mergers and Acquisitions

“…Research has also examined prior ISI experience ; Kovela and Skok, 2012) eight times, and the level of pre-merger data sharing seven times. In addition, research has investigated the impact of pre-merger habits and practices (Vieru et al, 2016), governance mode, and user skills (Du, 2015).…”

“…IT flexibility and related concepts, including scalability and other loosely defined references to infrastructures that do not permit certain actions (Wijnhoven et al, 2006;Vaniya et al, 2013), have been studied eight times. Other frequently studied aspects of the pre-merger IT infrastructure include IT standardization and IT extensiveness (Du, 2015) that have been studied seven and five times, respectively. The many variables investigated within the IT infrastructure category signals the importance of considering the capacities of the IT assets that can take several years to develop.…”

“…Organizational characteristics M&A experience 9 The organizational context, specifically, different withinorganizational characteristics of the two M&A organizations, has been studied 43 times through 22 different variables. Most frequently, research has studied how previous merger experiences and pre-merger organizational performance (Du, 2015), which have been examined nine and eight times, respectively, affect ISI. Other related variables include organizational structure (examined four times) and geographical distribution (examined three times).…”

“…IS organizational compatibility, and the organizational structures and cultures within the parties' IS functions have been examined six and five times, respectively. This category also includes relative IT capability (Du, 2015;Tanriverdi and Uysal, 2015), which treats the difference between IT capabilities as a capability gap. This has been examined five times.…”

“…If the target is acquired from another multi-business organization (e.g. Du, 2015). 4 Aligned post-M&A state.…”