Human Capital, Inter-firm Mobility and Organizational Evolution

Human Capital, Inter-firm Mobility and Organizational Evolution

Johannes M. Pennings and Filippo Carlo Wezel

The authors of this fascinating and original work contend that by analysing the conduct of organization members, a great deal can be learnt about firm behaviour and about the cooperative and competitive forces that underlie industry evolution.

Chapter 6: Mergers and Acquisitions: Strategic and Organizational Fit

Johannes M. Pennings and Filippo Carlo Wezel

Subjects: business and management, human resource management, organisation studies


6. Mergers and acquisitions: strategic and organizational fit? INTRODUCTION This chapter examines what happens to firms emerging out of a merger or acquisition (M&A). We claim that the match between merging firms, together with their prior acquisitive growth history, are crucial for the fate of the newly created organization. Organizational founding is typically associated with entrepreneurs, but many firms arise out of existing firms through spin-offs or M&As. What sets the former classes apart from M&A is inheritance: the skills that endow an M&A-based firm originate from the parents, while de novo firms have to build capabilities from scratch. Whether new firms formed by the fusion of two existing firms benefit from previously acquired assets hinges partly on the combination and commingling of previously separate bundles of resources. The question that we should ask is: Under what conditions will the combining of such bundles yield distinct benefits for the new firm? When exploring the fusion of two firms, we should consider a couple of distinct aspects that researchers have addressed. During the 1980s and 1990s much of the concern has been with the degree to which diversification and relatedness prevailed ex ante. Mergers were viewed as an event which could affect the abnormal returns of the constituting firms, depending on whether they belonged to similar or different sectors, for example two, three or four-digit SIC sectors. The greater the relatedness as inferred by the similarity of sectors, the more the...

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