The Role of Relatedness in Post-Acquisition
Organizational Identification Processes
A multiple case study in the private sector
By
A.C. Nieters
University of Groningen
Faculty of Economics and Business
ABSTRACT
The poor success rate of establishing a common identity after an acquisition indicates a lack of a valid strategy for managing the post-acquisition integration process. This research aims to provide a more comprehensive understanding of the process of organizational identification. Four types of organizational relatedness and their effects on post-acquisition organizational identification have been investigated. An explorative study, involving interviews with managers and employees who recently faced an acquisition, indicates a positive relationship between business- and cultural-, relatedness and post-acquisition organizational identification. The interviews resulted into mixed findings regarding the factors technology- and size relatedness. Results further suggest managerial commitment, a mixed management team and geographical dispersion as important factors to take into account. Lastly, associated with the types of relatedness are a number of side effects that were found to also determine the success of the post-acquisition integration process. The results of this research are translated into a more articulated strategy to enhance post-acquisition organizational identification.
CONTENTS
1. INTRODUCTION
3
1.1 Mergers and acquisitions
3
1.2 Social identity theory in organizations
4
1.3 Post-acquisition identification
5
1.4 Types of relatedness
6
1.5 Relatedness and post-acquisition identification
8
1.6 Research question
9
1.7 Research paper outline
10
2. METHODOLOGY
11
2.1 Research approach
11
2.2 Case studies
11
2.3 Data content
13
2.4 Data collection method
13
2.5 Data analysis method
15
3. RESULTS
16
3.1 Pre-set coding scheme
16
3.2 Pre-set factors
18
3.3 Emerged coding scheme
25
3.4 Emerged factors
26
4. DISCUSSION AND CONCLUSIONS
29
4.1 The influence of relatedness on post-acquisition
29
identification processes
4.2 The influence of other factors on post-acquisition
32
identification processes
4.3 Additional findings
33
4.4 Conclusions
34
4.5 Implications for theory and practice
36
4.6 Limitations and suggestions for future research
38
REFERENCES
40
APPENDICES
46
1. INTRODUCTION
The frequency, size, and degree of internationalization of organizational acquisitions escalated under pressure of the current era of globalization (Van Dick, Ullrich & Tissington, 2006), despite numerous negative consequences of acquisitions resulting into poor integration and underperformance (Amiot, Terry & Callan, 2007; Marmenout, 2010). As some researchers have argued that all value creation takes place after the acquisition (Haspeslagh & Jemison, 1991; Homburg & Bucerius, 2006), the topic of post-acquisition integration has received increasing research attention. Social identity theory, for example, offers an interesting explanation of how the employees’ identification with the acquiring organization can facilitate the post-acquisition integration process. Recently, researchers questioned whether the level of relatedness between the acquiring and acquired organization affects an acquisition's integration processes and performance. The term relatedness, in this context, refers to the degree of similarity between two organizations. Although employee identification is suggested to be an important determinant of the performance of acquisitions (Bartels, Douwens, De Jong & Pruyn, 2006; Giessner, 2011; Marmenout, 2010; Van Dick et al., 2006), possible relationships between types of relatedness and employee identification have rarely been subject of research. The objective of this research is to investigate whether different types of relatedness affect post-acquisition employee identification and, eventually, an acquisition's performance.
1.1 Mergers and acquisitions
stressing an unequal power relationship. This conceptualization is closely related to the definitions provided by Amiot et al. (2007), and Marmenout (2010). The latter mentions that acquisitions are often announced as mergers in order to appear less threatening to employees in the acquired organization (Teerikangas & Very, 2006; Vaara & Monin; 2008). In practice, it appears that mergers do also not come without power plays (Stahl, Kremershof & Larsson 2004). Since many similarities exist, mergers and acquisitions are often mentioned together in literature (Nilsson & Olofsson, 2006). Based on these similarities, the available literature on mergers as well as acquisitions will be used for this research.
1.2 Social identity theory in organizations
Many researchers have convincingly argued that the people in organizations are critical to the success or failure of acquisitions (Cartwright & Cooper, 1992; Marcks & Mirvis, 2001). Yet, processes related to employee integration after an acquisition are often paid less attention to than the strategic, financial and technical planning and execution processes (Marmenout 2010; Terry, 2003). Acquisitions imply in many cases a radical change for the acquired organization in terms of some kind of restructuring (Risberg, 1999; Daniel & Metcalf, 2001), and are considered one of the most traumatic processes amongst organizational changes (Nicandrou, Papalexandris & Bourantas, 2000). The change process often involves a transformation in an organization’s mission, strategy, structure, system, network and/or core values (Van Dick et al., 2006), after which employees do not longer recognize what the organization stands for (Schweiger, Ivancevish and Power, 1987). Poor integration efforts result into negative consequences for employees’ commitment, productivity, and satisfaction in the new organization (Van Dick et al., 2006). Frequently, these undesired outcomes result into employees leaving the new organization to seek employment elsewhere, thereby posing a threat on the organization's continuity (Appelbaum, Lefrancois, Tonna & Shapiro 2007).
view of the amount of time that people spend at work, it is likely that work organizations provide identities to individuals or groups (Ashforth & Mael, 1989). Indeed, numerous studies have shown the empirical reality of organizational identity (Haslam, 2004; Van Dick et al., 2006). In this research, organizational identification is defined as “a relatively enduring state that reflects an individual’s willingness to define him- or herself as a member of a particular organization” (Haslam, 2004, p. 382), which is grounded in the social identity theory.
It is argued that organizations benefit from high levels of identification in terms of highly motivated and performing employees (Haslam, 2004; Van Dick et al., 2006). Organizational identification facilitates the intrinsic motivation to commit to the vision, mission, values and collective goals by enhancing intergroup relations and cooperation (Kramer & Brewer, 1984; Ertürk 2010). Peer recognition and collective pride become more important than self-interested objectives (Dutton, Dukerich & Harquail, 1994). Although literature on employee commitment suggests that the dark side of fully engaged employees is to suffer from work-life imbalance and other negative consequences, such as burnout (Bakker, Albrecht & Leiter, 2011), health problems (Geurts & Demerouti, 2003), and increased working pressures (Makri & Ntalianis, 2015), it is often viewed as having significant pay-offs for a company in terms of higher levels of workplace performance (Brown, McHardy, McNabb & Taylor, 2011).
1.3 Post-acquisition identification (dependent variable)
increased turnovers (Jetten, O’Brien & Trindall, 2002; Ullrich & Van Dick, 2007; Van Dick et al., 2006), thereby undermining the strategic goals of the acquisition and increasing “us vs. them thinking” between employees of both organizations (Buono, Bowditch & Lewis, 1985).
On the other hand, post-acquisition identification relates positively to employees' job satisfaction, emotional well-being, and team performance (Jetten et al., 2002; Van Dick et al., 2006; Van Dick, Wagner & Lemmer, 2004). Strongly identified employees are more willing to put in extra effort, and less likely to withdraw from the new organization (Van Dick et al., 2006). Retaining the best talent contributes to organizational performance, knowledge transfers across partners, and the continuity of successful organizational strategies, which makes the establishment of employees’ loyalty through a sense of identity of high importance to the acquisitions' managers (Hambrick & Cannella, 1993; Schweiger & DeNisi, 1991). The next paragraph seeks to generate deeper insights into what managers can do to facilitate organizational identification in acquisitions. One way might be to ease the integration process, so that fewer changes are needed and employees more easily identify themselves with the new organization.
1.4 Types of relatedness (explanatory variables)
As mentioned before, among the goals of acquisitions are creating organizational synergies and entering new businesses. To forecast synergies, the degree of similarity between two organizations is often used, which is referred to as "relatedness" (Lubatkin & Srinivasan, 1997). The decision to acquire an organization with a product portfolio related to the acquirer's core business, or to acquire an organization in a new business area, is of high managerial concern, but still has received little attention of researchers. Relatedness has been divided into business, cultural, technology, and size relatedness (Homberg, Rost & Osterloh, 2009), which are discussed below.
existing knowledge, resources, technologies, customer bases, and networks. A high degree of transferability of known organizational aspects and shared practices is expected to contribute to the employees’ post-acquisition identification.
Cultural relatedness refers to similarities between corporate cultures in terms of decision making processes, business processes, informal controls, norms and values that govern behaviour, and management style, which result into lower integration costs (Homberg, Rost & Osterloh, 2009). As cultural differences between organizations increase, the difficulties, costs, and risks associated with cross-cultural integration will rise (Barkema, Bell & Pennings, 1996; Hofstede, 1980; Kogut & Singh, 1988; Stahl & Voigt, 2005). International acquisitions are particularly difficult to integrate, due to the fact that different corporate cultures as well as different national cultures have to be bridged. Barkema et al. (1996) refer to this as "double layered acculturation". As the cultural relatedness between two organizations increases, managers and employees on both sides are expected to experience a higher degree of shared understandings and managerial practices, which can facilitate the employees’ identification process.
easier for managers to identify redundancies and to recognize, assimilate and apply the value and content of acquired knowledge (Homberg, Rost & Osterloh, 2009). The authors reason that such redundancies can lead to workforce reductions resulting into cost savings and increased synergies. A higher level of similarity in terms of size is expected to foster a sense of continuity for employees, which can ease the employees' post-acquisition organizational identification.
Existing theories on the benefits of organizational relatedness in acquisitions reveal inconsistent findings regarding the post-acquisition integration process. Whereas some researchers argue that a degree of relatedness can be beneficial for post-acquisition integration processes, other researchers argue it does not benefit such processes. As stated before, one of the prevalent determinants of the performance of acquisitions is employee identification, yet possible relationships between types of relatedness and employee identification have rarely been subject of research. The following section will discuss findings on the link between cultural relatedness and post-acquisition identification of employees, which is the only type of relatedness that has been linked to employee identification before.
1.5 Relatedness and post-acquisition identification
As illustrated in the previous section, for all types of relatedness can be expected that a higher level of similarity will foster a sense of continuity for employees, which will ease the employees' post-acquisition organizational identification. As the distance between two organizations increases, managers and employees on both sides need to put more effort and time into the integration process, due to a lack of shared understanding, common practices, and available knowledge (Cefis, Marsili & Rigamonti, 2015). A lower level of relatedness is therefore expected to make employees' integration and organizational identification after an acquisition more difficult.
1.6 Research question
The poor success rate of establishing a common identity after an acquisition indicates a lack of a valid strategy for managing the post-acquisition integration process. Worthwhile, it will be interesting to managers when a more articulated strategy to enhance post-acquisition organizational identification could be developed.
This research aims to provide a more comprehensive understanding of the process of organizational identification and an answer to the following central research question: To what extent and in what way can types of relatedness, between the acquiring and acquired organization, affect post-acquisition organizational identification?
More specifically, the following sub questions will be addressed:
To what extent and in what way can business relatedness, between the acquiring and acquired organization, affect post-acquisition organizational identification?
To what extent and in what way can cultural relatedness, between the acquiring and acquired organization, affect post-acquisition organizational identification?
1.7 Research outline
2. METHODOLOGY
This chapter will elaborate upon the research approach. Afterwards, the acquisition projects that were subject of this study will be presented, followed by a section explaining data content. Lastly, the methods for data collection and data analysis will be clarified.
2.1 Research approach
As mentioned before, the objective of this paper is to investigate the role of four types of relatedness in post-acquisition organizational identification processes. This research aims to provide a more comprehensive understanding of the process of organizational identification and the development of a common group identity. Given the relatively new and unexplored nature of the phenomenon, the knowledge generating approach “theory development” is used (Eisenhardt, 1989).
To explore the relationship between relatedness and post-acquisition organizational identification, an explorative case study was conducted. In order to enable in-depth analysis of the change process with a major focus on the research question, an embedded multiple-case study was chosen (multiple case studies with multiple units of analysis). The cases and units of analysis were selected based on the judgment of the researcher (e.g. the division of organizational units), which is referred to as judgment sampling (Cooper & Schindler, 2008).
2.2 Case studies
Data has been collected on multiple international acquisition projects to investigate possible factors that explain the feelings of employees towards this strategy and their personal identification with the new organization. A total of 15 employees of the acquired companies were interviewed, who have mixed feelings regarding the acquisitions. Both employees who stayed within the post-acquisition organization as well as employees who left the organization after the acquisitions were interviewed. The fifteen employees of the acquired companies can be divided into top managers, middle managers and employees. In addition, five integration managers of the acquiring company were interviewed to collect data on their approaches and resulting outcomes. It is important to note that all acquisitions differed in terms of business-, cultural-, technology- and size relatedness between the acquiring and acquired organization.
The first acquisition project was conducted in 2011. The project included a German manufacturer and marketer of specialty plastic coatings with total annual revenues of 115 million euros. The target employed around 800 people and was considered significantly smaller than the acquiring company. The acquirer aimed to strengthen its position in the market by increasing its market share of already existing Industrial Coatings activities, therefore, the companies did not significantly differ in terms of business- or technology relatedness. The target was known for its "sales-mentality", and the acquiring organization expected some cultural issues after the acquisition. The second acquisition project was conducted in 2008. The target was a manufacturer of decorative paint and bright films from the United States with approximately 100 employees, whom possessed highly specific technological know-how for eco-friendly coating solutions. The acquirer aimed to add the target's complementary products and technologies to its portfolio. In terms of relatedness, it was assumed that the organizations differed in terms of business-, technology- and size relatedness.
worked together in multiple joint ventures, after which the acquirer decided to take over the entire business. The organizations were assumed relatively similar in terms of business-, cultural-, technology- and size relatedness, since both companies did not significantly differ in terms of size and operated in similar industries and multinational environments by the time of the acquisition.
The last project included the acquisition of a British chemical company in 2008. The target had nearly 30.000 employees and annual revenues of almost 5 billion euros. The organizations were assumed relatively similar in terms of business-, cultural-, and technology relatedness. Regarding size relatedness, the target exceeded the size of the existing chemical division of the acquirer, yet the target was still somewhat smaller than the total acquiring organization.
2.3 Data content
The aim of the data collection is to gather experiences and relevant anecdotes regarding members' feelings and experiences of post-acquisition identification. More specifically, the goal of the researcher was to collect information about incidents where business-, size-, cultural- and/or technological relatedness were influencing the interviewees' post-acquisition identification. Interviewees were asked to provide concrete examples of the influence of business-, size-, cultural- and technological relatedness on their identification with the new organization to fulfil this goal.
2.4 Data collection method
All interviews started off with a set of introduction questions, followed by questions to gather information about factors experienced by interviewees, which were not specified in the theory section of this research. Questions were asked regarding how interviewees experienced being a member of the new organization, and what factors possibly contributed to that feeling. Next, questions were asked to explore how the interviewee experienced the process of the acquisition. The process of an acquisition possibly influences the connectedness of employees with the new organization, which makes it an important factor to take into account. During the third phase of the interview, questions were asked to explore the presence or absence of similarities between the acquired and acquiring firm that indicated a degree of business-, cultural-, technology-cultural-, or size relatednesscultural-, and the impact of such similarities on employees’ post-acquisition organizational identification. Interviewees were asked to provide concrete examples on the influence of such organizational similarities on their personal identification with the organization.
On average, the interviews lasted an hour and took place at the work location of the interviewees or via telephone. All interviews were recorded to ease the transcribing and coding of interviews for the researcher. Confidentiality and anonymity were guaranteed to all interviewees by assigning a label to each interviewee consisting of a number attributed to each acquisition and a number attributed to each interviewee. Table 1: Labels of interviewees
2.5 Data analysis method
All twenty interviews were transcribed and coded based on both deductive and inductive coding. The coding technique was used to diminish the large amount of data obtained from the interviews and to simplify the comparison of the different data. Deductive codes emerged from the theory presented in the introduction and literature review and were listed in a pre-set coding scheme, which can be found in table 2a. The pre-set codes for the identified factors were: business relatedness, cultural relatedness, technology relatedness and size relatedness. Data that was coded indicated a degree of business, cultural, technology, or size relatedness, and the impact of such similarities on employees’ post-acquisition organizational identification. Only fragments of the interviews related to thoughts and experiences about concrete events were coded. Assumptions of interviewees were not taken into account.
Inductive codes emerged from the insights that were gained from the experiences of the interviewees. The researcher first coded all interviews and added the inductive codes to the existing coding scheme. A fellow researcher was asked to code a number of interviews to increase the quality of the coding scheme. By using the insights of multiple researchers, the inter-rater reliability and validity were increased (Aken, Berends, & Van der Bij, 2012). The resulting codes were compared, and differences were discussed to optimize the initial coding scheme. Next, the researcher used the optimized coding scheme to code all interviewees a second time. Any differences in coding between the first and the second time were reconsidered by clearly focusing on the descriptions in the coding scheme.
3. RESULTS
The results of this research are presented below. First, the pre-set coding scheme, used for the interview analysis, and the corresponding findings will be presented. As mentioned before, the pre-set codes aimed to investigate the influence of business-, size-, cultural- and technological relatedness on employees' personal identification with the post-acquisition organization. Additional factors came up during the interviews that influenced the interviewees' post-acquisition identification. The coding scheme of the emerged codes will be presented after which the outcomes of these factors are presented as well.
3.1 Pre-set coding scheme
The pre-set coding scheme used for the interview analysis and the corresponding findings are presented in table 2a. The findings of this research are presented in columns 4-6.
Table 2a: Pre-set codes and the correspondent findings
Subject Code Description Sample Fre
que ncy Respo ndents + Business Relatedness & Post-acquisition Identificatio n
BRI The extent to which the transferability of existing knowledge, resources, technologies, customer bases, and networks positively influences the post-acquisition
identification process
"I only acquired companies that were active in similar markets and industries, because it’s easier to integrate and people don't need to learn a lot of new behaviours or skills". (AQ4-2) 3 AQ3-3 AQ3-4 AQ4-2 - Business-related Differences & Post-acquisition Identificatio n
BDI The extent to which the non-transferability of existing knowledge, resources, technologies, customer bases, and networks negatively influences the post-acquisition identification process
"If you buy a related business, the practices, cultures and size are more similar and easy to integrate. When you buy a special (different) business like us, you need people who are into that. They did not understand our way of doing business and vice versa, and that made it very difficult for us to become "acquiring
company". "
(AQ2-1)
2 AQ1-3 AQ2-1
Cultural Relatedness & Post-acquisition Identificatio n cultural relatedness between two organizations in terms of norms, values, business processes, and
management styles, facilitates the post-acquisition identification process
were similar, because they were both internationally oriented. They had to deal with the same things [...] Multinational companies coming together already share some
understanding. (AQ3-2) AQ4-1 AQ4-2 AQ4-4 AQ4-5 - Cultural Differences & Post-acquisition Identificatio n
CDI The extent to which cultural differences between two
organizations in terms of norms, values, business processes, and
management styles, negatively influence the post-acquisition
identification process
"Our (acquired employees)
mentalities didn’t fit with the culture of "acquiring company". I saw a lot of us (employees) struggling with that. In Asia you might need to buy dinners and beers to build trust and establish a relationship, but they
(acquiring organization) wouldn't allow us (employees). We lost business to our
competitors. That led to internal conflicts, but also negative feelings towards "acquiring company"." (AQ1-3) 8 AQ1-2 AQ1-3 AQ1-4 AQ1-5 AQ3-1 AQ3-3 AQ3-4 AQ3-5 + Technology Relatedness & Post-acquisition Identificatio n
TRI The extent to which the transferability of available technology-related knowledge, capabilities and skills positively influences the post-acquisition
identification process
"We shared the same
technological basis, which was because of our overlapping histories of course. It helped their (acquired company) employees a lot after the acquisition." (AQ4-1) 4 AQ1-2 AQ1-3 AQ3-2 AQ4-1 - Technology -related Differences & Post-acquisition Identificatio n
TDI The extent to which the non-transferability of available technology-related knowledge, capabilities and skills negatively influences the post-acquisition
identification process
"Well, regarding technologies in a particular segment (interior auto motives) we got some reasonable but very old technologies from "acquiring company". Our technologies were well-developed, and so were our skills, so it would be logic to follow our way, but that did not happen and.. It felt like we forced one step back."
(AQ1-3) 2 AQ1-3 AQ4-1 + Size Relatedness & Post-acquisition
SRI The extent to which similarity in terms of organizational size fosters a sense of
continuity for employees
Identificatio n
and positively influences the employees' post-acquisition identification process + Size Differences & Post-acquisition Identificatio n
SDI The extent to which differences in terms of organizational size positively influence the employees'
post-acquisition identification process
"I felt pleased to be part of a bigger group. It was a step-‐up in terms of status and inputs. But not only that, I looked forward to new opportunities because of their size in terms of, for example, market reach and power." (AQ3-1) 3 AQ1-3 AQ3-1 AQ4-1 - Size Differences & Post-acquisition Identificatio n
SDI The extent to which differences in terms of organizational size foster a sense of discontinuity for employees and negatively influence the post-acquisition
identification process
"Before (the acquisition), I felt that what I did was actually beneficial for the company, something worthwhile. And in such big companies it's difficult to see what effect you are having, if any. So you wonder sometimes: what am I still doing here?" (AQ2-1) 7 AQ1-1 AQ2-1 AQ2-2 AQ2-5 AQ3-2 AQ3-4 AQ3-5 3.2 Pre-set factors
This section contains the outcomes of the interviews related to the pre-set factors, which are mostly perceived as positively influencing post-acquisition organizational identification. Size relatedness is the only factor for which no positive effects were mentioned related to employees' organizational identification after an acquisition.
3.2.1 Impact of business relatedness on post-acquisition identification
The interviewees indicated that business relatedness positively affects post-acquisition identification outcomes. The transferability of existing knowledge, resources, technologies, customer bases, and networks is found to ease the identification process, because acquired employees do not need to change current skills and behaviours. In addition, a sense of belonging might already exist at the industry-level, which is shared among employees of both organizations in case of high business relatedness. As mentioned by interviewee AQ3-4: "Oh yes.. It (business
organizations already shared a pre-acquisition identity of so-called "coatings-people", which was derived from manufacturing and selling the same type of product. A sense of belonging to the same group within society facilitates the post-acquisition organizational identification of employees.
Meanwhile, organizations that operate in significantly different industries can be difficult to integrate. Seven years after the second acquisition project it remains unclear for both the target and the acquiring organization to which division the acquired business belongs. As interviewee AQ2-1 mentioned: "We are in a unique
industry and they (acquiring organization) just do not know where (in which division) to put us [...] I think we have been part of at least five different business units in the past seven years, all of which have different leadership styles and cultures. We have
seen a high amount of turnover in R&D, Marketing, Sales and IT because of these continuous shifts." The lack of a clear group-membership significantly influences the
employees' identification with the acquirer and their intentions to leave the post-acquisition organization. In addition, interviewee AQ3-2 mentions: "Some companies
acquire other companies to add a completely new product or industry to their business, so in your terms it is not related. And then they add another problem to the cultural problems that come with integration, namely that they do now have the knowledge about the market and products and there is no division that can manage this organization." As can be derived from this statement, high differences between
the organizations' industries, markets and products will limit opportunities for re-categorization from one group to another. This in turn will pose a threat on employees' opportunities for post-acquisition organizational identification.
Interviewee AQ4-‐4 holds a particular interesting view on business relatedness. According to the interviewee, companies that are active in similar markets and industries and that sell similar products, are likely to be direct competitors. As stated by the interviewee: "It can be important to be active in similar markets and
direct competitor." Other interviewees did not mention the potential influence of
such negative feelings towards competitors.
3.2.2 Impact of cultural relatedness on post-acquisition identification
Interviewees experienced organizations' common norms, values, mentalities and business processes as also positively influencing their post-acquisition identification process. As recognized by one of the integration managers (interviewee AQ4-1): "To
me, the most important factor in post-acquisition integration processes is fit of culture. It helps employees to relate to my organization." As explained by interviewee
AQ4-2, cultural fit can create bonds between employees right after the acquisition: "I
have an example of another acquisition where cultural fit was quite good I think. We had the same historical background, the companies had been separated once and now became one company again [...] We shared the same values and practices, and former colleagues would now work with each other again, that strengthens ties and creates strong commitment."
Even more important seemed the difficulties arising from efforts to integrate different cultures. As stated by interviewee AQ3-3: "I always warn if you acquire a company
with high cultural differences, it can cause huge problems with employees. {...}".
Interviewee AQ1-3 explained how different mentalities and leadership styles caused frustrations on his side: "Oh there were high differences, yes. I came from a small
company where there was always a degree of risk when investing money. [...] We are risk-takers. That was negative in the opinion of "acquiring company", they wanted guaranteed success and no risk at all. They would come up with a 50-year plan, haha. [...] Their flexibility was rather low and it took some time for me to accept that. I still don't agree with it, but well, I accept it. The same interviewee later expressed more
negative feelings towards the acquirer stemming from differences in mentalities: "Let
examples illustrate how imposed changes on how to do business can lead to lower team performance and cause frustrations among employees. Furthermore, cultural differences were experienced as a cause for employees to leave the organization after the acquisition, as explained by interviewee AQ3-3: "We set-‐up a mixed top management team, but the middle managers were kept intact from the acquired firm. We then tried to install our own culture, for example our safety rules [...] That created stress at the middle management roles and many of them left."
Interviewee AQ3-3 provided another interesting perspective: "I believe cultural fit is
crucial to establish one company culture. But for that you need a clear assessment and view on your own culture first, and "acquiring company" did not have that. They did not have a coherent strategy, coherent policies, and coherent business processes nor practices. So there was no clear culture for us to take over {...} That incoherency made it difficult for us." The interviewee highlights that, even though employees were
willing to adapt new practices and behaviours, the lack of coherency in the acquirer's strategy, policies and practices made it difficult to establish and relate to one post-acquisition organizational culture. Interviewee AQ3-4 explained why he felt the transfer of the corporate culture was difficult: "They (acquiring company) never really
had a standard strategy document, for example for marketing. In my overall career experience that's really extraordinary [...] In other businesses there's much more outlook: " this is how we do it here". "Acquiring company" never really had that. Over a 20 years period, it changed >30% of its portfolio every 5 years, that's a high level of change as you might know."
3.2.3 Impact of technology relatedness on post-acquisition identification
Statements by some interviewees indicate a positive relationship between the transferability of available technology-related knowledge, capabilities, and skills and the employees' post-acquisition identification process. As mentioned in the theory section, the transferability of patents is an important indicator for technology relatedness. Interviewee AQ1-3 expressed highly positive feelings towards the acquisition in the light of the transferability of patents: "They (acquiring company)
Furthermore, interviewee AQ2-1 expressed that employees did not face any difficult changes in the technological field, which made it easier for them to continue their operations as they were used to. However, this view can be biased by the fact that the second acquisition project was technology-driven and all technologies of the acquired organization were kept intact.
Interviewee AQ1-3 also indicated that the non-transferability of available technology-related knowledge, capabilities and skills restrained the post-acquisition identification process: "Well, regarding technologies in a particular segment (interior auto motives)
we got some reasonable but very old technologies from "acquiring company". Our technologies were well-developed, and so were our skills, so it would be logic to follow our way, but that did not happen and.. It felt like we forced one step back."
This statement illustrates how the technologies of the acquiring company can be "forced down the throats" of employees. Employees of the acquired organization could not use their advanced technology-related knowledge and -skills within the post-acquisition organization, which led to negative feelings towards the acquiring organization. Interviewee AQ4-2, one of the integration managers, also experienced this matter and shared her experience from a different acquisition project: "We shared the same technological basis, which was also derived from our histories. So to a large extent it was related and I think it helped us a lot, but there was one issue: they were more developed, more innovative let's say [...] They had to go one step back, which created some frustrations among employees."
Interviewee AQ1-4, who also experienced a loss of authority and control over R&D-activities, explains: "We lost control over R&D, so we lost morale and enthusiasm. I mean.. I understand it.. but it doesn't stimulate us [...] We were still committed though, but no question we were more committed to "acquired company"." The
combination of existing projects can cause a loss of authority, which in turn lowers the commitment of employees. Later on, the same interviewee, AQ1-‐4, expressed his negative feelings related to this subject again: "We lost control and
autonomy over numerous of factors, and so we lost pride, enthusiasm and commitment to our work. They (acquiring company) should have continued the changes we proposed, and provide us with control over our R&D."
Lastly, interviewee AQ1-2 expressed his doubts regarding the transferability of existing technological skills: "The key is that there must be one system, and it is easier
to work with a system that is already known within the organization. However, I doubt whether existing skills are often really transferable."
3.2.4 Impact of size relatedness on post-acquisition identification
As outlined in the introduction section, size relatedness facilitates efficient knowledge integration processes between firms. The interviewees did express some concerns regarding size relatedness and integration efforts, however, this could not directly be linked to post-acquisition identification processes. Interviewee AQ4-1: "I think it's
easier to integrate smaller companies, because less people are involved to get on-board, but I guess it also has disadvantages. One thing I am sure about after our acquisition: the acquired company should never be bigger than the acquiring company." One of the integration managers, AQ1-1, explained why acquisitions
between equals are not desirable: "Acquisitions between equals give space for endless
negotiations. I was in such a "merger" once, but the outcomes were far from optimal [...] In the end, it was not about finding the best solution, it was one big power play."
royal status of an "acquiring company". [...] It’s a great branding to have." This
statement supports the theoretical explanation that collective pride resulting from a status symbol can increase an employee's willingness to define him- or herself as a member of a particular organization.
Interviewee AQ2-3, one of the integration managers, explained that an acquiring organization could be especially threatening for supporting functions of a smaller target organization: "I think we were threatening for their small company. I mean, we
could easily make off with their innovations. Most supporting functions will also feel threatened, because it's quite usual to centralize them into the existing functions."
Other interviewees argued that small companies are often responsive, flexible and fast moving, which conflicts with the stable and bureaucratic functioning of most large organizations. Interviewee AQ2-1: "It is tough for a small company as we are when
you are bought by a large business. We were very responsive, fast and flexible [...] "acquiring organization" on the other hand is very stable and bureaucratic. It is difficult to relate to when you are not used to that. Interviewee AQ2-2 acknowledges
the restraining effect of size differences as well: "In large companies,
communication-lines are longer and there are many things to worry about, so the business moves slower. In small companies, communication is easier and things move fast. I don't believe employees on the work floor can relate to "acquiring organization"." Lastly,
the possibilities to enhance intergroup relations and cooperation with colleagues throughout the organization are limited in larger organizations, as explained by interviewee AQ2-5: "In our company everybody knew everybody, even I did as the
3.3 Emerged coding scheme
Table 2b presents the codes that emerged during this research and the correspondent findings.
Table 2b: Emerged codes and the correspondent findings
Subject Code Description Sample Frequ
ency Respondents + Managerial Commitment and Post-Acquisition Identification
MCI The extent to which the management teams of either one or both
organizations put time and effort into the
post-acquisition integration process to facilitate post-acquisition identification.
"I was very close with Peter, our CEO by then. Peter expressed his goals and was positive that he could put our team to play within
"acquiring company". We trusted Peter, we were very loyal to him, so I believed in his goals." (AQ4-3) 6 AQ1-2 AQ1-3 AQ2-2 AQ4-1 AQ4-3 AQ4-4 - Lack of Managerial Commitment and Post-Acquisition Identification
LMI The extent to which a lack of commitment (in terms of time and effort put into the integration process) of the management team of either one or both organizations negatively influences post-acquisition identification processes.
"We experienced little commitment of "acquiring company". We were only 90 employees in total and they just wanted our
technologies, so a limited amount of their people came to actually see us [...] So how can you expect that we are happy to work for your organization?" (AQ3-‐4) 1 AQ3-4 + Mixed Management Team and Post-Acquisition Identification
MMI The extent to which the management team of the post-acquisition business unit includes managers of both the acquiring
organization and the acquired organization.
"What we did well? ... Our mixed management team has been one of the biggest plusses of this acquisition. It helped employees of both companies to commit to both the acquisition and
"acquiring company." (AQ1-2) 4 AQ1-1 AQ1-2 AQ1-4 AQ1-5 - Geographical Dispersion and Post-Acquisition Identification
GDI The extent to which the geographical dispersion of employees constrains post-acquisition identification.
"I think it was important to have personal contact, which was more difficult because of the distance. It required frequent phone calls and video meetings to have our people commit to this new organization."
(AQ1-1)
3.4 Emerged factors
This section contains the outcomes of the interviews related to the emerged factors. Four factors were perceived to positively or negatively influence the post-acquisition identification process: managerial commitment, mixed management team, the acquirer's initial objectives and geographical dispersion. Managerial commitment was the only factor perceived as having both a positive influence, if present, and a negative influence, if absent, on employees' identification processes.
3.4.1 Impact of managerial commitment on post-acquisition identification
The interviewees indicated that they experienced managerial commitment of the acquiring organization as having a positive impact on post-acquisition identification processes. Employees who strongly identify with their manager are more likely to identify themselves with the post-acquisition organization if their manager shows his/her commitment. As interviewee AQ1-1, one of the integration managers, explained: "I think the attention of the board or other supervisory body is an
important issue in order to achieve optimum integration results. Whether this integration applies to technologies, business practices or, employees. Let me give you an example.. I used to write a monthly update for employees of "acquired organization" to show them what was going on in their organization and to set out our goals of the acquisition, but I put it out there as if the head of their own company wrote it [...] So, to them (employees of acquired organization) it became evident that their boss committed to our goals, which made it easier for their employees to commit to our goals as well." Another integration manager, interviewee AQ3-3, also
experienced this: "It depends on whether the acquired company becomes core
business or just a minor part. We paid high attention to their company and their employees, they were not used to that amount of attention, which made that they really wanted to be part of us." This example illustrates that managers are more likely
to commit to the acquisition if the target company is integrated into the core business, which facilitates the sense of belonging by employees.
commitment of "acquiring company". We were only 90 employees in total and they just wanted our technologies, so a limited amount of their people came to actually see us [...] So how can you expect that we are happy to work for your organization?" This
example illustrates that managers are less likely to commit to the acquisition if the target company does not become core business, thereby limiting the sense of belonging by employees.
3.4.2 Impact of mixed management teams on post-acquisition identification
Employees of the acquired organization experience a sense of continuity when the management team of the organization or business unit after the acquisition includes managers of both the acquiring-‐ and the acquired organization. Interviewee AQ1-‐1 illustrates this in the following statement: "It is important
that either the CEO or the CFO is from the acquiring company to transfer its culture. The remaining function (CEO or CFO) should be from the acquired company. Employees will really feel a sense of continuity when top management stays. Take the former CEO of "acquired organization". A while after the acquisition the man left our business, after which many of his former employees followed his example."
3.4.3 Impact of geographical dispersion on post-acquisition identification
One of the interviewees indicated that he experienced geographical dispersion as affecting the establishment of a post-acquisition identity. The presence of a geographic distance will make it harder for employees to identify themselves with the post-acquisition organization. As interviewee AQ1-1 noted: "I think it was important
to have personal contact, which was more difficult because of the distance. It required frequent phone calls and video meetings to have our people commit to the new organization." ). The use of frequent virtual meetings and phone calls helped people
to commit to the post-acquisition organization. 3.5 Additional findings
interviews that are not directly related to the establishment of a post-acquisition identity. Multiple interviewees experienced that identification does not occur at the organizational level. Instead, it occurs at the divisional- or site level. Interviewee AQ1-1 mentions: "I am proud of my business and product, and the entity feeling is created by.. Let me call it rebelling against the HQ's processes. Compared to other units, there is no overlap in our products." When multiple business divisions exist
with unrelated products, it is likely that an identity for employees exist at the level of the individual business unit. Another interviewee, AQ1-‐5, mentions: "You
know. Actually I did not identify myself with the organization, not in this acquisition. Look at "acquiring company", identification much more occurs at the product or brand level instead of the overall organizational level." A possible
explanation for the occurrence of an identity at the division-‐ or site level lies in the fact that most of the original brands of acquired companies were kept intact and, therefore, the acquiring organization consists of multiple brands and multiple identities. Interviewee AQ3-‐1 explains: "Acquiring organization" is
making some significant changes to the current structure in the last couple of years, like reducing its brand and product portfolio, which facilitate true organizational identification I think, but prior to that the BU culture was always dominant [...] The cultures across business units can be highly different. You know, "acquiring company" is a hidden name in most of the markets. Most of the original brands are kept intact, so I don't really relate to the overall organization.
Lastly, the value of the establishment of a post-acquisition organizational identity can be questioned. Organizations often acquire a target organization when it is believed that this target organization can be of high value. A strong identity can be expected to be present within this target organization, which can be one of the reasons for the high performance of the organization. Interviewee AQ3-3 explains that it might not always be favourable to change this value: "They (employees) still call themselves by the
4. DISCUSSION AND CONCLUSION
This section aims to provide an answer to the research questions formulated in the theory section. In addition, propositions will be formulated for future research. Furthermore, conclusions as well as theoretical and practical implications will be provided. The last paragraph contains the limitations of this research and suggestions for future research.
4.1 The influence of relatedness on post-acquisition identification processes
4.1.1 To what extent and in what way can business relatedness, between the acquiring and acquired organization, affect post-acquisition organizational identification?
As explained in the theory section, a high degree of transferability of known organizational aspects and shared practices is expected to contribute to the employees’ post-acquisition identification. This positive relationship is confirmed by the outcomes of the interviews. The most important reason provided for this positive relationship was that employees do not have to learn new skills and behaviours when entering a related organization, so that changes in tasks and roles will be less significant. In case of high business relatedness, a sense of belonging might already exist at the industry-level that is shared among employees of both organizations. The existence of such a common identity is experienced to facilitate the creation of a new post-acquisition identity.
Moreover, interviewees confirmed that organizations that operate in significantly different industries are more difficult to integrate. High differences between the organizations' industries, markets and products make the re-categorization of employees from one group to another more difficult. If the employees' place in the organizational structure remains unclear, these employees might not feel a sense of belonging. This in turn will pose a threat on their post-acquisition organizational identification.
geographical area(s). In that case it is likely that employees have felt the threat of the specific competitor before, with which they do not want to identify themselves.
4.1.2 To what extent and in what way can cultural relatedness, between the acquiring and acquired organization, affect post-acquisition organizational identification?
Cultural relatedness was the only type of relatedness that had been linked to post-acquisition identification of employees by previous researchers (Marmenout, 2010; Stahl & Voigt, 2005). The perceived cultural similarity between the acquirer and the acquired organization was found to directly affect employees’ satisfaction and intentions to leave. The interviewees confirm a positive relationship between the so-called cultural fit and employees' commitment. A degree of shared understanding is suggested when both organizations operate in a multinational environment. Cultural fit in terms of shared values and mentalities was experienced to facilitate bonds between employees of both organizations right after an acquisition. The overlap in understanding and knowledge of employees makes that fewer changes in mind-sets are needed.
On the other hand, when the corporate culture was forced down the throat of acquired employees it resulted into frustrations, conflicts, and other negative feelings towards the acquiring organization. As outlined in the theory section, imposed changes on how to do business can lead to lower team performance and eventually can lead to employees leaving the organization after the acquisition, which can pose a threat on the value of the acquisition.
4.1.3 To what extent and in what way can technology relatedness, between the acquiring and acquired organization, affect post-acquisition organizational identification?
Theory indicated that a high degree of transferability of available knowledge, skills and R&D practices contributes to employees’ post-acquisition identification (Colombo & Rabbiosi, 2010). As mentioned in the theory section, the transferability of patents is an important indicator for technology relatedness, which was experienced by one employee to provide a sense of pride and recognition.
Other statements illustrate how the technologies of the acquirer can be "forced down the throats" of employees, which give rise to negative feelings towards the acquiring organization. Especially when the technologies of the acquirer are less advanced, employees of the acquired organization could not use their specialized technology-related knowledge and -skills within the post-acquisition organization. The "step back" in terms of innovative technologies causes frustrations among acquired employees.
As mentioned in the theoretical part of this research, by combining previously separated R&D projects and facilities, the post-acquisition organization would be able to increase its economies of scale and terminate overlapping projects (Colombo & Rabbiosi, 2010). Such synergies are positive for the acquiring organization, however, multiple interviewees expressed their dissatisfaction with the loss of control over R&D-projects. The perceived loss of autonomy lowers employees' pride, enthusiasm and commitment after the acquisition, which are closely linked to the concept of organizational identification.
4.1.4 To what extent and in what way can size relatedness, between the acquiring and acquired organization, affect post-acquisition organizational identification?
Regarding size relatedness, it was expected that similarity in terms of organizational size fosters a sense of continuity for employees and could positively influence the employees' post-acquisition identification process. The outcomes of the interviews did not indicate the existence of a positive relationship between size similarities and a sense of continuity of employees. Instead, it was mentioned that acquisitions between equals are likely to give rise to power plays. According to theory, such “us vs. them thinking” between members of both organizations undermines the strategic goals of the acquisition (Buono, Bowditch & Lewis, 1985).
Differences between organizations in terms of size, on the other hand, could influence the development of post-acquisition organizational identification in both a positive and a negative way. The positive effect of size differences becomes visible in employees' feelings of pride and status to become part of a large organization. In addition, it is experienced that larger organizations provide employees with new and motivating opportunities. The collective pride resulting from a status symbol can increase an employee's willingness to define him- or herself as a member of a particular organization.
The negative effects of size differences on post-acquisition identification are based on differences in how organizations function. It was argued that small companies are often responsive, flexible and fast moving, which conflicts with the stable and bureaucratic functioning of most large organizations. Furthermore, it is experienced that it is more difficult to establish personal ties with many people in large organizations, whereas employees coming from small organizations are used to work as "one big family". In the latter case the social work group is a more significant part of our self-concept, which is limited after the acquisition.
managers are more likely to commit to the acquisition if the target company is integrated into the core business. In that case, managers are more willing to invest time and resources in the integration processes, which facilitate a sense of belonging and recognition by employees. The managers of the target company also play a role. Employees who strongly identify with their manager are more likely to identify themselves with the post-acquisition organization if the manager expresses strong commitment to the acquisition. If top management did not put time and effort in the post-acquisition integration process, employees experienced that they were less committed to the post-acquisition organization.
Regarding the second factor, the establishment of a mixed management team, a positive relationship was found between the presence of a mixed management team and employees' identification with the post-acquisition organization. Multiple interviewees experienced a sense of continuity when the management team of the organization or business unit after the acquisition included managers of both the acquiring-‐ and the acquired organization. This sense of continuity facilitates employees' post-‐acquisition organizational identification.
The final factor, geographical dispersion, was experienced to limit the establishment of a post-acquisition identity. The presence of a geographical distance will make it more difficult for employees to identify themselves with the post-acquisition organization. The presence of geographical distance requires frequent face-to-face or virtual meetings and phone calls to establish post-acquisition organizational identification.
4.3 Additional findings
The second insight concerns the value of the establishment of a post-acquisition organizational identity. Organizations often acquire a target organization that can be of high value to the existing business. Within the target organization an identity, based on the companies' history and experience, is likely to exist and functions as one of the organizational assets. During the interviews it was proposed that replacing the existing identity might destroy part of the performance and value of the target organization, which is often not desirable.
4.4 Conclusions
As proposed in the introduction section, social identity theory offers an interesting explanation of how employees’ identification with an acquiring organization can facilitate the post-acquisition integration process and organizational performance. This research investigated different types of organizational relatedness that were expected to affect employees’ post-acquisition organizational identification: business-, cultural-business-, technology-business-, and size relatedness. As expectedbusiness-, a positive relationship was found between the pre-set factors business- and cultural relatedness and post-acquisition organizational identification processes. With regard to the pre-set factor technology relatedness it remains unclear whether a degree of transferability of available knowledge, skills, R&D practices and existing technologies will indeed lower the level of change in knowledge, skills and systems required, which in turn facilitates post-acquisition organizational identification. Instead, it was found that the transferability of R&D-practices and technologies often restrict employees' post-acquisition autonomy and control, which cause frustrations and negative feelings that limit post-acquisition organizational identification. Regarding the pre-set factor size relatedness, it was found that differences between organizations in terms of size can affect the development of post-acquisition organizational identification in both a positive and a negative way.
