Context Sensitivity of Post-Acquisition Restructuring: An Evolutionary Perspective

Abstract

The transformation and integration of acquired businesses is subject to tensions between radical change to match the strategy and corporate culture of the acquirer, and promoting what is valuable in resources and cultural attributes in the acquired organization. Analysts' disagreement, even within the tradition of the resource-based view of the firm, arises from different conceptualizations of the nature of resources. We present an evolutionary perspective that shows not only the merits of competitive selection, but of retaining and developing context sensitivity and diversity.

Our case evidence shows that a defensive focus on short-term efficiency, i.e. downsizing, may destroy valuable human capital and employee motivation, and thus fail to realize the long-term potential of the organization. Investor determined strategies increased allocative efficiency in terms of productivity and profitability more rapidly. However, even in this case, acquirers providing more autonomy to local decision-makers and research units have been able to realize more of the potential contributions of the acquired assets, thus increasing dynamic efficiency.

Our empirical analysis of the tension between change and continuity is based on 20 original case studies in Hungary and East Germany. Foreign investors acquired these firms in the privatization wave of the early 1990's.

JEL Classification: G34, L33