Post-acquisition Strategies, Integration Capability, and the Economic Performance of Corporate Acquisitions

This paper introduces a knowledge-based view of corporate acquisitions, and tests the post-acquisition performance consequences of two capability-building mechanisms: experience accumulation and knowledge codification. In the model, the acquiring firm makes decisions about the level of integration and the degree of replacement of the target’s top management team, and can develop a capability to manage the post-acquisition integration process by tacitly accumulating acquisition experience and explicitly codifying it in manuals, systems and other acquisition-specific tools. In a sample of 228 acquisitions in the US banking industry, we find that experience accumulation fails to significantly impact performance, but that knowledge codification has a strong and positive influence. The impact of codification is also strengthened with increasing levels of post-acquisition integration, i.e. when the organizational challenge becomes increasingly complex. Finally, the level of integration between the two firms involved in the acquisition significantly enhances performance, while the replacement of top managers in the acquired firm impacts performance in a negative fashion. Implications are drawn for organizational learning theory and for a knowledge-based approach to corporate strategy research.