On the role of communication and management engagement for acquisition success: A study of Israeli startups

Abstract

Objective: The aim of this paper is to shed light on the effects of communication and management engagement on start-up acquisition success.

Research Design & Methods: The present paper adopts a behavioural perspective and uses a set of quantitative data collected from start-up companies from Israel, which were taken over by international firms, in order to explore the role of acquired firm’s management. Particular emphasis is put on communication and the managerial engagement in the post-acquisition stage.

Findings: Partial empirical support for these relationships can be found. Subsequently, a number of avenues for future research are discussed.

Implications & Recommendations: Specifically, it is argued that communication and management engagement mediates the influence of a number of employee-related and organisational factors on acquisition performance.

Contribution & Value Added: Taking into account the significant failure rate of international acquisitions, the identification of their critical success factors is an important issue. This pertains also to the acquisition of start-ups by established firms, for which it is a strategy for enhancing their technological base. The paper also contributes to extant literature by adopting the acquired firm’s perspective.

Keywords

international mergers & acquisitions, performance, start-ups, post-merger integration, communication; management engagement

Author Biography

Jan Polowczyk

Habilitated doctor, Associate Professor at the Poznań University of Economics and Business, Department of International Competitiveness. He spent 15 years in the corporate sector, holding senior managerial positions in Polish affiliates of international companies. The main field of his interests is strategic management. He is a member of Strategic Management Society.

Ofer Zaks

PhD, lecturer and researcher at the Department of “Management of Service Organizations” in the Jerusalem Hadassah college, Israel. He was previously employed as a management team member (VP HR) in various firms – low & high-tech. In his research he concentrates on factors that influence the success of M&A processes- mainly in high- tech & start-ups companies & on Industry 4.0.

Piotr Trąpczyński

Habilitated doctor, Associate Professor at the Poznań University of Economics and Business, Department of International Competitiveness. He acts as one of directors at the Knowledge Transfer Company of the same university, supporting firms in their international expansion. In his research work, he concentrates on the performance outcomes of firm internationalisation. His work has been published inter alia in the Journal of Business Research, Journal of World Business, International Business Review, or the European Management Journal. He is board member and co-founder of the AIB-CEE Chapter.

References

1. Agarwal, R., & Helfat, C. E. (2009). Strategic renewal of organizations. Organization Science, 20(2), 281-293.
2. Almor, T. (2013). Conceptualizing paths of growth for technology-based born-global firms originating in a small-population advanced economy. International Studies of Management & Organization, 43(2), 56-78.
3. Amiot, C. E., Terry, D. J., Jimmieson, N. L., & Callan, V. J. (2006). A longitudinal investigation of coping processes during a merger: Implications for job satisfaction and organizational identification. Journal of Management, 32(4), 552-574.
4. Angwin, D. N., Paroutis, S., & Connell, R. (2015). Why good things Don’t happen: the micro-foundations of routines in the M&A process. Journal of Business Research, 68(6), 1367-1381.
5. Rafferty, A. E., Jimmieson, N. L., & Armenakis, A. A. (2013). Change readiness: A multilevel review. Journal of Management, 39(1), 110-135.
6. Armenakis, A. A., & Harris, S. G. (2002). Crafting a change message to create transformational readiness. Journal of Organizational Change Management, 15, 169-83.
7. Avnimelech, G., & Schwartz, D. (2009). Structural changes in mature Venture Capital industry: Evidence from Israel. Innovation Management, Policy & Practice, 11(1), 60-73.
8. Baum, J. R., & Locke, E. A. (2004). The relationship of entrepreneurial traits, skill, and motivation to subsequent venture growth. Journal of Applied Psychology, 89(4), 587-598.
9. Becker, J. U., Clement, M., & Nöth, M. (2016). Start-ups, incumbents, and the effects of takeover competition. Journal of Business Research, 69(12), 5925-5933..
10. Bezrukova, K., Thatcher, S., Jehn, K. A., & Spell, C. S. (2012). The effects of alignments: Examining group faultlines, organizational cultures, and performance. Journal of Applied Psychology, 97(1), 77-94.
11. Birkinshaw, J., Bresman, H., & Håkanson, L. (2000). Managing the post‐acquisition integration process: How the human integration and task integration processes interact to foster value creation. Journal of Management Studies, 37(3), 395-425.
12. Boeker, W., & Wiltbank, R. (2005). New venture evolution and managerial capabilities. Organization Science, 16(2), 123-133.
13. Cefis, E., & Marsili, O. (2006). Survivor: The role of innovation in firms’ survival. Research Policy, 35(5), 626-641.
14. Cai, L., Chen, B., Chen, J., & Bruton, G. D. (2017). Dysfunctional competition & innovation strategy of new ventures as they mature. Journal of Business Research, 78, 111-118.
15. Capron, L. (1999). The long‐term performance of horizontal acquisitions. Strategic Management Journal, 20(11), 987-1018.
16. Chaudhuri, A., & Holbrook, M. B. (2001). The chain of effects from brand trust and brand affect to brand performance: the role of brand loyalty. Journal of Marketing, 65(2), 81-93.
17. Cheng, C., & Yang, M. (2017). Enhancing performance of cross-border mergers and acquisitions in developed markets: The role of business ties and technological innovation capability. Journal of Business Research, 81, 107-117.
18. Coff, R. W. (1999). How buyers cope with uncertainty when acquiring firms in knowledge-intensive industries: Caveat emptor. Organization Science, 10(2), 144-161.
19. Cooper-Hakim, A., & Viswesvaran, C. (2005). The construct of work commitment: Testing an integrative framework. Psychological Bulletin, 131(2), 241-259.
20. Dashti, Y., Schwartz, D., & Pines, A. (2008). High technology entrepreneurs, their social networks and success in global markets: The case of Israelis in the US market. In A. Rahim (Ed.), Current topics in management. 13 (pp. 131-144). Piscataway, NJ: Transaction.
21. Datta D.K. (1991). Organizational fit and acquisition performance: effects of post-acquisition integration. Strategic Management Journal, 12(4), 281-297.
22. De Fontenay, C., & Carmel, E. (2004). Israel’s silicon wadi: The forces behind cluster formation. In T. Bresnahan & A. Gambardella (Eds.), Building high tech clusters: Silicon Valley and beyond (pp. 40-77). Cambridge, UK: Cambridge University Press.
23. Edwards, J. R., & Lambert, L. S. (2007). Methods for integrating moderation and mediation: a general analytical framework using moderated path analysis. Psychological Methods, 12(1), 1.
24. Feather N.T. (1992). Expectancy-value theory and unemployment effects. Journal of Occupational & Organizational Psychology, 65, 315-330.
25. Ferreira, M.P., Santos, J.C., Almeida, M.I.R., & Reis, N.R. (2014). Mergers & acquisitions research: A bibliometric study of top strategy and international business journals, 1980–2010. Journal of Business Research, 67(12), 2550-2558.
26. Galpin, T. J., & Herndon, M. (2007). The complete guide to mergers and acquisitions (2nd ed.). San Francisco, CA: Jossey-Bass.
27. George, J., & Zhou, J. (2007). Dual tuning in a supportive context: Joint contributions of positive mood, negative mood, and supervisory behaviors to employee creativity. Academy of Management Journal, 50(3), 605-622.
28. Gomes, E., Weber, Y., Brown, C., & Tarba, S. (2011). Managing mergers, acquisitions and strategic alliances: Understanding the process. Hampshire, England: Palgrave McMillan.
29. Gomez, C., & Rosen, B. (2001). The leader –member exchange as a link between managerial trust and employee empowerment. Group and Organization Management, 26(1), 53-69.
30. Graebner, M. E. (2004). Momentum and serendipity: How acquired leaders create value in the integration of technology firms. Strategic Management Journal, 25(8-9), 751-777.
31. Holt, D. T., Armenakis, A. A., Feild, H. S., & Harris, S. G. (2007). Readiness for organizational change: The systematic development of a scale. Journal of Applied Behavioral Science, 43, 232-255.
32. Homburg, C., & Bucerius, M. (2006). Is speed of integration really a success factor in acquisitions and acquisitions? An analysis of the role of internal and external relatedness. Strategic Management Journal, 27, 347-367.
33. Hurley, R. F. (2006). The Decision to Trust. Harvard Business Review. September, 55-62.
34. Inkpen, A. & Currall, S. C. (2004). The coevolution of trust, control, and learning in joint ventures. Organization Science, 15, 586-599.
35. Ivancevich, J. M., Schweiger, D. M., & Power, F. R. (1987). Strategies for managing human resources during M&A. Human Resource Planning, 10(1), 19-35.
36. Jimmieson, N., Terry, D., & Callan, V. (2004). A longitudinal study of employee adaptation to organizational change: The role of change-related information and change- related self-efficacy. Journal of Occupational Health Psychology, 9, 11-27.
37. Jordão, R.V.D., Souza, A.A, & Ewerton, A.A. (2014). Organizational culture and post-acquisition changes in management control systems: An analysis of a successful Brazilian case. Journal of Business Research, 67(4), 542-549.
38. Junni, P., Sarala, R. M., Tarba, S.Y., & Weber, Y. (2015). The Role of Strategic Agility in Acquisitions. British Journal of Management, 25(4), 596-616.
39. Junni, P., & Sarala, R. M. (2013). The role of absorptive capacity in acquisition knowledge transfer. Thunderbird International Business Review, 55(4), 419-438.
40. King, D. R., Slotegraaf, R. J., & Kesner, I. (2008). Performance implications of firm resource interactions in the acquisition of R&D-intensive firms. Organization Science, 19(2), 327-340.
41. King, G. (2002). Crisis management & team effectiveness: A closer examination. Journal of Business Ethics, 41(3), 235-249.
42. Krug, J. A., & Hegarty, W. H. (2001). Predicting who stays and leaves after an acquisition: A study of top managers in multinational firms. Strategic Management Journal, 22, 185-196.
43. Krug, J. A., & Nigh, D. (2001). Executive perceptions in foreign and domestic acquisitions: An analysis of foreign ownership and its effect on executive fate. Journal of World Business, 36, 85-105.
44. Krug, J.A. ,& Aguilera, R.V. (2005). Top management team turnover in mergers and acquisitions. In C. Cooper & S. Finkelstein (Eds), Advances in Mergers and Acquisitions, Vol. 1, JAI, New York, NY.
45. Larsson, R., & Finkelstein, S. (1999). Integrating strategic, organizational, and human resource perspectives on mergers and acquisitions: A case survey of synergy realization. Organization Science, 10, 1-26.
46. Lim, M.-H., & Lee, J.-H. (2016). The effects of industry relatedness and takeover motives on cross-border acquisition completion. Journal of Business Research, 69(11), 4787-4792.
47. Madsen, S. R., Miller, D., & John, C. R. (2005). Readiness for organizational change: Do organizational commitment and social relationships in the workplace make a difference? Human Resource Development Quarterly, 16, 213-233.
48. Marks M.L. (1982). Merging human resources: a review of current research. Mergers & Acquisitions, 17, 38- 44.
49. Marks, M. L., & Mirvis, P. H. (1986). The merger syndrome. Psychology Today, 20(10), 36-42.
50. Marks, M. L., & Mirvis, P. H. (1997). Revisiting the merger syndrome: Dealing with stress. Mergers and Acquisitions, 31(6), 21-27.Mirvis
51. Meyer, J. P., & Allen, N. J. (1997). Commitment in the workplace: Theory, research, and application. Thousand Oaks, CA: Sage.
52. Marks, M. L., & Mirvis, P. H. (2001). Making mergers and acquisitions work: Strategic and psychological preparation. Academy of Management Perspectives, 15(2), 80-92.
53. Minbaeva, D. (2007). Knowledge transfer in multinational corporations. Management International Review, 47, 567-593.
54. Minbaeva, D., Pedersen, T., Bjorkman, I., Fey, C. & Park, H.J. (2003). MNC knowledge transfer, subsidiary absorptive capacity and HRM. Journal of International Business Studies, 34(6), 586-599.
55. Mirvis, P. H., & Marks, M. L. (1994). Managing the Merger: Making it Work. Prentice Hall, Paramus, New Jersey.
56. Moschieri, C., & Campa, J.M (2014). New trends in mergers and acquisitions: Idiosyncrasies of the European market. Journal of Business Research, 67(7), 1478-1485.
57. Nadler, D. A., Thies, P. K., & Nadler, M. B. (2001). Culture change in the strategic enterprise: Lessons from the field. CL Cooper, S. Carwright and PC Earley, The International Handbook of Organizational Culture and Climate. John Wiley & Sons Ltd, Chichester.
58. Oberg, C., & Tarba, S. Y. (2013). What do we know about post-merger integration following international acquisitions? Advances in International Management, 26, 471-494.
59. Oreg, S. (2006). Personality, context, and resistance to organizational change. European Journal of Work and Organizational Psychology, 15, 73-101.
60. Piderit, S. K. (2000). Rethinking resistance and recognizing ambivalence: A multidimensional view of attitudes toward an organizational change. The Academy of Management Review, 25, 783-794.
61. Popli, M., Ladkani, R.M., & Gaur A.S. (2017). Business group affiliation and post-acquisition performance: An extended resource-based view. Journal of Business Research, 81, 21-30.
62. Puranam P., Singh H., & Zollo M. (2002). The inter-temporal tradeoff in technology grafting acquisitions. Working paper, London Business School.
63. Rahman, M., Lambkin, M., & Hussain, D. (2016). Value creation and appropriation following M&A: A data envelopment analysis. Journal of Business Research,69(12), 5628-5635.
64. Ranft, A. L., & Lord, M. D., (2002). Acquiring new technologies and capabilities: A grounded model of acquisition implementation. Organization Science, 13(4), 420-441.
65. Ranft, A. (2006). Knowledge Preservation and Transfer During Post-Acquisition Integration. In C. Cooper & S. Finkelstein, Advances in Mergers and Acquisitions, Vol. 5, (pp. 51-67), New York: JAI
66. Rhoads, K., Busenitz, L., & Haines, H. (2012). Entrepreneurial Acquisition: Founder Retention Post- Acquisition, Asset or Liability?. Frontiers of Entrepreneurship Research, 32(4), 1-15.
67. Richardson, P., & Denton, D. K. (1996). Communicating change. Human Resource Management, 35, 203-216.
68. Santos, F., & Eisenhardt, K. M. (2009). Constructing markets and shaping boundaries: Entrepreneurial power in nascent fields. Academy of Management Journal, 52(4), 643-671.
69. Schoar, A. (2002). Effects of corporate diversification on productivity. Journal of Finance, 57(6), 2379-2403.
70. Schoenberg, R. (2006). Measuring the performance of corporate acquisitions: an empirical comparison of alternative metrics. British Journal of Management, 17(4), 361-370.
71. Schweiger, D.M., & DeNisi, A.S. (1991). Communication with employees following a merger: a longitudinal field experiment. Academy of Management Journal, 34(1), 110-135.
72. Seo, M., & Hill, N. S. (2005). Understanding the human side of merger and acquisition: An integrative framework. Journal of Applied Behavioral Science, 41, 422-443.
73. Shane, S., Locke, E. A., & Collins, C. J. (2003). Entrepreneurial motivation. Human Resource Management Review, 13(2), 257-279.
74. Simons, T. (2002). Behavioral integrity: The perceived alignment between managers’ words and deeds as a research focus. Organization Science, 13, 18-35.
75. Stahl, G. K., Chua, C. H., & Pablo, A. L. (2012). Does national context affect target firm employees’ trust in acquisitions? Management International Review, 52(3), 395-423.
76. Terry, D. J., Callan, V. J., & Sartori, G. (1996). Employee adjustment to an organizational merger: Stress, coping and intergroup differences. Stress Medicine, 12, 105-122.
77. Trąpczyński, P., Zaks, O., & Polowczyk, J. (2018). The Effect of Trust on Acquisition Success: The Case of Israeli Start-Up M&A. Sustainability, 10(7), 2499.
78. Vaara, E., Sarala, R., Stahl, G., & Bjorkman, I. (2012). The impact of organizational and national cultural differences on social conflict and knowledge transfer in international acquisitions. Journal of Management Studies, 49(1), 1-27.
79. Van Dam, K. (2005). Employee attitudes toward job changes: An application and extension of Rusbult and Farrell’s investment model. Journal of Occupational and Organizational Psychology, 78, 253-272.
80. Very, P., Lubatkin M., Calori, R., & Veiga, J. (1997). Relative Standing and the Performance of Recently Acquired European Firms. Strategic Management Journal, 18(8), 593-614.
81. Vinten, G. (1999). Corporate communications in small‐ and medium‐sized enterprises. Industrial and Commercial Training, 31(3), 112-119.
82. Vroom V. (1964). Work and Motivation. New York: Wiley. Wald.
83. Wanberg, C. R., & Banas, J. T. (2000). Predictors and outcomes of openness to changes in a reorganizing workplace. Journal of Applied Psychology, 85, 132-142.
84. Weber, Y., Rachman-Moore, D., & Tarba, S. Y. (2012). HR practices during post-merger conflict and merger performance. International Journal of Cross Cultural Management, 12(1), 73-99.
85. Weitzel, U., & McCarthy, K. J. (2011). Theory and evidence on mergers and acquisitions by small and medium enterprises. International Journal of Entrepreneurship and Innovation Management, 14(2), 248-275.
86. Whitaker, S. C. (2012). Mergers & Acquisitions Integration Handbook: Helping Companies Realize the Full Value of Acquisitions. Hoboken: Wiley.
87. Zaks, O., Polowczyk, J., & Trąpczyński, P. (2018). Success factors of start-up acquisitions: Evidence from Israel. Entrepreneurial Business and Economics Review, 6(2), 201-216.
88. Zhou, J., Shin, S. J., & Cannella Jr, A. A. (2008). Employee self-perceived creativity after mergers and acquisitions: Interactive effects of threat—opportunity perception, access to resources, and support for creativity. The Journal of Applied Behavioral Science, 44(4), 397-421.
89. Zollo, M., & Meier, D. (2008). What is M&A performance? Academy of Management Perspectives, 22(3), 55-77.