balancing integration and autonomy in the post-acquisition...
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Balancing Integration and Autonomy in the Post-acquisition Phase- A study of German firms acquired by Chinese firms
Master’s Thesis 30 credits Department of Business Studies Uppsala University Spring Semester of 2015
Date of Submission: 2015-05-29
Jing Liu Xiaohuan Chen Supervisor: Susanne Åberg
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ABSTRACT
Acquisitions as a commonly adopted tool enable Chinese firms to gain quicker and deeper
access to certain resources and capabilities from developed countries. The integration process
after acquisition plays a key role in creating the expected value for acquirers. In recent years,
Chinese acquirers have shifted their integration strategy from heavy involvement to high
autonomy. By examining six acquisitions done by Chinese firms in Germany, this study was
carried out in order to answer the question how integration and autonomy can be balanced in
the post-acquisition phase. Specifically, five key success factors were examined: culture
distance, communication, integration speed, leadership & top management team turnover and
resources complementarity. The results demonstrated that both high integration and high
autonomy could be simultaneously achieved in one acquisition case. Despite the fact, that in
general speed of integration was slow, all examined acquisition examples achieved a high
integration level after a certain period of time. The results also showed that the Chinese side
rather considered large cultural distance between the two countries a complementary factor as
they benefited from learning the German way of conducting business. The German side also
tended to learn from its Chinese acquirers, which stabilized top management teams during
this “co-learning process”.
Key Words: Post-acquisition Integration, Autonomy, China, Germany, Culture distance,
Communication, Resources Complementarity, Leadership, Integration speed.
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ACKNOWLEDGEMENTS
First, we are so grateful to have Susanne Åberg as our supervisor, who has guided us through
the whole semester and has always been responsive for any questions we have had. Secondly,
we also would like to thank all our interviewees for sharing their experience and knowledge
with us. They are Mr. Zhang from Sany, Mr. Grosch Sven in Waldrich Coburg, Mr. Degen
Rainer from Degen Machinery, Mr. Liu Zhong and Miss. Liu Leeco from SZXN. Due to the
non-disclosure agreement, we cannot name some interviewees or companies here, but we still
would like to express our gratitude to them. Thirdly, many thanks to our seminar group for
their critical comments and suggestions. Last but not least, we want to say thanks to Thomas
Seifert for proofreading our paper and providing support for our data access to some German
firms.
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ABSTRACT'........................................................................................................................................'1!
ACKNOWLEDGEMENTS'................................................................................................................'2!
1.'Introduction'................................................................................................................................'7!1.1'Problem'Statement'...........................................................................................................................'7!1.2'Research'Purpose'.............................................................................................................................'8!1.3'Research'Question'............................................................................................................................'9!
2.'Theory'Review'and'Framework'...........................................................................................'9!2.1'Acquisition'Motivation'....................................................................................................................'9!2.2'Integration'Approach'in'PostRacquisition'.............................................................................'10!2.2.1!Definition!of!integration!and!autonomy!..........................................................................................!10!2.2.2!Integration!approach!model!.................................................................................................................!11!
2.3'Theoretical'Framework'Background'......................................................................................'11!2.3.1!Culture!distance!.........................................................................................................................................!12!2.3.2!Communication!..........................................................................................................................................!13!2.3.3!Integration!speed!......................................................................................................................................!14!2.3.4!Leadership!and!TMT!turnover!............................................................................................................!15!2.3.5!Resource!and!capability!complementarity!vs.!similarity!.........................................................!16!
2.4'Conceptual'Framework'................................................................................................................'18!
3.'Methodology'..............................................................................................................................'19!3.1'Research'Approach'........................................................................................................................'19!3.2'Research'Design'.............................................................................................................................'19!3.3'Research'Strategy'..........................................................................................................................'19!3.4'Case'Selection'..................................................................................................................................'20!3.5'Data'Collection'................................................................................................................................'21!3.5.1!Primary!Data!collection!and!interview!process!...........................................................................!21!3.5.2!Choice!of!Interviewees!............................................................................................................................!22!3.5.3!Gaining!Access!............................................................................................................................................!23!3.5.4!Secondary!data!collection!......................................................................................................................!24!
3.6'Data'Analysis'...................................................................................................................................'24!3.7'Reliability,'Validity'and'Limitation'..........................................................................................'25!
4.'How'Chinese'Firms'Integrate'Acquired'German'Firms'..............................................'26!4.1'Schiess'AG'and'Shenyang'Machine'Tool'(SMTCL)'...............................................................'26!4.1.1!Culture!............................................................................................................................................................!26!4.1.2!Communication!..........................................................................................................................................!27!
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4.1.3!Integration!speed!......................................................................................................................................!27!4.1.4!Leadership!and!top!management!team!turnover!........................................................................!27!4.1.5!Resource!and!capability!.........................................................................................................................!28!
4.2'Waldrich'Coburg'and'Beijing'No.'1'Machine'Tool'Plant'...................................................'28!4.2.1!Culture!............................................................................................................................................................!29!4.2.2!Communication!..........................................................................................................................................!29!4.2.3!Integration!speed!......................................................................................................................................!30!4.2.4!Leadership!and!TMT!turnover!............................................................................................................!30!4.2.5!Resources!and!capability!complementarity!..................................................................................!30!
4.3'Putzmeister'and'Sany'...................................................................................................................'31!4.3.1!Culture!Distance!.........................................................................................................................................!31!4.3.2!Communication!..........................................................................................................................................!31!4.3.3!Integration!speed!......................................................................................................................................!32!4.3.4!Leadership!and!TMT!turnover!............................................................................................................!32!4.3.5!Resource!and!capability!complementarity!....................................................................................!32!
4.4'Degen'and'Suzhou'Xinneng'(SZXN)'..........................................................................................'32!4.4.1!Culture!............................................................................................................................................................!33!4.4.3!Communication!..........................................................................................................................................!33!4.4.3!Integration!speed!......................................................................................................................................!33!4.4.4!Leadership!and!TMT!turnover!............................................................................................................!34!4.4.5!Resource!and!Capability!Complementarity!...................................................................................!34!
4.5'Solar'Cell'and'Bestwind''(Anonymous)'...................................................................................'34!4.5.1!Culture!............................................................................................................................................................!34!4.5.2!Communication!..........................................................................................................................................!35!4.5.3!Integration!Speed!......................................................................................................................................!35!4.5.4!Leadership!and!TMT!turnover!............................................................................................................!35!4.5.5!Resource!and!capability!complementarity!....................................................................................!36!
4.6'Energy'and'Inno'(Anonymous)'..................................................................................................'36!4.6.1!Culture!............................................................................................................................................................!36!4.6.2!Communication!..........................................................................................................................................!37!4.6.3!Integration!speed!......................................................................................................................................!38!4.6.4!Leadership!&!TMT!.....................................................................................................................................!39!4.6.5!Resources!complementary!....................................................................................................................!39!
5.'Analysis'.......................................................................................................................................'41!5.1'Integration'types'of'the'six'acquisitions'................................................................................'41!5.2'Culture'Distance'.............................................................................................................................'41!
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5.3'Communication'...............................................................................................................................'43!5.4'Integration'Speed'...........................................................................................................................'45!5.5'Leadership'and'TMT'turnover'...................................................................................................'46!5.6'Resource'and'capability'complementarity'vs.'similarity'.................................................'48!
6.'Conclusion'..................................................................................................................................'52!
List'of'References'.........................................................................................................................'56!
Appendix I Interview Guide to Chinese Firm .................................................................. 64!
Appendix II Interview Guide to German Side ................................................................. 67!
Appendix III. Summary of Theoretical Background ....................................................... 68!
Appendix IV. Summary of Analysis Findings ................................................................. 72!
Figure 1. Integration approach model .............................................................................. 11!
Figure 2. Theory Framework ........................................................................................... 18!
Figure 3. Integration Approach Model and Six Acquisitions .......................................... 41!
Table 1. Description of Acquisitions ............................................................................... 20!
Table 2. Overview of the Interviews ................................................................................ 22!
Table 3. Resource Complementarity in Six Acquisitions ................................................ 49!
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List of Abbreviations
OFDI Outbound Foreign Direct Investment
M&As Mergers and Acquisitions
EMNCs Emerging Market Multinationals
OLI Ownership, Location and Internalization
TMT Top Management Turnover
SMTCL Shenyang Machine Tool Co., Ltd
SZXN Suzhou Xinneng
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1. Introduction In recent years, China has been proactively investing into highly developed economies. The
number of foreign acquisitions made by Chinese companies rose rapidly, it doubled from 40
in 2003 to 82 in 2006 and reached a peak of 298 in 2008. In 2012, Chinese Outbound Foreign
Direct Investment (OFDI) in Germany amounted to 1.93 Bio. Euros that represented 17% of
Germany’s total FDI. Germany became the most popular country which covered 64 percent
of all Chinese acquisition deals in the EU (Germany Trade and Invest, 2013). Therefore, we
put the focus of our study on Chinese companies acquiring German firms.
Acquisition is a common tool for firms to obtain quicker corporate growth and thus it
attracted substantial attention from scholars (Deng, 2007). According to Haspeslagh and
Jemison (1991) “all value creation takes place after acquisition”. Four integration strategy
approaches are frequently used in acquisition integration studies. They are “Preservation”,
“Symbiosis”, “Absorption” and “Holding”. Each approach defines a specific level of
autonomy granted to the acquired firms and a specific integration level. Prior research
identified several obstacles during the integration process, such as organizational
incompatibility (Datta and Grant, 1990; Jemison and Sitkin, 1986), high executive turnover
(Hambrick and Cannella, 1993), culture distance (Weber, Shenkar and Raveh, 1996),
operational disruption (Paruchuri et al., 2006) and leadership vacuum (Haspeslagh and
Jemison, 1991). Conflicts often occur during integrating and restructuring acquired firms,
because both are typically accompanied by loss of autonomy. The acquirers’ intensive
interference may lead to high top management turnover (TMT). These conflicts have a
negative impact on post-acquisition performance (Chatterjee, Lubatkin, Schweiger and
Weber, 1992; Very, Lubatkin and Calori, 1997; Hambrick and Cannella, 1993). The loss of
autonomy can even result in resentments and anger (Buono and Bowditch, 1989). The further
conclusion is made that integration strategy has to balance integration and autonomy
(Haspeslagh and Jemison, 1991; Graebner, 2004). Hence, five main success factors shall be
considered which are culture distance, communication, integration speed, leadership & top
management team turnover, as well as resource complementarity. (Gomes, Angwin, Weber
and Yedidia, 2013; Ranft and Lord, 2002)
1.1 Problem Statement The type of integration strategy determines how much value is created. Implementing an
efficient integration strategy has the goal to unlock potential synergies between the two firms.
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A non-existent or poor post-acquisition integration strategy can lead to acquisition failure
(Haspeslagh and Jemison, 1991). In order to achieve potential synergies, many acquirers used
to adopt integration strategies and plans such as typical 100 days plans which focused on the
integration of acquired firms into their own corporate structures and on making changes as
quickly as possible to reduce uncertainty of employees and customers (Reichheld and Henske,
1991; Clemente and Greenspan, 1997; InKpen, Sundaram and Rockwood, 2000). Yet, these
strategies and plans may also create many bad side effects on target firms, such as high
employee resistance and high top management turnover due to the loss of autonomy of the
acquired company and the parent firms’ excessive interference (Ranft and Lord, 2002). In
general more than 80 percent of acquisitions failed to achieve enough profits to cover annual
cost of capital. And only 23 percent of acquisitions can be considered successful (Bekier,
Bogardus and Oldham, 2001).
A study on Chinese mergers and acquisitions (M&As) in Germany found out that one third
of all acquisitions made between 2000 and 2010 were disastrous. Only about one third was
considered successful. As most of Chinese acquirers heavily involved in their subsidiaries,
these German factories closed down and no acquisition objectives were achieved (Liu and
Waldemar, 2011). However, Chinese acquirers learned from previous mistakes they made
when acquiring firms in developed countries. Some researchers find that in recent years these
acquirers shift to a different integration approach, in which they grant a high level of
autonomy to acquired firms, and try to preserve the boundaries between the two sides. This
resulted in fewer failures in comparison to previous acquisition deals (Bruche and Wallner,
2013; Otto, 2013; Liu and Woywode, 2013).
Although many researchers argue that high autonomy granted to acquired firms means loss
of control and limited integration, leading to unsatisfying results for the acquirers (Puranam,
Singh and Chaudhuri, 2009), some scholars highly support this integration approach, because
fewer bad side effects occur such as employee resistance and high top management turnover
(Kale, Singh and Raman, 2009). Hence we were very interested in investigating this topic and
to discover how the conflicts are handled when balancing the dilemma of autonomy and
integration in post acquisition stage.
1.2 Research Purpose Previous scholars mainly focused on acquisitions done by Western MNCs. There is a lack of
research in the area of acquisitions done by emerging market multinationals (EMNCs). Hence,
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the purpose of this thesis is to increase the understanding of post-acquisition integration made
by Chinese firms acquiring German firms, as well as to establish a sound foundation for
further theory development within the field of post-acquisition integration.
1.3 Research Question A case study of Chinese firms acquiring German firms with six acquisition examples is
carried out to answer the following research question:
How$do$Chinese$firms$balance$integration$and$autonomy$with$acquired$German$firms?!
2. Theory Review and Framework All theories about acquisition motivation and post acquisition integration concerning five
main concepts are critically reviewed, summarized and presented at Appendix III.
2.1 Acquisition Motivation Since the study of motivations in the pre-acquisition stage enhances the understanding of
integration in the post-acquisition stage (Napier, 1989), this section reviews reasons why
firms from emerging countries make M&As in developed countries.
The ownership, location and internalization (OLI) eclectic model (Dunning, 2000) says that
firms can exploit their assets overseas and increase their profits only when they have certain
ownership-specific advantages, which are not possessed by competitors from other countries
and by internalizing these advantages in a favorable location. OLI eclectic model represents
three types of advantages of enterprises that seek international expansion, namely ownership
advantages, locational advantages and internalization advantages.
Dunning’s eclectic paradigm could relevantly explain the EMNCs’ OFDI towards other
developing countries, as these EMNCs could leverage ownership advantages and search for
location-specific advantages (Luo and Tung, 2007). However, EMNCs do not have such
superior ownership advantages to leverage when they invest in developed countries (Amsden
and Chu, 2003; Goldstein, 2007; Mathews, 2006).
Instead, they take proactive actions to compensate for their competitive disadvantages by
acquiring firms from developed countries. A springboard perspective is used to explain
EMNCs’ motivations to acquire firms in developed countries. EMNCs use acquisitions as a
springboard to obtain strategic assets in order to strengthen their position in home markets
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where there is rapid growth (Luo and Tung, 2007). Strategic asset is defined as “the
specialized capabilities and resources, which belong to an enterprise which are hard for
competitors to imitate” (Amit and Schoemaker, 1993).
Obtaining strategic asset is proved to be the most crucial motive for Chinese MNCs’ OFDI.
Chinese MNCs prefer acquisition as a quicker way to access strategic capabilities and
resources such as advanced technology, managerial expertise, and market resources in
industrial countries (Deng, 2007).
In conclusion, the motives for M&As of MNCs from developed countries and of EMNCs
are different. The former intends to leverage ownership advantages, the latter aims at
acquiring strategic capabilities and resources.
2.2 Integration Approach in Post-acquisition
2.2.1 Definition of integration and autonomy
After acquiring another firm, integration strategy becomes the central focus, and it strongly
influences post-acquisition performance (Haspeslagh and Jemison, 1991; Gomes et al., 2013).
Integration strategy is about how to balance integration and autonomy (Haspeslagh and
Jemison, 1991; Graebner, 2004).
Integration is defined as “making changes in the functional activity arrangements,
organizational structures and systems, and cultures of combining organizations to facilitate
their consolidation into a functioning whole (Pablo, 1994). Integration can positively affect
post-acquisition performance by exploiting potential synergies between acquired firms and
acquirers (Capron, 1999; Larsson and Finkelstein, 1990; Birkinshaw, Bresman and Håkanson,
2000).
Autonomy in an acquisition by definition is the day-to-day freedom to make decisions
rather independently without parent firm's intensive involvement but in the same time to keep
a close and respective cooperation for the sake of post-acquisition objectives (Hayes, 1979;
Vancil, 1979). Autonomy encourages people to be more responsible and do more meaningful
work, as through it the needs for higher order of human beings, e.g. in terms of power and
freedom, can be met (Khandwalla, 1977; Stubbalt, 1983)
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2.2.2 Integration approach model
A commonly used model for acquisition integration approaches is Haspeslagh and Jemison
(1991), which reveals four types of integration approaches. Each approach represents
different levels of autonomy and integration. We will frequently refer to some of these types
in our theory framework. The terms “preservation” and “absorption” are used more
frequently in order to clearly distinguish between autonomy and integration.
In the model the vertical dimension represents autonomy granted to the acquired firms. The
horizontal dimension shows the strategic interdependence (integration) expected between
acquirers and acquired firms.
1. Preservation: acquirers keep the acquired firms intact, high autonomy is granted and
resources are provided if needed
2. Symbiosis: acquirers must simultaneously ensure boundary preservation and
boundary permeability. Target firms enjoy a certain degree of autonomy. Integration
is a gradual process
3. Absorption: acquirers dissolve the boundary between the two firms, assimilate
acquired firms into their own operation system, totally consolidate the operation of
the two firms and apply high level integration and low autonomy for the target firms.
Integration speed is high
4. Holding: acquirers have no intention to integrate and value creation is achieved
through financial transfer, application of general management skills or risk sharing.
Need for strategic interdependence
Low High
Nee
d fo
r autonomy
High
Preservation Symbiosis
Low
Holding Absorption
Figure 1. Integration approach model (Source: Haspeslagh and Jemison 1992 p.148)
2.3 Theoretical Framework Background Based on Haspeslagh and Jamison’s (1991) integration approach model, Gomes et al. (2013)
did further research and enhancement. He demonstrated six success factors in the post-
acquisition process, which are: integration strategies, post acquisition leadership, speed of
implementation, autonomy, communication and cultural distance. Since integration strategies
highly depend on leadership, speed, cultural distance and communication (Angwin, 2001;
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Weber et al., 1996; Waldman and Javidan, 2009; Schweiger and DeNisi, 1991), they can be
as well described as the balance between integration and autonomy (Haspeslagh and Jemison,
1991; Kale et al., 2009; Reich, 2013). Further more, some researches also put emphasis on
the importance of integrating and reconfiguring resources and capabilities from acquired
firms in the post acquisition stage (Kogut and Zander, 1992; Harrison, 2001; Zaheer,
Castaner and Souder, 2013). Hence, we have chosen culture distance, communication,
integration speed, leadership and top management team turnover, and resource
complementarity as the five criteria to analyze how Chinese companies balance integration
and autonomy. In the next five sections, we will review the literature about these five criteria
and critically discuss their impact on balancing integration and autonomy after acquisition.
2.3.1 Culture distance
Organizational cultures are closely associated with national cultures (Terpstra and David,
1991). If two countries have a great culture distance, there also is a big difference in
attributes of organizational cultures (Kogut and Singh, 1988). In terms of culture distance,
both national culture and organizational culture are put into consideration.
National cultural distance is the degree of shared values and customs between two
countries (Hofstede, 2001; Kogut and Singh, 1988; Morosini, Shane and Singh, 1998).
Organizational cultural distance can be defined as difference of how things are done in
different organizations (Miller, 2003). It influences how individuals and teams communicate
with each other, as well as with other stakeholders (Vazirani and Mohapatra, 2012).
Cultural distance is considered to be a critical determinant of integration after acquisition
(Björkman, Stahl and Vaara, 2007; Teerikangas and Very, 2006; Vermeulen and Barkema,
2001). Many studies have been done regarding relationships between cultural distance and
acquisition performance (Datta and Puia, 1995; Chakrabarti, Gupta-Mukherjee and
Jayaraman, 2008; Vaara, Sarala, Stahl and Björkman, 2012).
A big cultural distance could lead to poor post-acquisition performance (Chatterjee et al.,
2008; Olie, 1994; Vaara et al., 2012), because it is regarded as an obstacle during the
integration implementation process. It is more obvious in cross-border acquisitions
(Chakrabarti et al., 2008).
However, cultural difference could be seen as a sort of resource complementarity and lead
to value creation (Krishnan, Miller and Judge, 1997; Morosini et al., 1998; Vermeulen and
Barkema, 2001). Firms can learn from other firms with different cultures (Reus and Lamont,
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2009; Vaara et al., 2012). Hence, the increased diversification could result in a more intense
innovative spirit inside firms that allows them to improve marketing skills and acquire more
customers (Cox, 1991). Firms also become more adaptive towards changing environment by
acquisitions with firms of different culture (Barkema and Vermeulen, 1998).
When it comes to balancing autonomy and integration in terms of cultural distance,
Slangen (2006) argues that big national culture distance negatively affects acquisition
performance if the “absorption” approach is applied. Instead the adoption of the “preservation”
approach enhances acquisition performance under such circumstances.
2.3.2 Communication
Communication in a single organization facilitates firm performance as efficient internal
communication enables employees and managers to share insights and create conformity to
achieve common goals. Further more open and transparent communication increases
employee commitment (Mishra, Boynton and Mishra, 2014). Communication within one
company is already quite complex. As acquisition involves organizations, communication
challenges between acquirers and acquired firms are even higher. In comparison cross-border
acquisitions provide the highest level of difficulties and communication has an extremely
critical influence on post acquisition performance (Gertsen, Søderberg and Torp, 1998; Ranft
and Lord, 2002; Gomes et al., 2013).
Top managers normally are well informed about the acquisition. However, they have the
tendency to avoid discussions with employees due to many reasons (Miris and Marks, 1986).
Thereafter, employees seek information from other sources such as rumors due to the lack of
information and uncertainty towards their future (Napier, 1989).
D’Aprix (2009) emphasized that face to face communication could be a more credible
source of information for employees. Two-way communication formal as well as informal
between employees and managers is proved to be of highly valuable in organizations.
Open and transparent communication results in well informed employees. They obtain a
better understanding about the coming corporate changes and the difference in their work
responsibilities after acquisition, which enhances the integration process (Schweiger and
DeNisi, 1991; Eisenberg and Witten, 1987).
Ranft and Lord (2002) states that communication in the post-acquisition stage is proved to
be critical for reducing employee uncertainty, builds trust and facilitates knowledge exchange
between the two firms. Communication richness particularly compensates for the acquirers’
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limited control when “Preservation” integration type (acquired firms have high autonomy) is
adopted, as it establishes a cooperative and collaborative atmosphere in which the two firms
can achieve expected synergies under the internal organizational boundary. Haspeslagh and
Jemison (1991) emphasize that the atmosphere plays a key role in the integration
implementation process. When acquirers have a high integration and low autonomy plan,
which is called “Absorption”, the integrating process aims at assimilating target firms into the
acquirers’ systems, which requires a lot of communication work (Haspeslagh and Jemison,
1991).
2.3.3 Integration speed
Integration speed is considered to be critical in post-acquisition stage (Homburg and Bucerius,
2006; Schweizer and Patzelt, 2012). Either high speed or low speed could lead to good
performance (Inkpen et al., 2000).
Homburg and Bucerius (2006) argue that internal relatedness (management style, strategic
orientation, performance) and external relatedness (target market and market position) jointly
affect the relation between post acquisition performance and integration speed. High speed
could lead to better performance when higher internal relatedness comes with lower external
relatedness. In contrast high speed could strongly decrease performance if lower internal
relatedness as well as high external relatedness represent the situation of the two firms.
However, integration speed has a weak influence on post-acquisition performance when
internal and external relatedness are both high or both low.
Fast speed integration is especially beneficial when it comes to reducing customer
uncertainty after acquisition. Customer uncertainty originates from potential changes in
product related issues, different contact persons, rumors in the market and efforts of
competitors trying to gain over customers (Reichheld and Henske, 1991; Clemente and
Greenspan, 1997). Fast speed integration implementation e.g. conducted through a typical
100 day plan (Inkpen et al, 2000), could also increase employee commitment as it mitigates
the uncertainty for employees of the acquired firms. In addition, fast integration enables firms
to quickly benefit from economies of scale, and save cost (Capron, 1999; Homburg and
Bucerius, 2005).
In contrast, Ranft and Lord (2002) write that fast speed integration results in value
destruction e.g. because key employees and top managers with valuable knowledge leave the
organization soon after acquisition.
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Slow integration can leave a time period for mutual learning and trust building between
acquired and acquiring firms (Homburg and Bucerius, 2006). Mutual learning and trust
enable firms to achieve resource- as well as knowledge transfer (Haspeslagh and Jemison,
1991). Ranft and Lord’s (2002) further elaborate that slow integration has a positive impact
on cultural adaptation. Low speed and high autonomy given to the acquired firms could keep
the valuable knowledge inside the acquired firm for a period of time and therefore knowledge
transfer can be less difficult. Low speed enables the TMT (Top Management Team) to better
adapt the integrations plans and manage the team in accordance to the acquisition objectives.
However, for high-tech firms the first and prime motivation for acquisitions is to obtain new
technologies in order to combine them with their own business and create innovations. Hence
in this case, slow integration speed could be risky for acquirers (Lin, 2012).
2.3.4 Leadership and TMT turnover
2.3.4.1 Leadership
Leadership plays a vital role in creating substantial acquisition values towards acquisition
performance (Pablo, 1994; Strauss and Corbin, 1990; Waldman, Javidan and Varella, 2004).
Graebner (2004) conceptualized the acquisition values in two types, expected and
serendipitous. Acquired leaders are important for both types of values. On one hand,
Expected values can be achieved under the support of them, because they mitigate potential
conflicts and help to relieve employee anxiety that typically occurs in post-acquisition stage.
Acquisition can also catch serendipitous value, if leaders have the visibility to discover
unexpected synergies. Babić, Savović and Domanović (2014) emphasized that employee
needs support from leaders when there are new changes; leaders’ support could leads to a
better acquisition performance
2.3.4.2 TMT turnover
The TMT is a group of high position managers who have the responsibility to draft and
execute corporate strategies. They have the authority and power to comprehensively control
and influence firms. They are of high importance and influence (Smith, Smith, Olian, Sims Jr,
O’Bannon and Scully, 1994). When acquisitions take place, the TMT in the acquired firms
becomes a critical issue. Angwin and Meadows (2009) found that high-level integration as
conducted in the “absorption” approach might relate to high TMT turnover.
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From the acquired firm’s perspective, high-level integration indicates intensive
interventions from acquiring firms (Krug and Hegarty, 2001), less autonomy and lower
formal status (Hambrick and Cannella, 1993). As a result high-level TMT turnover increases
significantly.
In comparison, the integration approach with high autonomy granted to acquire firms
usually relates to low TMT turnover (Angwin and Meadows, 2009).
Low TMT turnover could come from two reasons. The first is that executives in acquired
firms have a positive outlook on the long-term benefits of the acquisition, which motivates
them to stay (Hambrick and Cannella, 1993). The Second is that the TMTs in both acquirers
and acquired firms have complementary functional backgrounds (Krishnan et al., 1997).
As stated above, the different TMT turnover rate after acquisition is caused by multiple
reasons. Whether TMT turnover has a positive or negative effect on post-acquisition
performance, there are also different opinions from previous researches. From corporate
control perspective, post-acquisition performance (Lowenstein, 1983) can be improved if
acquirers replace members of the acquired firm’s management team that are perceived
unnecessary to better exploit acquired assets. From a resource-based view, however, high
TMT turnover has a negative impact on post-acquisition performance, because the TMT in
acquired firms possesses unique and vital internal knowledge (Brockmann and Anthony,
2002; Michalisin, Karau and Tangpong, 2004; Kiessling and Harvey, 2006). Randel and
Ranft (2007) also emphasize that TMT turnover has negative effects on information
exchange and social capital in acquired firms. Butler, Perryman and Ranft (2012) examined
the relationship between top management turnover and the acquisition outcomes in acquired
companies. The result showed the same. The lower the turnover in an initial post acquisition
TMT, the greater the market expansion goals can be achieved (Cording, Christmann and
King, 2008).
2.3.5 Resource and capability complementarity vs. similarity
Firms make acquisitions to gain quick access to certain resources and capabilities in foreign
countries, in order to open up new markets and obtain new technologies. Kogut and Zander
(1992) put emphasis on the importance of integrating and reconfiguring resources and
capabilities from acquired firms in the post acquisition stage, e.g. new markets and
capabilities from acquired firms or mutual diversification of corporate resources (Morosini et
al., 1998; Kogut and Singh, 1988).
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2.3.5.1 Resource and capability complementarity
Resource and capability complementarity can be defined as two firms having complementary,
mutually enhancing elements, such as strong marketing abilities from one side combined with
advanced research and development abilities from the other side. Bringing two different
attributes together can potentially create greater joint values (Milgrom and Roberts, 1995).
To achieve such joint values, the two firms need to closely coordinate each other and
cooperate well (Kim and Finkelstein, 2009; Milgrom and Roberts, 1995). However, these can
only be achieved if acquirers and acquired firms can efficiently combine and integrate their
resources. Either side cannot create them alone (Cassiman, Colombo, Garrone and Veugelers,
2005; Conner, 1991). Thus, a certain level of integration is necessary to achieve potential
synergies between acquirers and acquired firms, when their resources and capabilities are
complementary (Harrison, 2001).
On the other hand, acquired firms have their own unique set of resources and capabilities,
which is embedded in its specific context and people as well as unfamiliar and new for the
acquirers. The acquirers have bigger challenges to be fully aware of the target’s resources and
capabilities than their own (Capron, 1999). These resources and capabilities should be well
maintained to achieve the aimed synergies. Acquirers should grant a certain level of
autonomy to the acquired firms in order to ensure the stability of the acquired firms (Harrison,
2001). This certain level of autonomy is also proved to be especially vital to deploy
complementary R&D resources and capabilities (Zaheer et al., 2013).
2.3.5.2 Resources and capability similarity
The extent of how much two firms overlap in terms of markets and technology is associated
with similarity. Two firms with high similarity of resources and capabilities have potential
synergies to achieve economies of scale and gain higher market power through integration
(Lubatkin, 1983). It has a positive impact on earnings for acquirers (Singh and Montgomery,
1987). A high integration level can be expected if two firms are similar. It is easier to go
through the integration process as the two firms share much of the same skills and
understanding of markets and technologies (Kogut and Zander, 1992; Makri, Hitt and Lane,
2010). Such high degree of integration means a lower level of autonomy (Datta and Grant,
1990). However, when firms acquire similar firms for the sake of gaining high-tech and
improving product quality by absorbing acquired knowledge, the target firms’ high loss of
18
autonomy will result in knowledge disruption. Therefore the expected objective to absorb
new technology cannot be realized (Puranam et al., 2009; Ranft and Lord, 2002).
Previous researches show that a high integration level means low autonomy granted to
acquired firms, and a high autonomy is always combined with a low degree of integration
(Datta and Grant, 1990; Pablo, 1994). However, Zaheer et al. (2013) argues that a high level
of integration and autonomy can coexist and are required to achieve great post acquisition
performance. Moreover, decisions on integration and autonomy levels are made separately,
especially when two firms match complementarily.
It can be said that balancing integration and autonomy is necessary, either when acquirers
and acquired firms are complementary or when they are similarly related in terms of
resources and capabilities.
2.4 Conceptual Framework We summarized our conceptual framework in Figure 2. As stated above, theories regarding
the implementation of integration have conflictive ideas as some scholars conclude that
different integration levels could all possibly lead to post-acquisition success or failures
(Child, Pitkethly and Faulkner, 1999; Hubbard and Purcell, 2001). We will take five factors
into consideration to explore Chinese acquirers’ integration approach. They are culture
distance, communication, integration speed, leadership and TMT turnover as well as
complementarity of resources and capabilities. These five key factors are vital for balancing
autonomy and integration (Gomes et al., 2013; Ranft and Lord, 2002).
Figure 2. Theory Framework
Autonomy'OR'Integration
Culture!Distance
Leadership and TMT turnover
Integration!Speed
Communication
Resource!and!Capability!Complementarity!vs.!Similarity v
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3. Methodology
3.1 Research Approach This thesis intends to increase the understanding of post-acquisition integration made by
Chinese firms acquiring German firms, as well as to establish a sound foundation for further
theory development within the field of post-acquisition integration. In order to contribute to
the mentioned topic, it is of high value for the authors to refer to the plenty existing theories
and studies of acquisition integration that are based on cases in industrialized countries.
However, we think that these theories are not sufficient to understand the integration
approach applied by Chinese MNCs, as these firms have different attributes and operate in
different business environments. Thus, abductive reasoning gets applied. This approach
allows us to go through an intertwined process that uses empirical data and existing theories.
Abductive reasoning has the advantages of understanding a new phenomenon, and of
improving the existing theories by adding new insights (Van Maanen, Sorensen and Mitchell,
2007).
3.2 Research Design The research design is the author's plan of how to answer the research questions (Saunders,
Lewis and Thornhill, 2012). We define the nature of our study as exploratory research. First,
as external researchers, we have no involvement and little understanding about the business
reality in the organizations, and we acknowledge that acquisitions from EMNCs are a new
phenomenon that has ample aspects to discover (Liu and Woywode, 2013; Kale et al., 2009).
This research design is more complex and probably different from previous studies, which
are mostly based on acquisitions done by firms from industrialized countries. Hence we were
ready and excited to gain new insights occurring during the data collection process as
exploratory research has the advantage of discovering and adding new perspectives on the
given topic. When choosing an exploratory methodology, a qualitative study is suitable (Yin,
2009).
3.3 Research Strategy A case study is relevant and suitable to gain an in-depth understanding of the context and the
processes of a phenomenon (Eisenhardt and Graebner 2007). It has the considerable ability to
answer the “how” questions (Yin, 2009). At the same time, the use of case studies is
20
worthwhile to explore or challenge the existing theories (Saunders et al., 2012). As little
attention has been drawn to the topic of balancing integration and autonomy granted to the
acquired German firms by Chinese acquirers, the evidence gained from a case study
including six acquisition examples can possibly build a foundation for further theory
development.
3.4 Case Selection In the beginning of acquisition example selection, we decided to contact acquirers of small
size, because we know that large size firms in China are highly hierarchical and hard to
contact. However, the small size firms, which did acquisitions of German firms, are not
present in the media. We tried to contact consulting firms that deal with acquisition issues for
Chinese companies. Yet, information on the acquisition deals is highly confidential.
Afterwards, we chose 25 companies from the acquisition report made by BGM Associates
Research (Bruche and Wallner, 2013). It lists the 25 largest corporate acquisitions from
China in Germany between 2002-2012. Because of expected access difficulties, we targeted a
large sample of firms in order to significantly increase the possibility to collect enough data.
Among these 25 companies, we have only had existing contacts to two firms. Strong
continuous efforts were made to gain access to all other 23 acquisitions. The initial contact by
email was unsuccessful as no feedback was received. Thus cold calls were made both to the
German and Chinese side.
After 2-4 weeks of contacting, access was gained to seven acquisitions. As one acquisition
(WISCO acquire Tailored Blanks) in the end did not provide new insights, it was deleted.
Among the six remaining acquisitions, only one required anonymity. Further more we also
chose to not present another example’s name as sensitive issues were raised during
integration process. We considered this a more ethical way of conduct. These two anonymous
acquisitions are from the new energy sector. The six acquisition examples therefore make up
one case, which is Chinese firm acquiring German firm.
Table 1 shows the fundamental information of the six acquisitions concerning industry,
transactions values, the number of employees in acquired firms, and the number of our
informants. Table 1. Description of Acquisitions
Acquisition
s Acquirer Acquired Industry
Acquired
Year
Approximate Transaction
Value/million Euro
Approximate Number of
Employees in Acquired Firm
Number and Level
of Informants
Affiliation of Informants
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1 SMTCL Schiess AG Machine 2004 8 140 employees 1 Manager Acquirer 2 Beijing No.1 Waldrich Coburg Machine 2005 35 500 employees 1 Manager Acquired 3 Sany Putzmeister Machine 2012 360 3000 employees 1 Manager Acquirer
4 SZXN Degen Machine 2013 8 < 50 employees 2 CEO Acquirer and Acquired
5 Bestwind Solar Cell New Energy 2014 6.14 36 employees 1 Manager Acquired 6 Energy Inno New Energy 2012 25 400 employees 2 Managers Acquired
3.5 Data Collection
3.5.1 Primary Data collection and interview process
In line with our research methodology and research strategy a “non-standardized” semi-
structured interview is chosen. Cooper and Schindler (2008) also suggest that when a study
includes exploratory elements, semi-structured interviews are suitable to obtain data.
Interviews are a most advantageous approach to obtain data in the following circumstances:
First, there is a substantial amount of questions. Second, the questions are open-ended and of
high complexity. Third, the logic and order of questions can be adjusted to different
interviewees (Jankowicz, 2005; Saunders et al., 2012).
Our interview media is mostly digital via the Internet together with telephone calling.
Concerning digital interviews, both synchronous (Skype and Chinese online chat program
QQ) and asynchronous (email and internet forums) ways are used. There are two main
reasons why such approaches instead of face-to-face interviews were chosen. Firstly, the
potential interviewees are either from China or Germany, which are geographically remote
from the authors. Secondly, as most of the interviewees are top managers with high job
intensity and physical visits are more difficult to organize, the probability that a face-to-face
interview request will be refused is rather high. Luckily, we were able to conduct only one
face-to-face interview in Uppsala due to the fact that the German firm has a subsidiary here,
and we interviewed the CTO in the end of our data collection in Uppsala.
Saunders et al. (2012) emphasize the importance of preparation before interviews.
Preparation increases data quality and demonstrates the authors’ competence and credibility.
First, information on potential interviewees was gathered, such as their previous work
experience and their working years in the studied organizations. We have mainly used their
LinkedIn profile and their corporate webpages. Secondly, in order to enhance information
quality provided by interviewees, we collected data online (company webpage, news in
Chinese, English and occasionally in German) about the acquisitions. Third, the list of
questions was sent to the interviewees beforehand, so that they could prepare themselves,
22
which is a way to facilitate cognitive access (Saunders et al, 2012). The themes of the
questionnaire were: cultural distance between German and Chinese firms, top management
turnover in German firms, communication mechanisms, integration speed, and the two firms’
complementarity of resources and capabilities. We have designed two interview guides for
both Chinese side and German side. The interview Guide for Chinese side is written both in
Chinese and English. (See Appendix I and Appendix II)
Table 2 below presents our summarized information of our interviewee position, and the
years they spend in the studied organization and the interview time. Interviewed companies
are marked with a white background in the table. The grey ones in the same line are their
acquired/acquirer companies. Table 2. Overview of the Interviews
3.5.2 Choice of Interviewees
Since the topic of our thesis is balancing autonomy and integration in the post-acquisition
stage, it involves both acquirers and acquired firms. We therefore have chosen interviewees
from both sides. In the beginning we intended to interview managing directors,
communication department managers, as well as works council representatives on the
German side. Works councils in Germany play a vital role between employer and employee,
as they deal with employment issues especially during acquisitions. These representatives are
more open to interview requests according to suggestion from BRIC-INVEST in Germany.
Interview No.
Acquisition firm Interview type Date Length Interviewee Stay
period Chinese Firm German Firm
1 Sany Putzmeister Skype March 23 35-40 min Secretary General Director 8 years 2 SMTCL Schiess Skype March 25 20-25 min PR Representative 12 years 3 WISCO Tailored Blanks Skype March 30 10-15 min CEO of Tailored Blanks - 4 BYJC Waldrich Coburg Skype March 27 20-25 min PR Representative 15 years 5 as above E-mail March 28 - as above as above 6 as above Skype March 31 30-35 min as above as above 7 SZXN Degen Skype March 31 30-35 min CEO of Degen 30 years 8 SZXN Degen Skype April 14 35-40 min CEO of SZXN 14 years 9 Bestwind Solar Cell Skype March 31 25-30 min Works Council Representative 15 years
10 as above E-mail April 01 - as above as above 11 as above Skype April 06 20-25 min as above as above 12 Energy Inno Skype April 07 55-60 min Product Manager 5 years 13
as above E-mail April 23 - as above as above
14 as above Face-to-face May 02 50-60 min CTO 30 years
23
BRIC-INVEST has been conducting many researches concerning BRIC (Brazil, Russia, India,
China) countries’ investments in Germany. In the end, we had a wide range of interviewees
from both German and Chinese firms: three CEOs, two PR representatives, one general
manager assistant, one works council representative, one product manager and one CTO
respectively. In total, fourteen interviews were conducted with eight interviewees.
3.5.3 Gaining Access
Acquisitions by nature are of high sensitivity. Thus gaining access and building trust became
a difficult part of this research. In the following our data collection strategy is further
described. In order to gain comprehensive data, we had the strategy to gain hybrid access - a
combination of traditional and internet-mediated approaches.
Overcoming organizational concerns about granting access:
To overcome concerns about time and resources required for the research, the participants
were offered to only partly answer the questions in our interview guide (Easterby-Smith et al.
2008). Informed consent was reached by declaring the interviewees’ rights and by promising
confidentiality of data before interview questions were sent to the organizations. By doing so,
anxiety was decreased, honesty and respect was shown to the interviewees, which in return
enhanced the possibility to collect more qualified data (Bryman and Bell, 2005; Saunders et
al., 2012).
Utilizing existing contacts
It is easier to gain access if existing contacts are utilized wisely (Easterby-Smith et al. 2008).
It is also suggested that by creating a track record based on old contacts credibility with new
contacts increases (Saunders et al., 2012). We have searched our existing contacts in China
and Germany, and have made best use of social media such as LinkedIn, Wechat (social
media platform widely used in China) and Facebook to find contacts that may facilitate
access. After selecting the acquisitions, we searched contacts connecting us to corporate staff
and managers. By using existing contacts to institutions such as the German Chamber of
Commerce in Shanghai, the Acquisition “Energy acquired Inno” was acquired as one of our
examples.
24
Establishing credibility
Robson (2011) illustrate that gaining the participants’ willingness to cooperate is a matter of
credibility and trust. By sending out emails using Uppsala University’s email system, a high
level of credibility and trust was built compared with sending emails via personal email
addresses. To enhance this positive effect the research purpose was clearly stated in the
emails and emphasis was put on the high importance of the participant’s cooperation and
support for the research.
Using proper language
In initial calls and emails to Chinese interviewees the term “Chinese firms’ wisdom and
experience in managing foreign acquired companies” was used instead of “research” to make
the topic more interesting for the potential participants. As their working style is rather
straight German interviewees were directly informed of our request. We were aware that
Chinese firms have a much more hierarchical structure compared with German firms. Hence
gaining access to top managers is much more difficult. Either through existing connections or
by convincing gatekeepers such as receptionists of the research value for the firm, we also
achieved the goal of talking to Chinese top managers.
3.5.4 Secondary data collection
In order to complement the primary data collected through interviews, we also used
secondary data, which is argued to be of higher quality (Saunders et al., 2012). As main
source for secondary data in this study documentary data, including organizational
documents, emails, and news on webpages were used.
At the same time, we have contacted some government-supported organizations, such as
the German Association of M&A consultants (http://www.bm-a.de/), as well as the Bric-
Invest Association in Germany (www.bricinvest.de). Their information helped us to gain an
overall understanding of the topic, as these organizations provide support and consultancy on
acquisition deals. We also contacted M&A consulting agencies, however, due to strict
confidentiality agreements with customers, they were not able to provide any secondary data.
3.6 Data Analysis The conducted interviews were recorded and transcribed. They were reviewed in detail
before the following interview to improve results. In total there are fourteen transcriptions.
25
They were summarized and categorized in accordance to the defined themes. Coding and
cluster analysis method (Foss, 2004) was used to review the data. First, all interview were
written down. Secondly, transcriptions of each Acquisition were classified into the five
concepts of our theory framework. Thirdly, we created and highlighted existing keywords
(codes) in our transcriptions. Then, all codes were moved to a new document and connected
with each other. The result was a summary of all 14 transcriptions categorized in five
concepts that could be examined on the base of the study’s theory framework. We have
summarized and compared the key findings, and the results show what are confirmed and
what contradicts the theories we presented in theory section. Please see Appendix IV.
3.7 Reliability, Validity and Limitation Case study research always has the limitations in terms of generalization to a big population
(Yin, 2009). However, we carried out a case study with six acquisition examples as
triangulation to make our conclusions stronger (Saunders et al, 2012). The conclusions might
be applicable to acquisitions done by emerging countries in developed countries due the
similar nature of post acquisition styles (Kale et al., 2009).
We are also aware that some of our respondents are CEOs who are very busy. Hence the
interview time was limited to maximum 20-25 minutes. Within this short period of time the
ability to develop a deeper understanding of the studied case through interviewed CEOs was
limited. However, we have tried to compensate by searching secondary data and by emailing
assistants to CEO’s to obtain internal supporting documents on the topic.
In order to improve validity, interviews were mainly conducted with top managers from
the Chinese and German side.
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4. How Chinese Firms Integrate Acquired German Firms In this section, we present our empirical findings regarding the six acquisition examples. The
findings show the reality of how Chinese acquirers balance integration and autonomy by
considering the five main factors in focus (culture distance, communication, integration
speed, leadership & top management team turnover, and resources complementarity). There
is also a short description of two firms and fundamental background of each acquisition.
4.1 Schiess AG and Shenyang Machine Tool (SMTCL) Shenyang Machine Tool Co., Ltd (SMTCL) was founded in 1995. It is a state-owned
machine tool builder in China. Schiess AG is a world-famous machine producer with 150
years history, located in Aschersleben, Germany.
SMTCL participated in an exhibition in Chicago in 2002 to introduce itself as the largest
machine tool producer in China. However, its booth was located in the basement where fewer
visitors passed by. This made SMTCL to change its strategy to gain and improve its global
impact through international cooperation. SMTCL was dedicated to get rid of limitations
stemming from China’s old planned economy, and increase its product range as well as its
machine precision. In December 2003, SMTCL and Schiess started to talk about cooperation.
On June 25th 2004, Schiess had to file for bankruptcy and SMTCL took the opportunity and
acquired the firm with an approximate transaction value of 8 million Euros. In December
2004, the acquisition was completed.
4.1.1 Culture
Schiess AG was less hierarchical than SMTCL and much more decision-making friendly.
Tasks were executed by strictly following previously made plans (Interview 2, 2015). At
SMTCL, however, the labor force was more flexible as employees were used to work
overtime if the organization needs them to finish urgent projects (Interview 2, 2015).
In the beginning of the acquisition, the difference between the two firms caused many
difficulties for cooperation. SMTCL chose to respect and accept the difference. The objective
was to develop mutual understanding over a long period of time.
Both sides adopted a “compromise” attitude to combine the two sides’ advantages and
create culture diversity (Hou, 2013). SMTCL aimed to learn the German’s rigorous and
precise manner of making machines, and then combine it with Chinese workers’ hard
working spirit. SMTCL also had the plan to transfer the Chinese hard working spirit, passion
27
and flexibility to Schiess AG. In order to achieve the objectives, SMTCL adopted the 3C
Principle (Communication, Credit, Cooperation).
After 10 years, the “marriage couple knows how to handle things together now”, as stated
by SMTCL (Interview 2, 2015). The German side learned the Chinese way of conducting
business at a certain level as the Chinese side absorbed the German’s way of doing things.
4.1.2 Communication
SMTCL sent some of its Chinese staff to Germany not to supervise German employees but to
support them and help the two sides to better communicate (Interview 2, 2015). German
engineers were also sent to China to facilitate communication and transfer skills (Hou, 2013).
4.1.3 Integration speed
“Chinese were very efficient, it only took 3 months for them to complete the whole acquisition,
which actually was supposed to take 6 months” said by German side (Hou, 2013). However,
after the deal was closed, SMTCL was very careful to execute its integration strategy slowing
moving towards its goal. Mr. Chen, who was the CEO of SMTCL, had set a long-term plan
for Schiess AG before acquisition.
He proposed three fundamental principles: First, to support Schiess AG to develop further.
Secondly, to keep the tradition of Schiess AG and keep its base in Germany rather than
moving it to China. Thirdly, to keep its talents and management style (Hou, 2013).
The slow integration speed also showed in the work of totally independent department. The
purchasing department did not achieve any synergies due to different product offerings. Such
independencies satisfy both sides. They have different requirements, as suppliers provide
material of different quality.
4.1.4 Leadership and top management team turnover
As Mr. Chen stated, the original TMT was kept and Schiess AG was granted high autonomy
to operate and develop new technology. Managing directors from SMTCL only interfered in
the decision-making process at a corporate level to ensure that Schiess AG follows the
corporate strategy of SMTCL (Interview 2, 2015).
At the same time, SMTCL also controlled who stayed in the TMT. “We only controlled the
top management team, in all other HR related issues we did not interfere”, said by Mr. Chen
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4.1.5 Resource and capability
Trinity can be summarized as SMTCL’s plan to integrate resources and capabilities. It stands
for “Get orders in China; Made in Germany; Timely service in China”. “We have a foot in
Europe, Schiess AG has a foot in China” (Hou, 2013). Regarding sales and market, the
acquisition provided chances for both sides. The two sides worked together on sales and had
a high level of integration (Interview 2, 2015).
SMTCL specializes in manufacturing small to medium size machine tools, while Schiess
AG is better in producing large machinery (Interview 2, 2015). “The acquisition widens our
product rage to higher quality products, and enables us to target more market segments”.
Before the acquisition, SMTCL relied on imports when high end products were needed.
Thereafter its German subsidiary’s produce was used for their orders in China. Additionally,
SMTCL had a “PRD (Product Research & Development) Plan”, which intended to reduce the
tech gap with Germany. 36 master students were hired to get trainings in Germany (Hou,
2013).
4.2 Waldrich Coburg and Beijing No. 1 Machine Tool Plant Started in 1949, Beijing No.1 Machine Tool Plant started its business in the year the People’s
Republic of China was founded. It’s a state-owned large-scale machine tool manufacturer.
Waldrich Coburg is a medium size machine tool builder in Germany, founded in 1920.
In 2004, the American company Ingersoll, the parent company of Waldrich Coburg at that
time, filed for bankruptcy and decided to sell two subsidiaries (Waldrich Coburg and
Waldrich Siegen). As Beijing No.1 and Waldrich Coburg started to cooperate since 1984, the
two sides had built trust over their 20 years of cooperation. Hence, Beijing No.1 decided to
acquire Waldrich Coburg with 35 Mio. Euros and continually invested approximate 40 Mio.
Euros for building a new manufacturing workshop, an office building, repairing machines
and increasing employee benefits. After 10 years, sales of Waldrich Coburg doubled, and the
number of employees increased from 500 to more than 800, which made Beijing No.1 the
largest Chinese employer in Germany. Beijing No.1 increased orders by 10 times and gained
5 times higher profits after the ten years cooperation.
29
4.2.1 Culture
An American firm had acquired Waldrich Coburg, and heavily intervened. The result was
not satisfactory. In comparison, the Chinese owner Beijing No.1 was different. “We have all
the freedom we need and all decision are made here in Germany.” said Becker, CEO of
Waldrich Coburg (Interview 4, 2015).
Beijing No.1 had a mid to long-term plan, which ranged over 5 years. However, it did not
require such plan from the German side. Waldrich Coburg had its own rather showed term
plan, which was based on one-year objectives (Interview 6, 2015). Such a “One country, two
systems” policy intended to create trust and a good cooperation atmosphere (Interview 5,
2015). Chinese incrementally learned and understood the culture of Germany and Waldrich
Coburg. After ten years, “Beijing No.1 can handle things and work with us in a more
European way” (Interview 4, 2015). Waldrich Coburg’s branch in Beijing strengthened its
connections with Chinese culture and further enhanced the corporation.
4.2.2 Communication
Right after acquisition, there were rumors in German media, and employees had many doubts
about its Chinese owner (Interview 4, 2015). In order to resolve all rumors and doubts, Mr.
Cui, CEO of Beijing No.1, started to talk with every employee with sincerity and openness
(Interview 5, 2015).
The communication mechanism during the integration process worked like this: First, there
were two big meetings every year. Secondly, three Chinese staff members were sent to
Germanys to coordinate the work. Thirdly, Beijing No.1 set up a special business unit to
handle the cooperation with Waldrich Coburg. The unit acted as a communication bridge.
Fifthly, when conflicts occurred, the key to solve the conflict was to have open and direct
communication that made compromises possible (Interview 6, 2015). One example was the
negotiation with works council in terms of increasing working time due to the increased
orders. Germany is a country with very strict rules for working time. The negotiation was
tough and long. However, an agreement was achieved in the end (Interview 5, 2015). Works
council agreed to increase working time by 2 hours every week and to abolish two holidays.
Such a result was rarely seen before (Interview 4, 2015).
30
4.2.3 Integration speed
Integration speed was considered slow (Interview 4, 2015). Beijing No1 followed two
principles for the past ten years:
a. The “Big tree principle” was initiated by Mr. Cui. During the years, Beijing No.1
provided necessary support when its German subsidiary needed or suggested new
projects. At the same time, it tried to keep the tradition of Waldrich Coburg and let it
grow independently like a big tree that is well adjusted to and rooted in its
environment. Any big or quick changes would put it in danger (Interview 4, 2015).
b. “Do participate but not lead” In order to create synergies, the management method
“matrix management” was applied by Beijing No1 (Interview 5, 2015). Through
matrix management, both sides could clearly see responsibilities for decision-making.
There were 56 decision-making items defined at the operational level, in which
Beijing No.1 controlled only four financial items. The German side decided over the
other 52 items. This transparent system of decision-making, made the two
organizations cooperate very smoothly. And it also created trust and showed respect
to the TMT in the acquired firms.
4.2.4 Leadership and TMT turnover
Beijing No.1 kept the whole TMT of Waldrich Coburg since 2005. The German team was
perceived as critical intangible assets. “Chinese people rather look up to us than down on us”,
said Mr. Becker, CEO of Waldrich Coburg (Interview 6, 2015).
Two reasons why TMT was stable were: First, Mr. Cui played a very critical role during
and after the acquisition. His personal character and communication skills reduced anxiety
and created a pleasant atmosphere (Interview 4, 2015). Secondly, the TMT felt good towards
the new owner. In comparison to the prior American owner that intervened and forced many
changes., Beijing No.1 granted high autonomy to the TMT (Interview 4, 2015).
4.2.5 Resources and capability complementarity
“The machine industry in Germany well-known globally. Its workers are well trained.
Germany has a stable economic and political system. These macro factors attracted us to
invest ”(Interview 5, 2015). After acquisition, Beijing No.1 and Waldrich Coburg made big
efforts to combine each other’s resources and capability to gain a “win-win” situation
(Interview 4, 2015).
31
The two sides had different machine types. Beijing No.1 had small size types for the lower
level market. The Germans had bigger machine sizes and covered the upper market. They
had no synergies in production. But the product design departments worked together on a
certain level and tried to create synergies in the mid level market (Interview 5, 2015).
As “made in Germany” was an absolute advantage for selling in China, more Chinese
clients bought Coburg’s products. Therefore, Waldrich Coburg Machine Tool Maintenance
Service (Beijing) Ltd was set up to offer customers in China more timely service. Salesmen
and some engineers from two sides worked together (Interview 4, 2015). They constantly
cooperated and exchanged ideas for the Chinese market. The Chinese and German engineers
were working together in Beijing to install new machines and to provide maintenance
services to customers. As a result, Beijing No1 continuously improved its product quality by
learning from the Germans.
4.3 Putzmeister and Sany Founded by Wengen Liang in 1986, Sany is the sixth largest heavy machinery manufacturer
in the world. The acquisition of Putzmeister by Sany caused big public reactions, as
Putzmeister was considered a “German gem”.
4.3.1 Culture Distance
Culture distance was perceived very high. All procedures and responsibilities were clear at
Putzmeister. At Sany, tasks are done not only by following general rules and procedures but
also by heavy influence from personal relationships and suggestions made by the boss
(Interview 1, 2015). The difference made it hard to share views about an issue. And high
autonomy was necessary to avoid potential conflicts.
4.3.2 Communication
As their communication style is very indirect, Chinese tried to learn from the German
directness. We could say that Sany adapted more to the German way in terms of
communication (Interview 1, 2015).
There were regular meetings between the two TMT and German engineers were sent to
China. Norbert Scheuch, former CEO of Putzmeister, said that instead of dispatching some of
its 180 engineers to China, Putzmeister helped Sany to recruit German professionals. Then
32
they were sent to Sany to train Chinese. Third, Chinese engineers were sent to Germany.
Some engineers were sent to Putzmeister. However, Putzmeister had the right to decide how
many it could welcome, as too many apprentices could have interrupted its own workflow
and routine.
4.3.3 Integration speed
The employees were very insecure about the acquisition, firstly because they were not
informed; secondly because they were afraid Sany would destroy Putzmeister’s German soul.
However, Sany kept everything and Putzmeister operated very autonomously. This calmed
down the employees (Interview 1, 2015). After the acquisition, there was very little change
such as in manufacturing and purchasing (Interview 1, 2015). Both sides considered
integration speed very low. “There are huge differences in management, problem solving,
and social structures, which could not be transferred. We will never be able to turn a
German company into a Chinese company, and vice versa” (Interview 1, 2015).
4.3.4 Leadership and TMT turnover
The CEO of Sany promised Putzmeister to stay unchanged. He promised no layoffs until
2020. The German CEO played a very important role for the acquisition (Richter, 2013). He
was very positive about the Chinese owner and his own career in a long term, he helped to
comfort employees and reduce employees’ doubts (Interview 1, 2015).
4.3.5 Resource and capability complementarity
The main purpose of the acquisition was to “get some technology and get some brand” (Zhuo,
2012). Both sides claimed high similarity of their products. The interviewee from Sany told
us that Sany and Putzmeister were at the same technology level. Putzmeister also said
“concrete pumps were completely overlapping products” (Richter, 2013). Since both sides
were direct competitors, Sany decided to separate their markets regionally. Putzmeister
focused on the European and American market, while Sany mainly sold its products in Asia
and the Middle East (Richter, 2013). The acquisition was to reduce competition on the
international market and better allocate resources (Interview 1, 2015)
4.4 Degen and Suzhou Xinneng (SZXN)
33
SZXN is a burgeoning company founded in 2001. But due to its creative technology, it
developed very quickly in those 15 years. Founded in 1968, Degen Maschinenbau GmbH had
more than 40 years of history in the manufacturing industry.
SZXN and Degen signed the agreement of transfer 51% stock to SZXN in January 2013.
The approximate transaction value amounted to around 8 Mio. Euros. The cooperation
between them had the potential to accelerate the internationalization of both companies. They
hoped to learn from each other and to enter the European and Chinese market.
4.4.1 Culture
At Degen, employees strictly followed the plan, which was less likely to be changed during
its execution. In comparison, SZXN had a more flexible plan that could be adjusted
depending on various changes. SZXN could finish an urgent project in a very short time with
flexibility and efficiency. The Chinese firm took more risks to expand, while the German
firm was more conservative (Interview 8, 2015).
4.4.3 Communication
Degen hired a Chinese engineer in Germany. He used Skype and QQ (Chinese social media)
all the time to handle communication with SZXN (Interview 7, 2015). At SZXN, there was a
Chinese who spoke German to communicate with the German side. In terms of technology
transfer, SZXN sent employees to Germany already twice one year after acquisition
(Interview 8, 2015).
“The communication between two sides is still very challenging for me, the tremendous
difference creates barriers against fully understanding each other. It can lead to mistrust and
less transparency perceived”, said Mr. Degen. “We see that both of us are learning from each
other, and compromising on some issues.” (Interview 7, 2015). Mr. Degen also used China’s
most popular social media platform “Wechat”, and tried to personally connect through social
media with his Chinese partners. In addition, we were told that a clearly stated long-term plan
for the German firm increased transparency and trust (Interview 7, 2015).
4.4.3 Integration speed
The integration speed at the time of the interview was still perceived to be quite slow. SZXN
granted a high level of autonomy, which did not mean it did not care about synergies. Instead,
34
it expected to incrementally achieve synergies with great care for stability. SZXN expected
that in three to five years, it could achieve the expected synergies.
4.4.4 Leadership and TMT turnover
SZXN choose not to get involved in the management of the German subsidiary because we
thought their top managers were doing very well. Any intervention could put their business
stability at risk (Interview 7, 2015).
4.4.5 Resource and Capability Complementarity
SZXN set the goal to make Degen a high end product producer in the global market and at
the same time to strengthen its own position and brand awareness globally especially in its
home market (Interview 8, 2015). Concerning products and markets, Degen covered the high-
end market, while SZXN covered the low and middle-end market with less advanced
technology and cheaper product prices (Interview 7, 2015).
As SZXN said “the Chinese market is promising and we have already sold some Degen
machines here, Chinese clients love ‘Made in Germany’, we share our experience with each
other, and we have the plan to work together on new product developments” (Interview 8,
2015). Meanwhile, Degen also acted like a bridge for SZXN to enter the European and other
foreign markets.
4.5 Solar Cell and Bestwind (Anonymous) Bestwind is a Hong Kong based high-tech company focusing on researching, developing,
producing and selling silicon solar cells. Solar Cell is located in Germany, and focuses on
photovoltaic products.
In May 2014, Bestwind acquired two German solar companies. Solar cell was one of them.
In total, Bestwind acquired three German firms (Solar Cell, Bestwind and TBH) in the new
energy industry.
4.5.1 Culture
The perceived cultural distance was not very big, due to Bestwind’s international way of
doing business (Interview 9, 2015). Hong Kong’s long colonial history and business
traditions played a very important and supportive role. Top managers have solid international
35
management expertise. Their employees in the Hong Kong headquarters were very
international and spoke good English and Mandarin. Bestwind had a very dynamic culture
and used to make quick decisions. Solar Cell had been acquired twice. The first acquirer was
also a Chinese firm, which made quite slow decisions. No changes were implemented in the
German firm. However, after the acquisition, Bestwind’s style was very different and quick
decisions were made (Interview 9, 2015).
4.5.2 Communication
There were regular meetings and reports between the two sides. The R&D department
reported every week or every two weeks to Bestwind (Interview 11, 2015). The reports
should include the progress of product development.
Bestwind suddenly changed its integration strategy. As a result communication intensified
tremendously between the three acquired German units. Nevertheless the whole organization
including the only reserved R&D department continued to feel quite nervous about the shift
in Bestwind’s integration strategy. Solar Cell still had doubts about its future since the long-
term plan was unclear. Our interviewee did not feel good and was very emotional about the
changes (Interview 9, 2015)
4.5.3 Integration Speed
Integration strategy changed from “Preservation” to “Absorption”. Bestwind promised to
grant high autonomy in the beginning, but in the end Solar Cell enjoyed very little autonomy
and speed of change was perceived very high (Interview 9, 2015). Bestwind appointed a new
CEO in charge of the three acquired firms. He integrated them into one structure. TBH
became the headquarters of Bestwind Europe (Interview 11, 2015). Solar Cell only became a
research center for certain solar components. Except for its R&D department, all the other
departments were about to be dissolved. Other top managers had to leave the firm (Interview
9, 2015).
4.5.4 Leadership and TMT turnover
The old TMT was replaced by new TMT to consolidate the integration process. The new
CEO having 20 years of managing experience in the solar industry was appointed to integrate
36
the units (Interview 9, 2015). All three acquired units had shared the same TMT (Interview
10, 2015).
4.5.5 Resource and capability complementarity
“The solar power industry in Germany was going down” (Interview 10, 2015). However, the
“industry in China is growing quickly”. Potential synergies could be unlocked by combining
the technologies of all acquired German firms. They worked together to achieve the goal set
by Bestwind, which was to create advanced solar products that could be sold on global
markets especially in Asian (Interview 9, 2015).
Solar Cell was no longer considered a technology pioneer. However, its R&D department
still had very excellent employees who Bestwind wanted to retain and nurture (Interview 9,
2015). For a new project, TBH solar and Solar Cell were developing a special solar device.
Bestwind supported and used us to develop the new technology” (Interview 11, 2015).
4.6 Energy and Inno (Anonymous) Energy Group is a multinational clean-energy power generation company from China. Inno is
a R&D oriented manufacturer of thin-film solar modules, which was originally founded in
Uppsala and moved to Germany later. The original lab in Uppsala still remains as the
research center of Inno. It has the largest CIGS solar modules production and highest
conversion efficiency in the world.
Energy acquired Inno in 2012 with an approximate transaction value of 25 Mio Euros.
That year was the most difficult for the solar energy industry. Due to low efficiency and high
cost of silicon solar cells, people began to doubt the reliability of solar technology. The whole
solar industry cooled down. As Energy had abundant capital, it closed the deal at a decent
price and successfully entered the solar industry.
4.6.1 Culture
All interviewees thought that national culture difference was very high. They confused the
idea of both national culture and organizational culture during our interviews. Interviewees
thought that national culture difference simply caused the different way of doing things
(Interview 14, 2015). However, besides being a source of communication issues and an
obstacle for creating synergies it also built opportunities for co-learning.
37
“I believe that the Chinese company is very good at finishing urgent short-term tasks very
quickly as well as developing a strategy for the very long term” (Interview 12, 2015). The
German company in contrast is better at project management and mid-term planning.
Whereas German firms are more transparent in communicating long-term real goals,
Chinese companies are very indirect in this regard. “Maybe it would be better if the Chinese
firm clearly tells us what the top goals are and what it wants. Sometimes you do not know
why things are the way they are. I am not very clear of the overall picture” (Interview 14,
2015). A culture difference issue was apparent and the German side hoped for a more open
attitude at both sides to better learn from each other. It took a long time to really understand
each other. The CTO of the German side also thought that they learned a lot about the
Chinese culture. He even went to Beijing for Chinese New Year. The culture was undergoing
a diversification process.
“I do not feel that the Chinese side was forcing changes on us, we enjoy a lot of autonomy
in daily operation. They are afraid things will be falling apart if they manage by themselves”
(Interview 14, 2015). Culture difference made Chinese very cautious and respect local rules.
For instance, the HR department from the two sides worked rather independently (Interview
13, 2015). There were no salary changes in the German subsidiary due to the fact that in
Germany one has to strictly follow trade unions, labor unions etc. Energy also bought another
three American firms, and HR department from Energy also made efforts to integrate
different subsidiaries. It established common goals among different subsidiaries; so that
everything could be in align with the parent firm. Finance department also cooperated very
closely; a Chinese finance manager was working in Germany (integration).
4.6.2 Communication
Before and shortly after the acquisition, communication only took place between members of
top and middle management of the German subsidiary and selected Chinese managers and
experts. After the acquisition, more and more direct communication evolved between staff of
their different departments.
The organization of the Chinese parent company was very big, often changing and not very
transparent to the German subsidiary. Therefore, it was quite difficult for the German
employees to find the right contact person in the Chinese mother company. The situation
slowly improved with time, but the issue couldn’t fully be solved.
38
Important topics of the German side were usually addressed by the top management, which
had clear contact persons in the Chinese mother company. The Chinese side often had the top
management of the German subsidiary as main contact, even for smaller operative topics.
This clearly reflected in e-mail communication. The German side usually limited the
recipients in carbon copies, while the Chinese side often sent a copy to many people of the
higher management (Interview 13, 2015). For almost all activities the mother company
requested frequent reports from the German subsidiary. Sometimes, different departments of
the mother company required similar reports, which created unnecessary workload and
confusion for the German subsidiary. The Chinese side also collected ideas and suggestions
from its acquired subsidiaries when it had a new plan. For example, when the Chinese owner
wanted to expand to new markets. They asked the subsidiaries to report the advantages of the
new market (Interview 12, 2015). However, the German side thought that more information
and knowledge should be transferred back to the subsidiary.
Concerning communication on technology, the researchers of all parts of the corporate
group attended regular workshops to discuss and exchange ideas. The different subsidiaries,
however, mostly independently pursued concrete research projects. “I go to China for
management meetings, sometimes I go to the US for annual R&D meetings and I train
Chinese staff in China” (Interview 14, 2015).
After acquisition, the advisory board was added into the German organization. Its members
were Chinese with experiences in both cultures. They acted as important coordinators. Their
responsibility was to communicate corporate strategy, bonuses, targets, etc. “It helped a lot
that the Chinese owner had people that understood Western styles and culture.” (Interview
14, 2015).
4.6.3 Integration speed
“We have several areas with high synergy potentials such as purchasing and marketing. But
they are not unlocked yet.” (Interview 14, 2015). Transferring technology to China was an
ongoing process. But the CTO thought that the current process speed should be quicker. It
has already been three years since the acquisition, but our Chinese firm actually slowed down
the process of building the factory in China compared to the original plan. A new factory in
China will trigger technology transfer, train people, etc. There was a period when they were
not sure about the production and the future plan. So they were cautious and did not hire new
people during that period. But around this year, they plan to hire more people and make more
39
things happen (Interview 13, 2015). The integration process was speeding up. In addition,
many departments have built up a quite close cooperation. However, process development
and production (of the German product) are mostly managed by INNO independently. The
Chinese mother company is responsible for sales and marketing, while the German subsidiary
offers some support.
The subsidiary as a whole was incorporated into the new corporate structure and later
restructured to match the structure of the mother company and comply to the new company
goals. (Interview 13, 2015).
4.6.4 Leadership & TMT
All employees including the TMT kept their positions after the acquisition. A Chinese
finance manager has been added to the top management of the subsidiary. The Chinese firm
had more control on top management. The top managers were welcoming the Chinese owner.
During the integration process, the acquired leaders did not specifically need to comfort its
employees. The takeover had no influence on the employees in Uppsala. The Chinese TMT
made all the decisions, the German side had to follow them enjoying high autonomy to
execute them. “So top managers kept their former responsibilities to keep the company
running. And they also have the new responsibility to go with the long-term plan of the
Chinese acquirer. For example, expanding to new markets, building the new factory and
running long-term research projects” (Interview 13, 2015).
4.6.5 Resources complementary
INNO had a technology that Energy did not have. Technology was complementary between
the two sides. The R&D department operated independently but the German side had to
constantly report to Energy. The Chinese firm intended to maximize its market share in the
Chinese market. There, the Western technology could be used best in the long run. The
German firm also could benefit from it. “Without support from Energy, we will not be able to
enter the Chinese market” (Interview 14, 2015).
The best-integrated unit was the department for setting up plants and production lines. The
German side improved its capability to supply equipment for building factories in China.
There were synergies in the purchasing department as there were similarities in raw materials.
Although the acquisition did not have any impact on German customers, some insecurity for
suppliers occurred. “Before acquisition, the German owner bought from German suppliers,
40
and followed German legislation. Everyone was safe under the German system. Now you
change the owner to Chinese, especially when you go through economic difficulties, German
suppliers will feel less safe” (Interview 14, 2015).#
41
5. Analysis In this section the analysis of empirical findings is made based on the theoretical framework.
Please see Appendix IV as our summarized analytical results.
In 5.1, we classify the six acquisition examples into the integration model of Haspeslagh and
Jemison (1991). From 5.2 to 5.6 empirical data is analyzed by following the five concepts of
our theory framework.
5.1 Integration types of the six acquisitions We categorized the six acquisitions based on the four integration approaches defined by
Haspeslagh and Jemison (1991). Interestingly, we found out that integration approach of
SMTCL and Beijing No.1 has slowly changed from “preservation” to “symbiosis” within the
last ten years after acquisition.
Need for strategic interdependence
Low High
Nee
d fo
r autonomy
High Preservation
Sany, SZXN, Energy Symbiosis
SMTCL, Beijing No.1
Low
Holding Absorption Bestwind
Figure 3. Integration Approach Model and Six Acquisitions (Adapted from Haspeslagh and Jemison, 1992 p.148)
5.2 Culture Distance In five acquisitions, except Bestwind, high culture distance is perceived. This aligns with
theories saying that culture distance derives from both the firms’ and the countries’ cultures.
Organizational cultures are strongly influenced by national cultures (Terpstra and David,
1991; Kogut and Singh, 1988). These five acquisitions recognize the obstacle of realizing
synergies great culture distance causes. In the “Energy” acquisition, the German side
considers organizational procedures and structures of its parent firm so different due to large
company size and unfamiliar hierarchies that finding the right contact person seems almost
impossible. At Sany the CEO in Germany showed little optimism that any real synergies
could be realized due to the two firms’ culture distance. Also the interviewee from Sany
China thought that there are no obvious benefits or learning gained from its acquired firm in
Germany. This is in line with the theory claiming that big culture distance leads to poor
acquisition performance (Chakrabarti et al., 2008; Olie, 1994; Vaara et al., 2012). Findings
from SMTCL and Beijing NO.1 actually reveal no culture conflicts as (quote) “after a long
42
marriage, we know how to live together”. SMTCL, Beijing No.1, Energy, SZHN, despite
culture-based obstacles, all consider culture difference a complementary resource. Attitudes
towards co-learning and mutual respect are adopted to solve conflicts when implementing
changes. No side dominates decision-making as Chinese acquirers and German subsidiaries
“compromise ” when meeting critical issues.
Germans felt that their higher need for order was satisfied after acquisition as they further
enjoyed independence and freedom to conduct business. For instance, Chinese are long term
driven (5 - 10 years plan) and also good at running short-term projects (e.g. 3 days to finish
one big project). However, Germans are more midterm oriented, normally using detailed one-
year plans. Decisions on these plans are made independently, which enables the German firm
to keep its traditions, working style and business rhythm. As a result they feel more
motivated and willing to learn and accept new cultures. This may explain why theories argue
that autonomy motivates acquired teams by satisfying higher human needs (Khandwalla,
1997; Stubbalt, 1983).
Chinese acquirers appreciate the German culture in terms of strictness and precision. This
may explain why in most acquisitions German firms are left independent. Chinese want to
learn and intend to be influenced by Germans. In the acquisitions of SMTCL and Beijing
NO.1, on the one hand, Germans have experienced the Chinese coworkers’ strong working
spirit and flexibility to handle problems. On the other hand, Chinese have partially absorbed
the European way of doing business. In the acquisition of Beijing NO.1, both Chinese and
Germans have cooperated in design jobs and market activities, which resulted in more
innovative thinking by adopting a collaborative mentality. In the acquisition of SMTCL, the
Chinese way of thinking caused the acquired German firm to finally realize the true reasons
of its bankruptcy which were formerly undetectable. We could see the difference between
German and Chinese cultures as they diversify each firm’s resources by mutual adaption and
co-learning (Reus and Lamont, 2009), which generate a higher innovative spirit (Cox, 1991).
In all acquisitions, except for Bestwind, the “preservation” integration strategy was
adopted in the beginning of the acquisition process. With SMTCL and Beijing NO.1 the
approach slowly shifted from “preservation” to “symbiosis”. In two acquisitions a high level
of integration was shown in many aspects. The interviewees showed undisguised happiness
about the cooperation results of the German subsidiary and the Chinese parent firm. The
reason why the acquisition achieved a high level of integration after ten years to some degree
can be explained by Slangen, (2006). He indicates that with acquisitions involving two firms
with big national culture distance, post-acquisition performance can be enhanced if the
43
“preservation” approach is adopted. In contrast, although Sany adopted a “preservation”
approach three years after acquisition, both sides state that no obvious values were achieved.
This clearly contradicts Slangen (2006).
Another argument from Slangen says that the “absorption” integration approach has a
negative impact on acquisition results when both national cultures are different. The
acquisition “Bestwind”, showed that total assimilation and absorption of the acquired
German firms lead to employee unhappiness and value disruption.
To sum up, the six acquisitions demonstrate that culture is a critical element to consider
when choosing and implementing the proper integration strategy (Björkman et al., 2007;
Teerikangas and Very, 2006; Vermeulen and Barkema, 2001). In our study, successful
acquisitions were those where culture difference was considered a complementary resource
instead of an obstacle. When German firms felt free, respected and supported by their
Chinese acquirers, they initiated necessary change themselves.
5.3 Communication Communication becomes a key success factor after acquisition. Most interviewees
emphasized the difficulty of communication that is normally caused by language difference,
culture and location distance, and as well firm size difference. In the Energy acquisition, the
German side was confused when different Chinese departments asked for similar reports,
which unnecessarily increased the workload for the German side.
Communication gets tough for Chinese acquirers if the German subsidiary does not
welcome them. If acquirers take over a firm in difficulty, its employees are more open and
willing to accept the acquisition. As a result communication becomes easier. However, if the
acquisition causes reaction such as “Chinese are buying German souls”, the acquirers are
faced with hardship to overcome them. It is coherent with Gomes et al., (2013), who argue
that communication in cross-border acquisitions is more challenging as acquirers have to deal
with high complexity in terms of finding and following the right communication strategy.
In this context SMTCL, Beijing NO.1 and Energy have done a great job after acquisition.
Beijing NO.1 employed the “big tree principle” which guaranteed the German firm to
operate and grow within its own system. The Chinese parent company would only provide
support when “the tree needs extra nutrition”. Sincere meetings were held in Germany in
order to answer all questions and remove all doubts of the German employees and works
council representatives. A harmonious atmosphere was established. Haspeslagh and Jemison
44
(1991) emphasize that an efficient communication strategy leads to a more cooperative and
collaborative atmosphere, which is essential for the integration implementation process.
Beijing NO.1 gained trust by keeping its promises and doing what has been said to the
German side. This is also in line with the theory indicating that face-to-face communication
may deliver information with more credibility (D'Aprix, 2009). And also in line with Ranft
and Lord (2002) who emphasize on the significance of communication in order to reduce
employee uncertainty. After removing uncertainty and gaining fundamental trust, the
integration process started. Beijing NO.1 set up some communication mechanisms to
facilitate knowledge transfer. According to Ranft and Lord (2002), trust building is an
essential condition for knowledge transfer.
Most acquisitions in this study have shown similar communication mechanisms during the
integration process. First, the German side had Chinese coordinators that are experienced in
both Western and Chinese culture. They act as a bridge between the two sides. Secondly,
German experts were sent to China, or Chinese technicians were sent to Germany in order to
train Chinese employees. Thirdly, Chinese and German top managers frequently held
meetings. Intense communication between them ensured alignment of the German side to
corporate directions set by the parent company in particular if a high level of autonomy was
granted. Fourthly, Chinese acquirers sometimes have a special business unit to handle critical
joint projects. The communication mechanisms applied facilitates cross border
communication also under the “Preservation” approach. This explains the theory from (Ranft
and Lord, 2002), which argues that rich communication can compensate the disadvantage of
the acquirers’ limited control over target firms.
In one acquisition communication could not solve the underlying conflicts. Bestwind has
shifted its strategy from little interventions to heavy involvement at the German side.
Although frequent communication took place as top managers travelled onsite to talk to every
employee, the big shift led to distrust and communication failed. This further illustrates that
communication has to be consistent with company behavior (Cording et al., 2014).
In the acquisitions of Beijing NO.1, Energy, and SZHX, all interviewees stated that
continuous communication between acquirers and acquired firm takes place. However, the
biggest obstacle of getting a clear picture and developing long-term goals in terms of
subsidiary development stays. German subsidiaries were highly concerned about the
transparency of top goals. This issue was considered a culture problem especially due to
national culture incompatibility. Chinese are indirect in terms of communicating and solving
problems. The concepts of communication and culture are in many ways connected and
45
interact. This aligns with theory saying that communication and culture are interconnected,
and the way that people communicate is largely influenced by national culture (Morosini et
al., 1998).
5.4 Integration Speed In five acquisitions (except Bestwind), interviewees said that integration speed was slow.
Changes in target firms were conducted cautiously. InKpen et al., (2000) present a 100 days
plan arguing a high integration speed is the common way to mitigate uncertainty of
employees and related stakeholders. None of the studied acquisitions were following such
integration strategy that firms from developed countries adopt when making acquisitions. The
Chinese approach of slowly integrating the German side into the acquirers’ system proves
rather successful than the previously mentioned approach.
In two acquisitions, SMTCL and Beijing NO.1, certain synergies were achieved in sales
and technology development after 10 years. Both sides acted like an “old married couple”.
This also is in line with theory (Homburg and Bucerius, 2006; Haspeslagh and Jemison,
1991) arguing that slow speed integration leaves more time for mutual learning and mutual
culture exchange and further allows the realization of synergies.
SZXN and Energy also have the intention to preserve the business routine and tradition of
the target firms. Although SZXN did not achieved any synergies by then, the Chinese
acquirers wanted to speed up the integration process in the years to follow. Competition in
China is fierce. By applying the German firm’s capabilities quicker, they were aiming at
gaining a competitive edge in their home market through higher competence. Sany stated that
the acquisition did not bring them any obvious value yet. Hence the findings of these 5
acquisitions show that slow speed brings both satisfactory and unsatisfactory acquisition
performance. This is in line with theory from Schweizer and Patzelt (2012), which states that
integration speed critically influences post-acquisition performance. However, both low and
high speed could lead to good or bad results. No matter how Chinese balance integration
speed, either slow or quick speed might cause similar reactions in acquired firms. The
attitude from the German side varies as shown in the Energy acquisition. The Chinese
acquirer proposed a new joint project requiring both sides to cooperate applying a slow speed
approach. The German side, however, expected quicker synergies and changes to better
exploit knowledge developed in Germany on the Chinese market. Different integration speed
was expected and no specific speed turned out to be either definitively good or bad. This is
46
in line with Homburg & Bucerius (2006), which indicate that there is no obvious relationship
between integration speed and post-acquisition performance when both internal and external
similarity are low
5.5 Leadership and TMT turnover After acquisition, the leaders from Chinese acquirers and German firms put high importance
on the facilitation of the integration process. Beijing NO.1 is a representative acquisition
illustrating how Chinese leaders may influence the attitude of target firms towards the new
owner. Right after acquisition, rumors spread in the German organization saying that Chinese
would take advantage of German technology by downsizing and moving the German unit to
China.
Then the CEO, Mr. Cui, showed up in Germany, and did one-to-one talks with all
employees. His “Big Tree Principle” was used when he visited the German office. Although
he only knew little German, he used the following German words to communicate his sincere
intentions “Waldrich Coburg bleibt Waldrich Coburg” (Waldrich Coburg will still stay as
Waldrich Coburg). People were mentioning this episode throughout the acquisition’s 10-year
history. His strong leadership skill had created a positive influence on all German employees,
and increased their willingness to cooperate and communicate. The leadership shown by Mr
Cui supports the arguments made by Pablo (1994) and Waldman (2004), which emphasize
leadership’s essential role in the creation of value in the acquisition process.
The Chinese acquirers did not only focus on delivering ideas from their leaders, but also
were fully aware of the critical role German leaders play to mitigate potential conflicts and
solve problems that they were not able to identify. On the one hand this goes in line with
Kiessling and Harvey (2006), who argue that leaders in target firms possess vital and tacit
knowledge about their firms and on the other hand aligns with (Brockmann and Authony,
2002; Michalisin et al., 2004; Kiessling and Harvey, 2006) saying that the TMT in acquired
firms has unique and vital knowledge. Chinese acquirers were strongly aware that big culture
distance between two countries leads to different approaches how people communicate and
work with each other. Thus, replacing the German TMT with Chinese leaders to change
business rhythm puts high pressure on social capital. It’s not simple for Chinese leaders to
manage Western employees, as the risk is high to rather lose control in the end. This is in
accordance with Randel and Ranft, (2007), who say that acquired leaders have solid social
47
connections amongst their employees. However it contradicts Lowenstein, (1983), who
claims that replacing the target TMT means gaining higher control over acquired firms.
Chinese acquirers had frequent informal and formal meetings with top managers in
Germany, or invited them to China to gain experience in Chinese culture and the country’s
new developments. During meetings, Chinese acquirers further expressed their good
intentions, communicated corporate goals and exchanged information with Germans. In the
five acquisitions (except for Bestwind), acquired leaders were motivated to work for the
Chinese owner. In the Sany acquisition, the German CEO tried to convince his employees as
well as the whole German public of the positive effects brought by the acquisition.
Although expected synergies were not achieved after 3 year, the importance of his roles as
a leader to comfort employees for the acquisition success cannot be denied. Graebner, (2004)
argues the acquired leaders can be of great support in relieving employees’ anxiety. In the
acquisition of SZXN and Energy, the interviewees who all were top managers, said that
originally they saw more potential synergies in the acquisition. From their perspective,
unexpected advantages occur through the support of acquired leaders. This is also aligned
with another argument from Graebner (2004), saying that acquired leaders can discover
unexpected synergies and achieve serendipitous values.
In five acquisitions (except Bestwind) Chinese acquirers granted high autonomy to the
local TMT. As Chinese parent firms were also seeking a certain level of integration in
accordance to their acquisition motivation, they came up with a management approach called
“matrix management” (decision making items). As adopted in the acquisition of Beijing
NO.1, the German TMT had the rights to decide on 52 items, whereas the Chinese side could
only decide on four. The parent company could successfully keep the whole TMT at a low
turnover rate. This confirmed the results of a study done by Angwin and Meadows, (2009)
which states that high autonomy is a crucial element to keep TMT turnover low.
“Bestwind” in contrast started to strongly intervene in the German business half a year
after acquisition. Consequently TMT turnover rose significantly. Bestwind replaced the TMT
with managers, it selected on its own. As the new CEO was responsible for integrating the
three acquired German firms, “Bestwind” gained better control. Three acquired German firms
shared many functional departments, so “Bestwind” could reduce cost by laying off
employees The three German acquired firms were integrated to become one functional whole.
This example justifies the replacement of the TMT as it enables acquirers to better control
acquired firms. We therefore conclude that the reasons why “Bestwind” took a different
approach by replacing the acquired TMT in comparison to the other five acquisitions are their
48
confidence derived from its international management experience as well as the similarity of
technologies and management in the three acquired German firms.
The leaders in different German sub-units of Bestwind had similar management experience
and functional background. This is in line with Krishnan et al., (1997) saying that high
similarity in the TMTs’ backgrounds indicates overlapping capabilities and lead to high TMT
turnover. This theory also demonstrates that the possibility to integrate TMT teams with
complementary skills into one system is quite high. In the other five acquisitions where
initially no replacements in the TMTs were made, TMT turnover is low in the years after
acquisition. Beijing NO.1 can be taken as a classical acquisition. Its Chinese TMT is more
specialized in marketing and sales. Furthermore, after-sales were more respondent that on the
German side. The German side, however, was more specialized in producing high quality
precision machines. The TMT of the two sides matched in a way that they could get well
along with each other for a long period of time. This fact justifies and strengthens the theories
of Krishnan et al., (1997)
Another empirical finding contradicts the theory that is proposed by Babić et al., (2014),
who states that employees need more support from leaders after acquisition. In the Energy
acquisition, however, employees on the German side neither needed additional psychological
support from their leaders nor had a negative attitude towards the acquisition. This could be
explained by harsh market conditions in the solar industry as the market was shrinking
sharply in Germany. It is much easier to follow the integration strategy under such
circumstances.
5.6 Resource and capability complementarity vs. similarity Five acquisitions of our study (except for Bestwind) proofed the fact that the main motive of
Chinese acquirers purchasing companies in industrialized countries is the gain access to
lacking resources and capabilities (See Appendix IV). In the due diligence phase companies
made sure that they could be acquired. SMTCL and Beijing NO.1 are from Mainland China
and turned to professional consulting agencies in Hong Kong to get a clear picture of the
target firms. This approach strengthens the argument of Kogut and Zander, (1992) which
highlights the importance of identifying resources and capabilities in the acquisition process.
All six Chinese acquirers took over firms in their own industry. They are all related
acquisitions.
Resource complementary and similarity in terms of technology, market segmentation and
49
managerial expertise of the six acquisitions is summarized below. Table 3. Resource Complementarity in Six Acquisitions
SMTCL, Beijing NO.1, SZXN possesses a high degree of complementarity with their target
firms.
As Chinese tend to adopt the “preservation” integration approach when the two sides
highly complement each other. The TMT of SMTCL, Beijing NO.1, SZXN, planned to
improve their product quality by learning from the German’s globally well-known machine
making skills. They highly supported R&D departments to develop and keep the target team
stable by granting a high level of autonomy. Harrison (2001) argues that autonomy can
enhance the stability of target firms. It explains why Chinese tend to “preserve” instead of
“absorb”. The respect and support from Chinese owners, as well as the fast growing massive
Chinese market grant high potential benefits for German side. These two factors motivate the
German side to be more willing to “teach” Chinese employees and transfer know-how to
China. Obviously, the 1+1>2 joint values were achieved in the acquisitions of Beijing NO.1
and SMTCL, as both sides combined their complementary resources and capabilities. This
lies in line with Milgrom and Roberts (1995), who argue that greater joint values can be
created by such combinations.
Chinese acquirers normally suffer a lack of international expertise and have the intention to
learn from the German side. One German interviewee said “the Chinese are afraid that things
fall apart if they manage the German side by themselves”. It is substantially difficult for
Chinese sides to manage a Western business unit, as they do not know the rules and
procedures in Germany. They rather focus on their own domestic high potential markets, as
they understand them better. Capron, (1999) states that it is more challenging for acquirers to
rationalize the acquired firm’s resources and capability than their own.
Despite the lack of technology and management, the Chinese provided strong sales support.
As a result the German side was able to significantly increase its brand awareness and sales
Technology Market Managerial Expertise
SMTCL and Schiess AG Complementarity Complementarity Complementarity Beijing No.1 and Waldrich Coburg Complementarity Complementarity Complementarity SZXN and Degen Complementarity Complementarity Complementarity Sany and Putzmeister Similarity Similarity Similarity Bestwind and Solar Cell Similarity Similarity Similarity Energy and Inno Complementarity Complementarity Similarity
50
volume on the Chinese market. Few conflicts occurred as the Chinese side rarely intervened
and synergies were created as departments closely cooperated. Beijing NO.1 and SMTCL
achieved both high integration and high autonomy. This result strengthens the theory by
Zaheer et al., (2013) which argues that high level integration and autonomy can both exist
when the acquired firms’ resources and capabilities complements those of acquiring firms.
The Energy acquisition shows a medium level of complementarity.
“Energy” followed the strategy to acquire high-tech firms in developed countries with
different products, in order to widen its patent portfolio and strengthen its leadership role in
the new energy industry. It had solid experience in international business operations and was
extremely good at winning project bids in the Chinese market. Yet, the acquired firm, Inno,
had a technological product that Energy did not have.
Although “Energy” had rich international business experience, it decided to not get involve
in its German subsidiary. Autonomy is encouraged when acquirers are unfamiliar with the
technology in acquired firms (Zaheer et al., 2013). Meanwhile, in order to combine “Inno’s”
technology in its own wide product portfolio, “Energy” tried to integrate Inno into its new
corporate structure following the overall goal to align all acquired firms. The new factory in
China that was built by “Energy” and “Inno” should act as a technology transfer center,
triggering synergies in engineering, marketing and technology. This confirms the theory by
Harrison (2001) saying that a certain level of integration is needed when acquirers aim to
gain benefits from complementary resources and capabilities of acquired firms.
The Sany and Bestwind acquisitions show high similarity
Due to high similarity with its German subsidiary, Sany expected to realize many
synergies. It demonstrated publicly to the Chinese media that they would closely cooperate
with Putzmeister. Kogut and Zander (1992) argue that a high integration level can be
expected when two firms are similar.
However, reality showed that few synergies could be unlocked due to the slow integration
process. Both sides are large enterprises in the machinery industry. After the acquisition,
Sany deliberately ensured market protection for the German firm and promised a high level
of independence, as reaction to strong resistance from the entire organization and even the
German public.
To conclude, most Chinese acquirers purchased firms with resources and capabilities that
complement their own to diversify and complement each other (Morosini et al., 1998; Kogut
51
and Singh, 1988). Complementary resources make acquirers grant high autonomy to the
German side.
52
6. Conclusion Previous studies mainly focused on acquisitions done by companies from developed
countries. Some studies made certain contributions in the area of acquisitions done by
EMNCs. However, the post-acquisition stage still stayed almost unexplored. Although
assumptions were made that EMNCs grant high autonomy to target firms during the
integration process, only few studies actually tried to answer the questions how the
integration process works in detail and how Chinese acquirers balance integration and
autonomy given to German target firms. Therefore, the purpose of this paper is to gain deeper
understanding of post-acquisition integration made by Chinese firms acquiring German firms,
as well as to establish a sound foundation for further theory development within the field of
post-acquisition integration. In order to achieve this goal, the research questions were defined
as “How do Chinese firms balance integration and autonomy with acquired German firms?”
Based on previous studies, a theory model was developed that included five key factors
which have a substantial impact on the dilemma of balancing integration and autonomy.
These factors are culture distance, communication, integration speed, leadership & TMT
turnover and resource complementarity. A case study with six acquisition examples was
implemented, during which we have conducted fourteen interviews mainly with top
managers both from the German and Chinese side. The following five key findings could be
identified:
First, although previous scholars argued that high autonomy leads to loss of control and
limited integration, our results showed that granting high autonomy to acquired firms doesn’t
necessarily lead to such consequences. It could even be said that in one acquisition both high
autonomy and high integration can coexist. We discovered that German and Chinese firms
mainly possessed complementary resources and capabilities. German firms had more
advanced technology whereas Chinese had a strong foothold in the growing Chinese market
showing high demand for German products. This complementarity made each party
cooperate closely in marketing and sales as well as in R&D, so that both acquired more
customers and provided services to them especially in the Chinese market. In these
departments with high complementarity, both high integration and high autonomy were
simultaneously possible. This was one foundation piece for further theory development.
Secondly, the results also showed that the Chinese side rather considered large cultural
distance between the two countries a complementary factor as they benefited from learning
53
the German way of conducting business. The German side also tended to learn from its
Chinese acquirers. A “co-learning” process regarding culture, leadership and communication
between the two sides took place.
Thirdly, despite the fact that, in general, speed of integration was slow, all examined
acquisitions achieved a high integration level after a certain period of time.
Fourthly, all acquisitions shared similar communication strategies: coordinators proved
useful to act as bridge between the two sides. These coordinators had a deep understanding of
both Western and Eastern culture. Also meetings were held among TMTs to ensure the
achievement of corporate goals set by Chinese acquirers.
Fifthly, the studied acquisitions showed that the five key factors were interconnected.
Culture distance hampered the management of the acquired firm by the Chinese acquirer on a
daily base. As a result acquirers kept the acquired TMT stable and TMT turnover low. Big
culture distance caused acquirers to integrate at slow speed whose disadvantages could be
well compensated by intense communication. In addition, culture distance acted as
complementary resource and created more innovative thinking.
Besides the mentioned key findings, we could also conclude that the sizes of the acquirer, its
ownership such as state owned or privately owned, as well as its industry were closely related
with the integration approach chosen. For instance, big firms in the traditional machine
industry with state owned background (Sany, SMTCL, Beijing No.1) were more conservative
when making changes in the German target firms. They were more likely to apply the
“Preservation” approach with slow integration speed. Ten years after acquisition, Beijing
No.1 and SMTCL incrementally transformed to the “Symbiosis” integration approach. While
privately owned companies from new industries (Energy, Bestwind) were more experienced
in international business management and more progressive concerning the integration
process.
In addition, six acquirers promised to grant high autonomy to the acquired firms before
acquisition. Five of them kept their promise and slowly integrated the acquired firm without
big interventions. Only one acquirer (Bestwind) started to heavily intervene in the acquired
firm and absorbed it six months after acquisition. The reason why Bestwind suddenly
changed its approach was the target firm’s tremendously shrinking market share in Germany.
Furthermore Bestwind acquired three highly similar German firms in the same industry
regarding technology know-how, market segmentation, and managerial expertise. In order to
save cost all three units were merged into one structure, which showed more efficient results.
54
Energy was on the way to change its approach from “Preservation” to “Symbiosis” achieving
high integration and high autonomy. On the one hand, Inno intended to market the acquired
technology in China while the European market was going down. On the other hand, the
German subsidiary felt positive towards Energy, which proposed a new attractive business
model to gain a competitive edge in the long run. These two aspects made integration more
attractive to many departments of the German side.
6.1 Limitation
In our study, one limitation is that we did not make a standardized measurement for post-
acquisition performance. Some acquisitions firms think the acquisition have not yet generate
direct economic benefits, but they are happy about the situation as they for example
successfully entered the Chinese markets. Some other firms say that they have strong roots in
another continent after acquisition. Such non-standardized measurement probably could not
comprehensively represent the reality.
6.2 Implication for further research
We acknowledged that our research have limited acquisitions and not sufficient to generalize.
We suggest that future researchers should examine how other country EMNC integrates and
create synergies with their acquired targets in developed countries. The conceptual
framework in this study should be also further examined and further reveals how the
relationship among five concepts interacted. Chinese integration strategy and how it relates
with post-acquisition performance will be of high value to explore in future studies.
As Bestwind Acquisition is quite a mystery for us, due to the limited time and access, we
were not able to find the real motivation behind its acquisition. Further research could
explore the acquisitions that have done acquisition without a clear motivation, as well as how
their integration process works.
6.3 Managerial implications
This study provides a better understanding of integration approach that Chinese MNCs adopt
when making acquisition with German firms. It sheds lights on how Chinese MNC balances
integration and autonomy by referring to five defined concepts.
From a managerial perspective, the key findings of the study firstly show that a sincere and
open communication with works council and employees can reduce the uncertainty and
55
create trust, and it is quite critical for Chinese acquirers to clearly demonstrate to the acquired
firms about the long-term plan and stick to it, since most CEO of acquired firms express to us
the biggest obstacles for them is the exact and clear plan for the future, even they have high
autonomy currently.
Second, it suggests that acquirers should differently balance integration and autonomy in
different business units. And high integration and high autonomy in certain department is
possible and acquirers should implement efficient mechanisms so that expected synergies
could be achieved instead of totally intact the acquired firms. Third, acquirers should make
efforts to propose attractive business model for target firms to gain confidence and sincerity
towards the target firms, it could gain TMT and employees commitment if they perceive the
bright future to work for a new owner.
56
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Terpstra, V. and David, K.H. 1991. The cultural environment of international business 3rd ed.
Cincinnati, OH: South-Western Pub. Co.
Vaara, E. et al. 2012. The Impact of Organizational and National Cultural Differences on Social
Conflict and Knowledge Transfer in International Acquisitions. Journal of Management
Studies. 49(1),pp.1–27.
Vancil, R.F. 1979. Decentralization: Managerial Ambiguity by Design. Dow Jones-Irwin.
Vazirani, N. and Mohapatra, S. 2012. Merging Organizational culture through communication.
SIES Journal of Management. 1(8).
Vermeulen, F. and Barkema, H. 2001. Learning through Acquisitions. The Academy of
Management Journal. 44(3),pp.457–476.
Very, P. et al. 1997. Relative Standing and the Performance of Recently Acquired European Firms.
Strategic Management Journal. 18(8),pp.593–614.
Waldman, D.A. et al. 2004. Charismatic leadership at the strategic level: A new application of
upper echelons theory. The Leadership Quarterly. 15(3),pp.355–380.
Weber, Y. et al. 1996. National and Corporate Cultural Fit in Mergers/Acquisitions: An
Exploratory Study. Management Science. 42(8),pp.1215–1227.
63
Williamson, P.J. and Raman, A.P. 2011. How China reset its global acquisition agenda. Harvard
Business Review. 89(4),pp.109–114.
Yin, R.K. 2009. Case study research: design and methods 4th ed. Los Angeles, Calif: Sage
Publications.
Zaheer, A. et al. 2013. Synergy Sources, Target Autonomy, and Integration in Acquisitions.
Journal of Management. 39(3),pp.604–632.
Zhuo, Z. 2012. Sany acquire Intermix Gmbh. Available from:
http://finance.people.com.cn/n/2012/0923/c349598-19082136.html.
64
Appendix I Interview Guide to Chinese Firm
Acquisition Purpose : 1. What were the reasons your company chooses to acquire the German firm?
2. What are your expectations after the acquisition?
Cultural and leadership difference
3. What were the main differences of the two firms’ organizational culture?
4. What did you learn from German firm’s management style?
5. What is your long-term plan for German subsidiary?
How two firms work together to achieve synergy potential (Balance between autonomy
and integration)?
Communication
6. What difficulties do you think are the main obstacles for achieving potential synergy?
7. What mechanism exists to facilitate communication and trust building between two
sides?
!!
8. What do you think should be improved between two firms’ communication?
9. Which departments in Germany works very independently? Which departments
cooperate more and Chinese involve more?
65
10. After acquisition, for R&D and marketing or manufacturing, do you perceive two
sides are quickly or slowly integrated with each other?
11. Do you think Chinese firm adapts to German side more or another way around?
,
12. Do you think Chinese firm improve international management skill since acquisition
took place?
R&D and Manufacturing :
13. Do two firms’ R&D departments complement with each other?
14. How does R&D cooperate between two firms? Why do you choose such approach?
15. How do you cooperate with each other in Manufacturing and purchasing?
Marketing and Sales
16. Do you work together on market and sales strategies? How does it work?
17. What are the changes of both firms’ market share and brand awareness?
18. What are your plans for global market expansion? What is the role of your German
subsidiary?
HR
19. Which side decides on hiring and promotion in German side?
66
20. What are the changes of top management responsibility in German sides? Is there any
mechanism to facilitate the communication between top managers between two firms?
21. Is there a growing number of expatriate from German side to Chinese firm?(Or
Chinese move to German firm to work)
Final question :
22. What aspects do you satisfied about the cooperation Which aspects should be
further improved?
67
Appendix II Interview Guide to German Side
Acquisition Purpose: 1. Why do you think Chinese firm choose to acquire this company? 2. What are your concerns and expectations after the acquisition?
Cultural difference
3. What were the main differences of the two firms’ organizational culture? 4. What do you think of Chinese management and leadership style?
How two firms work together to achieve Synergy potential (Balance between autonomy
and integration)?
General questions:
5. What difficulties do you think are the main obstacles for achieving potential synergy? 6. What mechanism exists to facilitate communication between the two sides? What aspects
of the business performance on the German side are monitored by the Chinese side? 7. Which departments in Germany work independently? Which departments cooperate more
and involve the Chinese part more? Are you satisfied with how the cooperation works? 8. Do you think the speed of integration is slow or quick? 9. Do you feel secure and get support from Chinese side if in difficulty? 10. Do you think German firms adapt to the Chinese way more, or the other way around? 11. Do you think the Chinese have improved their international management skills since the
acquisition took place?
R&D and Manufacturing:
12. Does the two firms’ R&D complement each other? 13. How do the R&D-departments cooperate between the two firms? 14. How do you cooperate with each other in Manufacturing?
Marketing and sales
15. Do you work together on market strategies? 16. Did both sides improve market share and sales after acquisition?
HR
17. Which side decides on hiring and promotion in the German company? 18. What are the changes of top management responsibility in the German company? Are there a growing number of expatriates from the German company to the Chinese
company? (Or do Chinese employees move to the German company to work)
68
Appendix III. Summary of Theoretical Background Concept Researchers Theoretical Propositions
Pre-acquisition Acquisition motivation
Dunning (2000) OLI eclectic model: Firms internationalize due to three advantages: ownership, Location, and Internalization
Amsden & Chu (2003) EMNCs do not have competitive advantages when
they invest in developed countries. Goldstein (2007) Mathews (2006) Luo & Tung (2007) EMNCs intend to compensate for their ownership
disadantages by acquiring firms from developed coutries.
EMNCs take acquisitions as "springboard" to obtain strategic assets and strengthen their positions in home markets
Deng (2007) Chinese MNCs prefer acquisition as a quicker way to access to strategic capabilities and resources in industrial countries. Include following:
-Advanced technology -Managerial expertise
-Market resources Post-acquisition
Integration Capron, 1999 Integration can positively affect post-acquisition performance by realizing synergies. Larsson and Finkelstein
(1999)
Birkinshaw et al. (2000) Autonomy Khandwalla (1997) Autonomy could meet higher needs of human being
such as freedom and power , thus it could motivate acquried team.
Stubbalt (1983)
Integration approach model
Haspeslagh and Jemison (1991)
Four types of integration approaches: - Preservation: High autonomy and low integration - Symbiosis: High autonomy and high integration - Absorption: Low autonomy and high integration - Holding: Low autonomy and low integration
5 concepts Culture Distance Terpstra & David (1991) Culture distance derives from both organization
culture and national culture. Organizational cultures are closely associated with national cultures.
Kogut & Singh (1988)
Björkman et al. (2007) Cultual distance is a key determinant in post-acquisition integration. Teerikangas & Very (2006)
Vermeulen & Barkema (2001)
Olie (1994) a. A big cultual distance could lead to poor post-acquisition performance. Chatterjee et al. (2008)
Chakrabarti et al. (2008) Olie (1994) Vaara et al. (2012)
- Cultual distance is an obstacle for integration. - Culture distance as an obstacle is more obvious in
Cross-border Acquisitions Krishnan et al. (1997) b. Cultural distance can be seen as resource
complementarity and lead to value creation. Morosini et al., 1998 Vermeulen & Barkema
(2001)
69
Reus & Lamont (2009) - aquirers and acquired firms could learn from each other's culture, which create culture diversification
Cox (1991) - Culuture diversification could result in more innovative spirit.
Barkema &Vermeulen (1998)
- Firms with diversified culture are more adaptive to changes
Slangen (2006) When there is a big national culture distance, adoption of "preservation"integration could positively impact on post acquisition performance. In contrast, "absorption" integration negatively influences the result.
Communication Mishra et al. (2014) An efficient and open internal communication enables employees and managers share insights and increase committment to achieve the common goals.
Gertsen et al. (1998) Cross border acquisition has to deal with more challenging communication difficulties, and communication are critically impact on post acquisition performance.
Ranft & Lord (2002) Gomes et al. (2013)
Miris and Marks (1986) Top managers tend to avoid disscussing with employees about changes after the acquisition.
Napier et al. (1989) Employee from acquired side seeks information from other sources such as rumors due to the lack of information and uncertainty towards their future.
D' Aprix (2009) Face to face communication could create more credible information for employees.
Schweiger & DeNisi (1991) Open and transparent communications clearly inform employees about the corporate changes and their work responsibility differences after acquisition, which enhances integration process.
Mishra et al. (2014) Eisenberg & Witten (1987)
Ranft and Lord (2002) Communication richness compensates for acquirers limited control when acquirers have granted a high autonomy.
Ranft and Lord (2002) Communication reduces employee uncertainty and nerves, build trust Communicaition facilitate knowlege transfer.
Haspeslagh & Jemison (1991)
An Efficient communication strategy helps to establish a cooperative and collaborative atmosphere. Atmosphere is important for integration implementation process.
Haspeslagh & Jemison (1991)
The integration process of Absorption integration type is to assimilate target firms into the acquirers system, which needs much work of communication.
Integration Speed
InKpen et al. (2000) High speed integration could increase employee commitment.
Homburg & Bucerius (2006)
Internal similarity and external similarity jointly affect the relation between post acquisition perfomance and integration speed.
- High speed could lead to better performance when a high internal similarity combines with low external similarity
- High speed could strongly lower the performance when a lower internal similarity combines with high external similarity
70
- Integration speed does not have an obvious influence on post-acquisiton performance when internal and external similarity are both low
Homburg & Bucerius (2006)
Slow integration can leave period for mutual learning and trust buiding,which enable firms to obtain resource and knowledge transfer. Haspeslagh & Jemison
(1991)
Ranft & Lord (2002) Slow integration could positively impact on culture adaptation
Reichheld & Henske (1991) High integration speed can reduce customer uncertainty. Clemente & Greenspan
(1997)
InKpen et al. (2000) High speed integration could mitigate employee uncertainty, such as typical 100days plan
Capron (1999) High speed enables firms quickly benefit from economies of scale and save cost. Homburg & Bucerius
(2005)
Ranft & Lord (2002) Fast integration might result in value destruction Key employees and top managers leave the organization Lin (2012)
Leadership and TMT turnover
Pablo (1994) Leadership plays vital role in creating acquisition values Strauss & Corbin (1990)
Waldman et al. (2004) Graebner (2004) Acquired Leaders can achieve two types of values:
expected and serendipitous -Leaders can mitigate potential conflicts and relieve
emloyee anxiety that typically happen after acquisition. (Expected values)
- Leaders have the visibility and motivation to discover unexpected synergies.(Serendipitous value)
Babić et al. (2014) Employees need support from leaders after acquisition Angwin & Meadows (2009) A high level integration relates to high TMT turnover;
a high level autonomy relates to low TMT turnover. High TMT turnover might caused by Krug & Hegarty (2001) - intensive interventions from acquired firms Hambrick and Cannella
(1993) - less autonomy and lower formal status
Low TMT turnover might caused by Hambrick and Cannella
(1993) - The executives in acquired firms have positive
perceptions of the long-berm benefits on acquisition Krishnan et al. (1997) - TMT in acquirer and acquired firms have
complementary functional backgrounds. Lowenstein (1983) Acquirers replace acquired TMT to better control the
target firms Butler et al. (2012) TMT turnover has negative impact on post-acquisition
performance since Brockmann &Authony
(2002) - TMT in acquired firms has uniqure and vital
knowledge about target firm. Michalisin et al. (2004) Kiessling & Harvey (2006) Randel and Ranft (2007) - TMT turnover has negative effects on information
exchange and social capital in acquired firm Kogut & Zander (1992) Integrate and reconfigure resources and capabilities is
important for post acquisition performance. Morosini et al. (1998)
Kogut and Singh (1988) The new market and capability from acquired firms or
acquirers diversifies each other’s corporate resource
71
Resource and capability complementarity VS similarity
Milgrom & Roberts (1995) Bring two firms together with complementary resources could potentially create greater joint values.
Kim & Finkelstein (2009) Two firms need to be integrated to achieve the expected joint values. Cassiman et al. (2005)
Conner (1991) Harrison (2001) Certain level of integration is necessary to achieve
potential synergies whentwo sides' resources and capabilities are complementary.
Certain level of autonomy should be granted so that acquired firms' resources and capability could be maintained and stay stable
Capron (1999) Acquirers have more challenges to rationalize target’s resources and capability than their own
Zaheer et al. (2013) Autonomy is especially vital for acquirers to deploy R&D resources and capability
Lubatkin (1983) High resources and capability similarity by integration could lead to economic of scale and incresae earnings for acquirers
Singh & Montgomery (1987)
Kogut & Zander (1992) Integration level is expected high when two firms have
a high simiarity Makri et al. (2000) It is easier for two firms with high similarity in market
and technology to implement integration strategy. Puranam et al. (2009) Low level autonomy results in knowledge disruption. Ranft & Lord (2002
Zaheer et al. (2013) High Level of integration and high autonomy can coexist, expecially when two firms have complementary resources and capabilities
Con
cept
Res
earc
hers
The
oret
ical
Pro
posi
tions
Con
firm
ed fi
ndin
gsC
ontr
adic
tiona
ry fi
ndin
gs
Dun
ning
(200
0)O
LI e
clec
tic m
odel
: Firm
s in
tern
atio
naliz
edu
e to
thre
e ad
vant
ages
: ow
ners
hip,
Loca
tion,
and
Inte
rnal
izat
ion
Six
acqu
isiti
on fi
rms h
ave
not s
trict
lyfo
llow
ed O
LI m
odel
to in
tern
atio
naliz
e.
Am
sden
& C
hu(2
003)
Gol
dste
in (2
007)
Mat
hew
s (20
06)
EMN
Cs i
nten
d to
com
pens
ate
for t
heir
owne
rshi
p di
sada
ntag
es b
y ac
quiri
ng fi
rms
from
dev
elop
ed c
outri
es.
conf
irmed
by
five
acqu
isiti
ons(
exce
ptB
estw
ind)
Bes
twin
d
EMN
Cs t
ake
acqu
isiti
ons a
s "sp
ringb
oard
"to
obt
ain
stra
tegi
c as
sets
and
stre
ngth
enth
eir p
ositi
ons i
n ho
me
mar
kets
conf
irmed
by
five
acqu
isiti
ons(
exce
ptB
estw
ind)
. The
ir m
arke
t pos
ition
and
bra
ndaw
aren
ess e
spec
ially
in C
hine
se m
arke
t is
stre
nght
en a
fter a
cqui
sitio
n.C
hine
se M
NC
s pre
fer a
cqui
sitio
n as
aqu
icke
r way
to a
cces
s to
stra
tegi
cca
pabi
litie
s and
reso
urce
s in
indu
stria
lco
untri
es. I
nclu
de fo
llow
ing:
-Adv
ance
d te
chno
logy
conf
irmed
by
five
acqu
isiti
ons(
Exce
ptB
estw
ind)
-Man
ager
ial e
xper
tise
conf
irmed
by
four
acq
uisi
tions
(Exc
ept o
rEn
ergy
and
Bes
twin
d)
-Mar
ket r
esou
rces
conf
irmed
by
Sany
, SZX
N, t
hey
all i
nten
d to
expa
nd to
Eur
opea
n m
arke
t.
Cap
ron,
199
9Th
ree
acqu
isiti
on c
onfir
med
that
cer
tain
inte
grat
ion
lead
to v
alue
cre
atio
n.In
acq
uisi
tion
SZX
N, a
lthou
gh th
eac
quis
iton
enab
le G
erm
an si
de su
cces
sful
lyen
tere
d ch
ines
e m
arke
t, ho
wev
er, t
he c
ost o
fco
mm
unic
atio
n in
crea
sed.
The
acq
uire
dfir
ms n
ot su
re th
e re
al d
ilem
ma
resu
lt.
Den
g (2
007)
Our
stud
y di
d no
t fin
d ou
t why
Bes
twin
dac
quire
the
targ
et fi
rms
Post
-acq
uisi
tion
Inte
grat
ion
Inte
grat
ion
can
posi
tivel
y af
fect
pos
t-ac
quis
ition
per
form
ance
by
real
izin
gsy
nerg
ies.
App
endi
x IV
. Sum
mar
y of
Ana
lysi
s Fin
ding
s
Pre-
acqu
isiti
on
Acq
uisi
tion
mot
ivat
ion
EMN
Cs d
o no
t hav
e co
mpe
titiv
e ad
vant
ages
whe
n th
ey in
vest
in d
evel
oped
cou
ntrie
s.co
nfirm
ed b
y fo
ur a
cqui
sitio
ns e
xcep
t for
Bes
twin
d an
d En
ergy
.B
estw
ind
and
Ener
gy h
ave
stro
ngco
mpe
titiv
e ad
vant
age
in te
chno
logy
and
man
ange
men
t exp
ertis
e.
Luo
& T
ung
(200
7)
Lars
son
and
Fink
elst
ein
(199
9)B
irkin
shaw
et a
l.(2
000)
Kha
ndw
alla
(199
7)St
ubba
lt (1
983)
Four
type
s of i
nteg
ratio
n ap
proa
ches
:- P
rese
rvat
ion:
Hig
h au
tono
my
and
low
inte
grat
ion
Sany
, SZX
N, E
nerg
y
- Sym
bios
is: H
igh
auto
nom
y an
d hi
ghin
tegr
atio
nSM
TCL,
Bei
jing
No.
1En
ergy
is o
n th
e w
ay to
be
"Sym
bios
is"
- Abs
orpt
ion:
Low
aut
onom
y an
d hi
ghin
tegr
atio
nB
estw
ind
- Hol
ding
: Low
aut
onom
y an
d lo
win
tegr
atio
nN
one
Terp
stra
& D
avid
(199
1)K
ogut
& S
ingh
(198
8)
Bjö
rkm
an e
t al.
(200
7)Si
x ac
quis
ition
s all
conf
irmed
.
Teer
ikan
gas &
Ver
y(2
006)
Verm
eule
n an
dB
arke
ma
(200
1)O
lie (1
994)
Con
firm
ed b
y Sa
ny.
Cha
tterje
e et
al.
(200
8)- C
ultu
al d
ista
nce
is a
n ob
stac
le fo
rin
tegr
atio
n.C
onfir
med
by
all a
cqui
sitio
ns. A
llac
quis
ition
firm
thin
k its
diff
icul
t to
inte
grat
edu
e to
cul
ture
diff
eren
ce
How
ever
, the
cul
ture
obs
tacl
e di
d no
t cre
ate
pred
icte
d co
nflic
ts in
SM
TCL,
Bei
jing
No.
1,En
ergy
.
Inte
grat
ion
Inte
grat
ion
can
posi
tivel
y af
fect
pos
t-ac
quis
ition
per
form
ance
by
real
izin
gsy
nerg
ies.
Tech
nono
logy
impr
ovem
ent:
Sany
hav
enot
impr
oved
per
form
ance
on
tech
nolo
gy/p
rodu
ct o
fferin
g ha
s bee
nw
iden
ed in
Bei
jing
No.
1,SM
TCL
Aut
onom
y
Inte
grat
ion
appr
oach
mod
el
Has
pesl
agh
and
Jem
ison
(199
1)
5 C
once
pts
Cul
ture
Dis
tanc
eC
ultu
re d
ista
nce
deriv
es fr
om b
oth
orga
niza
tion
cultu
re a
nd n
atio
nal c
ultu
re.
Org
aniz
atio
nal c
ultu
res a
re c
lose
lyas
soci
ated
with
nat
iona
l cul
ture
s.
Con
firm
ed b
y fiv
e ac
quis
ition
s,exc
ept
Bes
twin
d G
roup
. Int
ervi
ewee
s alw
ays m
ixth
e do
min
e of
nat
iona
l cul
ture
and
firm
cultu
re. w
hen
we
ask
them
abo
ut th
eor
angi
zatio
n cu
lutre
, the
y al
way
s lin
k th
eid
ea to
nat
iona
l cul
utre
diff
fere
nce.
Cul
tual
dis
tanc
e is
a k
ey d
eter
min
ant i
n po
st-
acqu
isiti
on in
tegr
atio
n.
a. A
big
cul
tual
dis
tanc
e co
uld
lead
to p
oor
post
-acq
uisi
tion
perf
orm
ance
.In
terv
iew
ees i
n fo
ur a
cqui
sitio
n(ex
cept
San
yan
d B
estw
ind)
are
all
happ
y ab
out t
heac
quis
iton
perf
orm
ance
.C
hakr
abar
ti et
al.
(200
8)O
lie (1
994)
Vaar
a et
al.
(201
2)
Aut
onom
y co
uld
mee
t hig
her n
eeds
of
hum
an b
eing
such
as f
reed
om a
nd p
ower
,th
us it
cou
ld m
otiv
ate
acqu
ried
team
.
conf
irmed
by
all a
cqui
sitio
ns.
- Cul
ture
dis
tanc
e as
an
obst
acle
is m
ore
obvi
ous i
n C
ross
-bor
der A
cqui
sitio
nsK
rishn
an e
t al.
(199
7)M
oros
ini e
t al.,
199
8Ve
rmeu
len
&B
arke
ma
(200
1)R
eus &
Lam
ont
(200
9)- a
quire
rs a
nd a
cqui
red
firm
s cou
ld le
arn
from
eac
h ot
her's
cul
ture
, whi
ch c
reat
ecu
lture
div
ersi
ficat
ion
Con
firm
ed b
y fo
ur a
cqui
sitio
ns(e
xcep
t for
Sany
and
Bes
twin
d) fo
ur a
cqui
sitio
ns a
llth
ink
it's a
mut
ual a
dapa
tion
and
cultu
re c
o-le
arni
ng p
roce
ss.
Cox
(199
1)- C
ulut
ure
dive
rsifi
catio
n co
uld
resu
lt in
mor
e in
nova
tive
spiri
t.B
arke
ma
&Ve
rmeu
len
(199
8)- F
irms w
ith d
iver
sifie
d cu
lture
are
mor
ead
aptiv
e to
cha
nges
Slan
gen
(200
6)W
hen
ther
e is
a b
ig n
atio
nal c
ultu
re d
ista
nce,
adop
tion
of "
pres
erva
tion"
inte
grat
ion
coul
dpo
sitiv
ely
impa
ct o
n po
st a
cqui
sitio
npe
rfor
man
ce. I
n co
ntra
st, "
abso
rptio
n"in
tegr
atio
n ne
gativ
ely
influ
ence
s the
resu
lt.
Con
firm
ed b
y fiv
e ac
quis
ition
s(ex
cept
for
Sany
). A
mon
g th
ese
five
acqu
isiti
ons,
SMTC
L an
d B
eijin
g N
O.
Sany
and
its G
erm
an h
ave
very
littl
ein
tera
ctio
n, a
nd th
e in
tegr
atio
n st
rate
gy o
fpr
eser
vatio
n do
es n
ot sa
tisify
bot
h si
des.N
oex
pect
ed sy
nerg
ies a
re re
aliz
ed.
Mis
hra
et a
l. (2
014)
An
effic
ient
and
ope
n in
tern
alco
mm
unic
atio
n en
able
s em
ploy
ees a
ndm
anag
ers s
hare
insi
ghts
and
incr
ease
com
mitt
men
t to
achi
eve
the
com
mon
goa
ls.
Con
firm
ed b
y SM
TCL,
Bei
jing
NO
.1,E
nerg
yB
estw
ind
tried
the
best
to c
omm
unca
te w
ithits
acq
uire
d ta
rget
, how
ever
, th
e m
assi
vela
yoffs
alre
ady
crea
te to
o m
uch
anxi
ety
tow
ards
em
ploy
ees.
Even
the
rich
com
mun
icai
ton
coul
d no
t com
pesa
te o
n it.
Ger
tsen
et a
l. (1
998)
Ran
ft &
Lor
d (2
002)
Con
firm
ed b
y al
l acq
uisi
tions
. All
acqu
isiti
on fi
rm th
ink
its d
iffic
ult t
o in
tegr
ate
due
to c
ultu
re d
iffer
ence
How
ever
, the
cul
ture
obs
tacl
e di
d no
t cre
ate
pred
icte
d co
nflic
ts in
SM
TCL,
Bei
jing
No.
1,En
ergy
.
b. C
ultu
ral d
ista
nce
can
be se
en a
s res
ourc
eco
mpl
emen
tarit
y an
d le
ad to
val
ue c
reat
ion.
Bei
jing
No1
and
its G
erm
an si
de w
ork
onso
me
Des
ign
and
Mar
ket a
ctiv
ity, w
hich
nurtu
re m
ore
inno
vativ
e th
inki
ng in
thes
eac
tiviti
es b
y ad
optin
g di
ffere
nt m
enta
lity.
Com
mun
icat
ion
Cro
ss b
orde
r acq
uisi
tion
has t
o de
al w
ithm
ore
chal
leng
ing
com
mun
icat
ion
diffi
culti
es, a
nd c
omm
unic
atio
n ar
e cr
itica
llyim
pact
on
post
acq
uisi
tion
perf
orm
ance
.
Con
firm
ed b
y fiv
e ac
quis
ition
s(Ex
cept
for
Bes
twin
d). T
he re
ason
s: 1
, big
cul
ture
dist
ance
2, l
ocat
ion
dist
ance
3, l
angu
age
prob
lem
s 4,o
rgan
izat
iona
l stru
ctur
edi
ffere
nce.
5, f
irm si
ze d
iffer
ence
. O
neex
trem
e ex
ampl
e is
Ene
rgy'
s diff
eren
tde
partm
ents
ask
ing
Ger
man
firm
doi
ngre
peat
ed re
ports
and
fix
sim
ilar i
ssue
s tha
tco
me
from
Chi
nese
side
.
Cul
ture
Dis
tanc
e
Cha
krab
arti
et a
l.(2
008)
Olie
(199
4)Va
ara
et a
l. (2
012)
Gom
es e
t al.
(201
3)
Miri
s and
Mar
ks(1
986)
Top
man
ager
s ten
d to
avo
id d
issc
ussi
ng w
ithem
ploy
ees a
bout
cha
nges
afte
r the
acqu
isiti
on.
Con
firm
ed b
y Sa
ny. S
any'
s Ger
man
subs
idia
ry d
id te
nd to
avo
id to
talk
to w
hole
empl
oyee
in th
e be
ginn
ing
.
Bei
jing
NO
.1, S
MTC
L, E
nerg
y al
l ope
ned
talk
ed a
bout
the
acqu
isiti
ons.
Nap
ier e
t al.
(198
9)Em
ploy
ee fr
om a
cqui
red
side
seek
sin
form
atio
n fr
om o
ther
sour
ces s
uch
asru
mor
s due
to th
e la
ck o
f inf
orm
atio
n an
dun
certa
inty
tow
ards
thei
r fut
ure.
Con
firm
ed b
y Sa
ny, B
eijin
g N
O.1
, Ene
rgy.
Empl
oyee
s in
Putz
mei
ster
(San
y ac
quis
ition
),W
aldr
ich
Cob
urg(
Bei
jing
NO
.1)h
ave
been
seek
ing
for i
nfor
mat
ion
from
Ger
man
soci
ety
whi
ch h
ad c
erta
in n
egat
ive
impr
essi
on to
war
ds C
hine
se a
cqui
rers
. Bot
hPu
tzm
eist
er a
nd W
aldr
ich
Cob
urg
wer
e"G
erm
an S
oul"
.Ger
man
soci
ety
thus
wer
ecr
itici
zing
Chi
nese
buy
ing
its so
ul.
Empl
oyee
s in
Inno
(Ene
rgy
acqu
isiti
on) w
ere
posi
tive
and
look
ing
forw
ard
to th
eac
quis
ition
.
D' A
prix
(200
9)Fa
ce to
face
com
mun
icat
ion
coul
d cr
eate
mor
e cr
edib
le in
form
atio
n fo
r em
ploy
ees.
Con
firm
ed b
y B
eijin
g N
o1 a
nd S
MTC
L.C
EO fr
om C
hina
cam
e to
Ger
man
y to
hav
em
eetin
gs w
ith a
ll th
e em
ploy
ees.
Schw
eige
r & D
eNis
i(1
991)
Mis
hra
et a
l. (2
014)
Eise
nber
g &
Witt
en(1
987)
Ran
ft an
d Lo
rd (2
002)
Com
mun
icat
ion
richn
ess c
ompe
nsat
es fo
rac
quire
rs li
mite
d co
ntro
l whe
n ac
quire
rsha
ve g
rant
ed a
hig
h au
tono
my.
Bei
jing
NO
.1, S
MTC
L, E
nerg
y, D
egen
all
adim
itted
that
as G
erm
an si
de o
pera
tes
inde
pend
ently
, the
y co
mm
unci
ate
very
ofte
nso
that
kno
w h
ow c
an b
e tra
nsfe
rred
.R
anft
and
Lord
(200
2)C
omm
unic
atio
n re
duce
s em
ploy
eeun
certa
inty
and
ner
ves,
build
trus
tC
omm
unic
aitio
n fa
cilit
ate
know
lege
tran
sfer
.Con
firm
ed b
y B
eijin
gNo1
Com
mun
icat
ion
Cro
ss b
orde
r acq
uisi
tion
has t
o de
al w
ithm
ore
chal
leng
ing
com
mun
icat
ion
diffi
culti
es, a
nd c
omm
unic
atio
n ar
e cr
itica
llyim
pact
on
post
acq
uisi
tion
perf
orm
ance
.
Con
firm
ed b
y fiv
e ac
quis
ition
s(Ex
cept
for
Bes
twin
d). T
he re
ason
s: 1
, big
cul
ture
dist
ance
2, l
ocat
ion
dist
ance
3, l
angu
age
prob
lem
s 4,o
rgan
izat
iona
l stru
ctur
edi
ffere
nce.
5, f
irm si
ze d
iffer
ence
. O
neex
trem
e ex
ampl
e is
Ene
rgy'
s diff
eren
tde
partm
ents
ask
ing
Ger
man
firm
doi
ngre
peat
ed re
ports
and
fix
sim
ilar i
ssue
s tha
tco
me
from
Chi
nese
side
.
Ope
n an
d tra
nspa
rent
com
mun
icat
ions
clea
rly in
form
em
ploy
ees a
bout
the
corp
orat
e ch
ange
s and
thei
r wor
kre
spon
sibi
lity
diffe
renc
es a
fter a
cqui
sitio
n,w
hich
enh
ance
s int
egra
tion
proc
ess.
Con
firm
ed b
y SM
TCL
and
Bei
jing
NO
.1
Has
pesl
agh
& Je
mis
on(1
991)
An
Effic
ient
com
mun
icat
ion
stra
tegy
hel
psto
est
ablis
h a
coop
erat
ive
and
colla
bora
tive
atm
osph
ere.
Atm
osph
ere
is im
porta
nt fo
rin
tegr
atio
n im
plem
enta
tion
proc
ess.
Six
acqu
isiti
ons a
ll co
nfirm
ed.
Has
pesl
agh
& Je
mis
on(1
991)
The
inte
grat
ion
proc
ess o
f Abs
orpt
ion
inte
grat
ion
type
is to
ass
imila
te ta
rget
firm
sin
to th
e ac
quire
rs sy
stem
, whi
ch n
eeds
muc
hw
ork
of c
omm
unic
atio
n.
Bes
twin
d co
nfirm
ed
InK
pen
et a
l. (2
000)
Hig
h sp
eed
inte
grat
ion
coul
d in
crea
seem
ploy
ee c
omm
itmen
t.H
ombu
rg &
Buc
eriu
s(2
006)
Inte
rnal
sim
ilarit
y an
d ex
tern
al si
mila
rity
join
tly a
ffect
the
rela
tion
betw
een
post
acqu
isiti
on p
erfo
man
ce a
nd in
tegr
atio
nsp
eed.
Our
six
acqu
isiti
ons a
ll th
e lo
w in
tern
al a
ndex
tern
al si
mila
rity.
- Hig
h sp
eed
coul
d le
ad to
bet
ter
perf
orm
ance
whe
n a
high
inte
rnal
sim
ilarit
y co
mbi
nes w
ith lo
w e
xter
nal
sim
ilarit
y
Not
in th
e ac
quis
ition
- Hig
h sp
eed
coul
d st
rong
ly lo
wer
the
perf
orm
ance
whe
n a
low
er in
tern
alsi
mila
rity
com
bine
s with
hig
h ex
tern
alsi
mila
rity
Not
in th
e ac
quis
ition
Inte
grat
ion
Spee
dN
ot c
onfir
med
. We
do n
ot h
ave
a in
dep
th a
cqui
sitio
n w
ith h
igh
spee
d in
tegr
atio
n(Fi
veac
quis
ition
s are
all
slow
spee
d in
tegr
atio
, onl
y on
e ac
quis
ition
firm
Bes
twin
d ju
st st
arte
dto
spee
d up
inte
grat
ion)
Com
mun
icat
ion
- Int
egra
tion
spee
d do
es n
ot h
ave
anob
viou
s inf
luen
ce o
n po
st-a
cqui
sito
npe
rfor
man
ce w
hen
inte
rnal
and
ext
erna
lsi
mila
rity
are
both
low
Con
firm
ed b
y al
l acq
uisi
tions
. In
SMTC
Lan
d B
eijin
g N
O.1
, the
slow
spee
d in
tegr
atio
npr
oved
to p
ositi
vely
influ
ence
on
acqu
isiti
onpe
rfor
man
ce.
In S
any
acqu
isiti
on, t
hein
tegr
atio
n sp
eed
is to
o sl
ow, a
nd o
urin
terv
iew
ee fr
om S
any
said
the
acqu
isiti
ondo
esno
t brin
g ex
tra v
alue
s for
them
. In
both
Ener
gy a
nd S
ZX, i
nteg
ratio
n pr
oces
s is
expe
cted
to sp
eed
up to
real
ize
mor
epo
tent
ial s
yerg
ies.I
nter
estin
gly,
Inno
(Ene
rgy
acqu
isiti
on) s
ide
expe
ct h
ighe
r spe
ed to
inte
grat
e an
d de
ploy
its t
echn
olog
y in
Chi
nese
mar
ket.
Yet,
Bes
twin
d qu
icke
n its
chan
ges o
n th
e ge
rman
side
, and
it m
ade
Ger
man
side
ups
et. N
o m
atte
r int
egra
tion
issl
ow o
r qui
ck, t
he re
sult
and
influ
ence
are
unce
rtain
in e
ach
acqu
isiti
on.
Hom
burg
& B
ucer
ius
(200
6)H
aspe
slag
h &
Jem
ison
(199
1)R
anft
& L
ord
(200
2)Sl
ow in
tegr
atio
n co
uld
posi
tivel
y im
pact
on
cultu
re a
dapt
atio
n
Rei
chhe
ld &
Hen
ske
(199
1)
Sany
hav
e a
very
slow
inte
grat
ion
spee
d, a
ndth
e tw
o si
des h
ardl
y ga
ined
mut
ulal
unde
rsta
indi
ng a
nd tr
ust .
(1 tw
o si
des h
ave
been
dire
ct c
ompe
titor
for a
long
tim
e 2
high
prod
uct s
imila
rity
and
over
lap
3 so
, tw
osi
des d
onot
a m
utua
l goa
ls o
f int
egra
tion.
Inte
grat
ion
Spee
d
Slow
inte
grat
ion
can
leav
e pe
riod
for m
utua
lle
arni
ng a
nd tr
ust b
uidi
ng,w
hich
ena
ble
firm
s to
obta
in re
sour
ce a
nd k
now
ledg
etra
nsfe
r.
Five
acq
uisi
tions
exc
ept B
estw
ind
ado
pted
slow
inte
grat
ion
spee
d. A
mon
g th
e fiv
e, fo
urac
quis
ition
s exc
ept S
any
have
gai
ned
or st
illtry
ing
to g
ain
trust
and
bui
ld m
utua
lle
arni
ng.
SMTC
L an
d B
eijin
g N
o1 h
ave
done
acq
uisi
tion
for t
en y
ears
, tw
oac
quis
ition
s st
rong
ly re
pres
ent a
long
tim
eco
urte
rshi
p re
latio
nshi
p w
ith m
utua
lun
ders
tand
ing
and
smoo
th c
oope
ratio
n.C
hine
se le
arne
d Eu
rope
an w
ay ,
Ger
man
lear
ned
Chi
nese
way
.H
igh
inte
grat
ion
spee
d ca
n re
duce
cus
tom
erun
certa
inty
.N
ot c
onfir
med
In o
ur a
cqui
sitio
ns, h
igh
inte
grat
ion
spee
dac
tual
ly in
crea
se c
usto
mer
unc
erta
inty
.SM
TCL
once
trie
d to
spee
d up
the
proc
ess
of in
tegr
atio
n by
mak
ing
som
e qu
ick
chan
ges,
for e
xam
ple,
mov
ing
prod
uctio
n to
Chi
na a
nd it
act
ually
mad
e its
cus
tom
ers g
etw
orse
pro
duct
s due
to th
at G
erm
an m
ade
prod
ucts
are
mor
e ap
prei
cate
d /E
nerg
yac
quis
ition
s rev
eals
that
low
inte
grat
ion
spee
d di
dnot
hav
e an
y in
fluen
ce o
n ac
quire
dfir
ms'
cust
omer
.
Cle
men
te &
Gre
ensp
an (1
997)
InK
pen
et a
l. (2
000)
Hig
h sp
eed
inte
grat
ion
coul
d m
itiga
teem
ploy
ee u
ncer
tain
ty, s
uch
as ty
pica
l10
0day
s pla
n
Not
con
firm
edA
ll si
x fir
ms d
id n
ot h
ave
100d
ays p
lan
for
inte
grat
ion.
/Fiv
e ac
quis
ition
(ex
cept
for
Bes
twin
d) c
onfir
med
that
a lo
w sp
eed
inte
grat
ion
coul
d re
duce
em
ploy
eeun
certa
inty
.San
y ac
quis
ition
con
firm
ed a
sta
rget
firm
s' em
ploy
ees w
ere
miti
gate
d af
ter
Sany
dem
onst
ated
hig
h at
uono
my
and
very
little
cha
nges
wou
ld b
e m
ade.
C
apro
n (1
999)
Hom
burg
& B
ucer
ius
(200
5)
Ran
ft &
Lor
d (2
002)
Fast
inte
grat
ion
mig
ht re
sult
in v
alue
dest
ruct
ion�
Key
em
ploy
ees a
nd to
pm
anag
ers l
eave
the
orga
niza
tion
Con
firm
ed b
y So
lar C
ell.
Lin
(201
2)Sl
ow in
tegr
atio
n co
ule
be ri
sky
for h
igh-
tech
firm
s sin
ce th
ey n
eed
to g
et te
chno
logy
sour
ce q
uick
ly.
Pabl
o (1
994)
Stra
uss &
Cor
bin
(199
0)W
aldm
an e
t al.
(200
4)
Acq
uire
d Le
ader
s can
ach
ieve
two
type
s of
valu
es: e
xpec
ted
and
sere
ndip
itous
SMTC
L o
nce
mov
ed p
rodu
ctio
n to
Chi
na,
whi
ch su
ppos
e to
redu
ct c
ost ,
how
ever
,G
erm
an fi
rms h
as to
repr
oces
s the
pro
duct
,an
d it
in th
e en
d ac
tual
ly in
crea
se th
e co
st.
Lead
ersh
ipan
d TM
Ttu
rnov
er
Lead
ersh
ip p
lays
vita
l rol
e in
cre
atin
gac
quis
ition
val
ues
Con
firm
ed b
y si
x a
cqui
sitio
ns. A
ver
yre
pres
entiv
e ac
quis
ition
is B
eijin
g N
o1,
Chi
nese
CEO
Mr C
ui h
as sh
owed
a v
ery
trans
form
atio
nal l
eade
rshi
p st
yle,
he
was
the
one
who
cle
ar d
oubt
s for
em
ploy
ees .
His
"big
tree
prin
cipl
e" w
as v
ery
influ
entia
lG
raeb
ner (
2004
)
Inte
grat
ion
Spee
d
Hig
h in
tegr
atio
n sp
eed
can
redu
ce c
usto
mer
unce
rtain
ty.
Not
con
firm
edIn
our
acq
uisi
tions
, hig
h in
tegr
atio
n sp
eed
actu
ally
incr
ease
cus
tom
er u
ncer
tain
ty.
SMTC
L on
ce tr
ied
to sp
eed
up th
e pr
oces
sof
inte
grat
ion
by m
akin
g so
me
quic
kch
ange
s, fo
r exa
mpl
e, m
ovin
g pr
oduc
tion
toC
hina
and
it a
ctua
lly m
ade
its c
usto
mer
s get
wor
se p
rodu
cts d
ue to
that
Ger
man
mad
epr
oduc
ts a
re m
ore
appr
eica
ted
/Ene
rgy
acqu
isiti
ons r
evea
ls th
at lo
w in
tegr
atio
nsp
eed
didn
ot h
ave
any
influ
ence
on
acqu
ired
firm
s' cu
stom
er.
Hig
h sp
eed
enab
les f
irms q
uick
ly b
enef
itfr
om e
cono
mie
s of s
cale
and
save
cos
t. A
hig
her s
peed
inte
grat
ion
in E
nerg
y an
dSa
ny w
ere
perc
eive
d to
be
mor
e be
neni
tial
to sa
ve c
ost
-Lea
ders
can
miti
gate
pot
entia
l con
flict
s and
relie
ve e
mlo
yee
anxi
ety
that
typi
cally
happ
en a
fter a
cqui
sitio
n. (E
xpec
ted
valu
es)
Con
firm
ed b
y Sa
ny a
cqui
sitio
n. A
cqui
red
CEO
Mr S
cheu
ch d
id c
omfo
rting
the
empl
oyee
s.-
Lead
ers h
ave
the
visi
bilit
y an
d m
otiv
atio
nto
dis
cove
r une
xpec
ted
syne
rgie
s.(Se
rend
ipito
us v
alue
)
Con
firm
ed b
y Su
zhou
xinn
eng
acqu
isiti
on.
Acq
uire
d C
EO M
r Deg
en st
rong
ly d
edic
ated
to th
e or
ganz
atio
n. D
ue to
the
busi
ness
secr
etcy
he
just
told
us h
e se
es in
tere
sts t
hat
no o
ne e
lse
coul
d se
e.B
abić
et a
l. (2
014)
Empl
oyee
s nee
d su
ppor
t fro
m le
ader
s afte
rac
quis
ition
Con
firm
ed b
y fiv
e ac
quis
ition
s. Es
peci
ally
whe
n th
e ac
quire
d fir
ms a
re g
oing
thro
ugh
quic
k ch
ange
s. Fo
r ins
tanc
e, e
mpl
oyee
sca
me
to o
ur in
terv
iew
ee �
who
is w
orks
couc
il re
pres
enta
tive
to ta
lk a
bout
thei
rne
eds a
nd fe
ars.
In E
nerg
y ac
quis
ition
, afte
r acq
uisi
tion,
empl
oyee
s in
R&
D c
ente
r did
not
hav
e an
yin
fluen
ce a
nd d
o no
t hav
e em
otio
nal
reac
tions
tow
ards
the
acqu
isiti
on. I
t is
beca
use
the
R&
D c
ente
r has
bee
n ac
quire
dtw
ice.
It a
lread
y ge
t use
d to
fore
gin
owne
r.
Ang
win
& M
eado
ws
(200
9)A
hig
h le
vel i
nteg
ratio
n re
late
s to
high
TM
Ttu
rnov
er; a
hig
h le
vel a
uton
omy
rela
tes t
olo
w T
MT
turn
over
.
Con
firm
ed b
y si
x ac
quis
ition
s
Hig
h TM
T tu
rnov
er m
ight
cau
sed
byK
rug
& H
egar
ty(2
001)
- int
ensi
ve in
terv
entio
ns fr
om a
cqui
red
firm
sH
ambr
ick
and
Can
nella
(199
3)- l
ess a
uton
omy
and
low
er fo
rmal
stat
us
Low
TM
T tu
rnov
er m
ight
cau
sed
by- T
he e
xecu
tives
in a
cqui
red
firm
s hav
epo
sitiv
e pe
rcep
tions
of t
he lo
ng-b
erm
bene
fits o
n ac
quis
ition
Con
firm
ed b
y fiv
e ac
quis
ition
s exc
ept
Bes
twin
d( B
estw
ind
acqu
isiti
on h
as a
com
plex
situ
atio
n, a
nd so
me
the
TMT
leav
eth
e fir
m d
ue to
lay
off.
And
we
are
not s
ure
if th
ey h
ave
posi
tive
or n
egat
ive
attit
udes
tow
ards
the
new
acq
uire
rs. )
Kris
hnan
et a
l. (1
997)
- TM
T in
acq
uire
r and
acq
uire
d fir
ms
have
com
plem
enta
ry fu
nctio
nal
back
grou
nds.
Not
sure
Not
sure
Low
enst
ein
(198
3)A
cqui
rers
repl
ace
acqu
ired
TMT
to b
ette
rco
ntro
l the
targ
et fi
rms
Con
firm
ed b
y B
estw
ind
Lead
ersh
ipan
d TM
Ttu
rnov
er
Gra
ebne
r (20
04)
Con
firm
ed b
y B
estw
ind
But
ler e
t al.
(201
2)TM
T tu
rnov
er h
as n
egat
ive
impa
ct o
n po
st-
acqu
isiti
on p
erfo
rman
ce si
nce
Bro
ckm
ann
&A
utho
ny (2
002)
Mic
halis
in e
t al.
(200
4)K
iess
ling
& H
arve
y(2
006)
Ran
del a
nd R
anft
(200
7)- T
MT
turn
over
has
neg
ativ
e ef
fect
s on
info
rmat
ion
exch
ange
and
soci
al c
apita
l in
acqu
ired
firm
Kog
ut &
Zan
der
(199
2)In
tegr
ate
and
reco
nfig
ure
reso
urce
s and
capa
bilit
ies i
s im
porta
nt fo
r pos
t acq
uisi
tion
perf
oman
ce.
Con
firm
ed b
y si
x ac
quis
ition
s
(Mor
osin
i et a
l., 1
998;
Kog
ut a
nd S
ingh
,19
88).
The
new
mar
ket a
nd c
apab
ility
from
acqu
ired
firm
s or a
cqui
rers
div
ersi
fies e
ach
othe
r’s c
orpo
rate
reso
urce
.
Con
firm
ed b
y si
x ac
quis
ition
s. O
neac
quis
ition
s is
Sany
and
Put
zmei
ster
hav
eno
w m
ore
focu
s on
the
diffe
rent
mar
ket
sege
men
tatio
n, w
hich
shift
the
rela
tions
hip
as c
ompe
titor
s to
coop
erat
ive
rela
tions
hip.
Milg
rom
& R
ober
ts(1
995)
Brin
g tw
o fir
ms t
oget
her w
ithco
mpl
emen
tary
reso
urce
s cou
ld p
oten
tially
crea
te g
reat
er jo
int v
alue
s.
Con
firm
ed b
y si
x ac
quis
ition
s. G
erm
anfir
ms a
nd C
hine
se fi
rms a
ll ha
veco
mpl
emen
tary
reso
urce
s in
mar
ket
segm
enta
tion.
Fou
r acq
uisi
tions
( exc
ept
Bes
twin
d an
d Sa
ny) c
ompl
emen
t eac
h ot
her
in R
&D
, and
it b
rings
1+1
>2 jo
int v
alue
s.K
im &
Fin
kels
tein
(200
9)C
assi
man
et a
l. (2
005)
Con
ner (
1991
)C
erta
in le
vel o
f int
egra
tion
is n
eces
sary
toac
hiev
e po
tent
ial s
yner
gies
whe
ntw
o si
des'
reso
urce
s and
cap
abili
ties a
reco
mpl
emen
tary
.
Res
ourc
ean
dca
pabi
lity
com
plem
ent
arity
VS
sim
ilarit
y
Two
firm
s nee
d to
be
inte
grat
ed to
ach
ieve
the
expe
cted
join
t val
ues.
Fou
r acq
uisi
tions
con
firm
ed e
xcep
t San
yan
d B
estw
ind.
1:
Ene
rgy
mak
e ef
forts
inre
stru
ctur
ing
the
acqu
ired
firm
into
one
big
stru
ctur
e, so
that
the
subs
idia
ry c
an fi
t int
oth
e co
mm
on g
oal t
hat E
nerg
y se
t up.
2: F
our
acqu
isiti
ons a
ll ha
ve c
onst
ant c
omm
unca
tion
in R
&D
and
R&
D d
epar
tmen
ts h
ave
certa
inle
vel o
f int
egra
tion
to d
rive
new
tech
onlo
gyan
d kn
owle
dge
trans
fer.
Har
rison
(200
1)
Lead
ersh
ipan
d TM
Ttu
rnov
er
- TM
T in
acq
uire
d fir
ms h
as u
niqu
re a
ndvi
tal k
now
ledg
e ab
out t
arge
t firm
.C
onfir
med
by
six
acqu
isiti
ons
Cer
tain
leve
l of a
uton
omy
shou
ld b
e gr
ante
dso
that
acq
uire
d fir
ms'
reso
urce
s and
capa
bilit
y co
uld
be m
aint
aine
d an
d st
ayst
able
Cap
ron
(199
9)A
cqui
rers
hav
e m
ore
chal
leng
es to
ratio
naliz
e ta
rget
’s re
sour
ces a
nd c
apab
ility
than
thei
r ow
n.Za
heer
et a
l. (2
013)
Aut
onom
y is
esp
ecia
lly v
ital f
or a
cqui
rers
tode
ploy
R&
D re
sour
ces a
nd c
apab
ility
.co
nfirm
ed b
y si
x fir
ms.
Six
firm
s all
have
high
aut
onom
y in
R&
D d
epar
tmen
t.N
orm
ally
Chi
nese
acq
uire
rs m
ore
finan
cial
ly su
pppo
rt R
&D
dev
elop
men
tsu
ch a
s Bei
jing
No1
and
Ene
rgy.
The
targ
etfir
ms i
ndep
ende
ntly
dev
elop
new
pro
duct
s,an
d th
e C
hine
se a
cqui
rers
will
ado
pt c
erta
inpr
oduc
ts a
nd se
ll th
em in
Chi
na.
Luba
tkin
(198
3)Si
ngh
& M
ontg
omer
y(1
987)
Kog
ut &
Zan
der
(199
2)In
tegr
atio
n le
vel i
s exp
ecte
d hi
gh w
hen
two
firm
s hav
e a
high
sim
iarit
y.C
onfir
med
by
Sany
Ene
rgy
and
Bes
twin
d.O
ne g
ood
exam
ple
is S
any.
InC
hine
se m
edia
, San
y de
mon
stra
ted
to th
epu
bilic
that
ther
e ex
ists
a g
reat
pot
entia
lsy
nerg
ies b
etw
een
Sany
and
Put
zmei
ster
.M
akri
et a
l. (2
000)
It is
eas
ier f
or tw
o fir
ms w
ith h
igh
sim
ilarit
yin
mar
ket a
nd te
chno
logy
to im
plem
ent
inte
grat
ion
stra
tegy
.
Bes
twin
d ha
s alre
ady
star
ted
to "
abso
rb"
itsac
quire
d fir
ms b
y do
wns
izin
g an
d cr
eate
econ
omic
of s
cale
by
shar
ing
the
sam
e TM
T,as
it sa
w th
e ov
erla
ppin
g fu
nctio
nal u
nits
with
in th
e w
hole
org
aniz
atio
n.
Sany
per
ciev
ed h
igh
diffi
culty
to o
btai
nsy
nerg
ies,
and
it di
d no
t ach
ieve
obv
ious
syne
riges
afte
r thr
ees y
ears
.
Pura
nam
et a
l. (2
009)
Ran
ft &
Lor
d (2
002
Ener
gy a
nd S
any
acqu
isiti
on ,
the
prod
uct
mat
eria
ls h
ave
muc
h si
mila
rity.
The
acqu
isiti
ons h
ave
not s
een
obvi
ous e
arni
ngs
for a
cqui
rers
due
to e
cono
mic
of s
cale
Low
leve
l aut
onom
y re
sults
in k
now
ledg
edi
srup
tion.
Con
firm
ed b
y B
estw
ind.
Bes
twin
d st
arte
d to
heav
ily in
terv
ene
into
the
busi
ness
of t
arge
tfir
ms,
and
even
it in
tend
s to
keep
R&
Dde
velo
pmen
t, an
d la
yoff
othe
rs, t
his a
ctio
nac
tual
ly m
ake
the
R&
D a
lso
lose
secu
rity
and
feel
bad
abo
ut it
, ou
r int
ervi
ewee
as a
tech
inic
al le
ader
con
side
r lea
ve th
eor
gain
zatio
n.
Res
ourc
ean
dca
pabi
lity
com
plem
ent
arity
VS
sim
ilarit
y
Har
rison
(200
1)
Con
firm
ed b
y si
x ac
quis
ition
s. C
hine
sefir
ms h
ave
less
inte
rnat
iona
l exp
eriti
se a
ndth
ey a
re la
ck o
f kno
wle
dge
in E
urop
ean
mar
kets
that
is w
hy th
ey h
ave
mor
ech
allle
nges
to ra
tiona
lize
its a
cqui
red
firm
sre
sour
ces,
only
can
rely
on
Euro
pean
s to
deal
with
the
busi
ness
Hig
h re
sour
ces a
nd c
apab
ility
sim
ilarit
y by
inte
grat
ion
coul
d le
ad to
eco
nom
ic o
f sca
lean
d in
cres
ae e
arni
ngs f
or a
cqui
rers
Not
con
firm
ed
Zahe
er e
t al.
(201
3)H
igh
Leve
l of i
nteg
ratio
n an
d hi
ghau
tono
my
can
coex
ist,
expe
cial
ly w
hen
two
firm
s hav
e co
mpl
emen
tary
reso
urce
s and
capa
bilit
ies
SMTC
L an
d B
eijin
g N
o.1
alre
ady
achi
eve
the
resu
lt. T
hrou
gh o
ur in
terv
ew, w
e co
uld
see
that
Ene
rgy
acqu
isiti
on p
roba
bly
will
be
achi
evin
g th
e re
sult
as w
ell .
Ene
rgy
high
lyre
spec
t the
loca
l rul
es o
f Ger
man
y, a
nd le
tth
e su
bsid
iary
wor
k w
ith h
igh
auto
nom
y. a
ndth
ey a
re a
lso
alre
ady
mak
ing
man
y pr
ojec
tsto
geth
er. A
fact
ory
is ju
st b
uilt
up to
act
as
know
ledg
e tra
nsfe
r cen
ter a
nd m
any
func
tiona
l uni
ts fr
om b
oth
side
s are
inte
grat
ed in
the
fact
ory.
Res
ourc
ean
dca
pabi
lity
com
plem
ent
arity
VS
sim
ilarit
y