Strategies for Healthcare Payer Information Technology Integration After Mergers and Acquisitions

Strategies for Healthcare Payer Information

Technology Integration After Mergers and

Acquisitions

Section 1: Foundation of the Study

Healthcare insurance companies (herein identified as payers) are at the epicenter

of a fundamental transformation in the United States healthcare market, a change driven

mainly by the Patient Protection and Affordable Care Act’s (ACA) mandate for

healthcare reform (Muppalla & Capobianco, 2010). The full impact of the ACA on

healthcare payer organizations is largely unknown, but healthcare analysts have predicted

that the legislation’s transformation of healthcare would touch every aspect of healthcare

payers’ businesses (Muppalla & Capobianco, 2010). These healthcare analysts called for

a fundamental “change in operational DNA” of healthcare payers (p. 3). The necessary

amendments in the healthcare payer industry would require stakeholders to take

incremental steps toward compliance to guarantee success in the evolving healthcare

delivery system (Muppalla & Capobianco, 2010).

In this mandatory transformation, healthcare payers are using a self-renewal

process, commonly seen in companies across the globe, to address increasing

competition, globalization, changes in technology, and government regulations such as

those mandated by the ACA (Woodlock, 2014). During the process of self-renewal,

leaders of healthcare companies must rethink their companies’ visions and missions,

improve their organizational cultures, and take steps to increase competence by creating

new product lines either internally or externally. Many of these leaders lean on mergers

and acquisitions (M&As) to enhance their companies’ offerings—a key strategy for

renewal (Duobiene, 2013; McCue, Thompson, & Tae Hyun, 2015). Although healthcare

payers often pursue M&As to achieve their varied goals, this strategy does not guarantee

success (Lohrke, Frownfelter-Lohrke, & Ketchen, 2016). Healthcare payers’ ability to

realize their acquisition synergies are contingent upon their managers’ ability to create

innovative strategies to meet old and new challenges alike.

Background of the Problem

Before the ACA, healthcare payer leaders pursued M&As primarily to increase

market share through expansion of membership (Lineen, 2014). Since the ACA became

law, the number of healthcare M&As has doubled (Lineen, 2014; McCue et al., 2015). In

the post-ACA healthcare environment, healthcare payers would need to diversify their

business portfolios, expand their strategic capabilities, and make investments to (a) meet

the tighter reimbursement standards, (b) manage the flood of new enrollees coming

through the private and public exchanges, and (c) improve the quality of care and health

outcomes for the consumers (French, Homer, Gumus, & Hickling, 2016; McCue et al.,

2015). In the past 5 years, many healthcare payers have engaged in multiple horizontal

heterogeneous acquisitions, which involves two companies that have related products and

services, but fundamentally diverse business models (herein identified as strategic

acquisitions; McCue et al., 2015). For example, an acquisition of a wellness company, a

healthcare analytics company, or a chronic care management company by a healthcare

payer is a strategic acquisition. These strategic acquisitions present significant challenges

since healthcare payers find themselves venturing into unfamiliar territories when they

acquire companies that have fundamentally disparate business models (Woodlock, 2014).

Despite an increase in the number of M&As, the success rate of M&As has not improved

(Gomes, Angwin, Weber, & Tarba, 2013). The success of these strategic acquisitions is

contingent on the integration strategies adopted by acquiring companies’ leaders during

the postacquisition information technology (IT)-integration phase (Angwin & Meadows,

2015; Lohrke et al., 2016).

Problem Statement

Postacquisition IT integration is critical to the success of M&As, yet acquirers

struggle to realize the desired synergies during this phase (Henningsson & Kettinger,

2016). Alaranta and Mathiassen (2014) stated that 3 out of 4 companies involved in

M&As face significant challenges during the critical postacquisition IT integration phase.

The general business problem was that healthcare payer organizations are experiencing

high integration and operational costs during the postacquisition IT integration phase. The

specific business problem was that some healthcare payer organization managers lack

strategies to achieve operational and strategic synergies during the postacquisition IT

integration phase.

Purpose Statement

The purpose of this qualitative single case study was to explore strategies

healthcare payer organization managers used to achieve operational and strategic

synergies during the postacquisition IT integration phase. The targeted population

consisted of senior executives, IT strategists, and acquisition integration leaders from a

large healthcare payer in the midwestern United States who have implemented strategies

to achieve operational and strategic synergies during the postacquisition IT integration

phase. The results from this study may help healthcare payers’ senior executives, IT

strategists, and acquisition integration leaders (a) accelerate the postacquisition IT

integration process, (b) reduce the probability of failures during the postacquisition IT

integration phase, and (c) identify opportunities to maximize the investment value. The

findings of this study could lead to positive social change by stimulating a business

environment that might allow healthcare payers to expand their strategic capabilities and

serve their local communities with new products and choices that improve the quality of

care, health outcomes, well-being, and longevity of the consumer.

Nature of the Study

I employed a qualitative research methodology with a case study design. The

primary distinction between qualitative and quantitative methods is that qualitative

researchers rely on open-ended questions and foster flexibility using emerging

approaches, whereas quantitative researchers rely on numbers, typically collected through

closed-ended questions and predetermined approaches (Yilmaz, 2013). Researchers (e.g.,

Moustakas, 1994; Yilmaz, 2013; Yin, 2014) have conducted qualitative studies to

understand and explain human behavior because the qualitative method allows

researchers to focus on the whole of human experience by exploring its meanings and

essences. Quantitative studies are typically designed to test theories or hypotheses using

the scientific method (Fassinger & Morrow, 2013), whereas researchers use qualitative

studies to encourage rich insights and thick descriptions into behavioral patterns,

consumer trends, market needs, and human motivations (Stake, 2010). Mixed methods

research contains potential problems of inconstant application and incorporation of

methodologies without a well-defined base (Larkin, Begley, & Devane, 2014). For an

investigation of strategies used to achieve collaboration and integration, or synergies, for

strategic acquisitions during the postacquisition IT integration phase, I did not test

theories or hypotheses, collect quantitative empirical data, or determine numerical

relationships, which is part of a quantitative study or the quantitative portion of a mixed

methods study (Larkin et al., 2014). Additionally, the mixed methods approach, which

combines qualitative and quantitative methods, can be time consuming and expensive, as

collecting and analyzing the datasets using multiple methods can be complex (Larkin et

al., 2014). Larkin et al. (2014) also noted that the mixed methods approach often includes

use of both open-ended questionnaires to obtain qualitative data and closed-ended

questionnaires to obtain quantitative data. I did not use closed-ended questionnaires

because I wanted to understand, through semistructured interviews and a focus group

discussion, the multiple strategies used to achieve operational and strategic synergies. A

qualitative method is more suitable for studying complex human behavior than is a

quantitative approach (Yilmaz, 2013) and was the method I used in this study.

I considered four research designs for this qualitative study on strategies used to

achieve operational and strategic synergies during the postacquisition IT integration

phase: (a) case study, (b) phenomenology, (c) ethnography, and (d) narrative. According

to Cronin (2014), a case study design involves an in-depth exploration of an individual, a

group of people, activity, or an event. The participants for this study were individuals

charged with formulating strategies that can be used to achieve synergies of strategic

acquisitions during the postacquisition IT integration phase. A case study was appropriate

for this project because it allowed for an in-depth exploration of the case within the

contexts of the phenomenon being investigated. The results of this study helped me

answer the what, how, and why research questions regarding strategies used by healthcare

payer organization managers to achieve operational and strategic synergies, all within the

context of the postacquisition IT integration phase of strategic acquisitions. Capturing

managers’ rich experiences and thick descriptions offered deeper knowledge and insights

into the effectiveness of the strategies, the nature of the challenges, and opportunities

brought by the strategic acquisitions. Phenomenological designs best suit research studies

that require capturing the essence of lived experiences and perceptions of participants;

there is an expectation that there would be invariant constituents in those experiences

(Moustakas, 1994). This design was not the optimal choice because the focus of this

research study was not to capture the essence of lived experiences and perceptions of

participants during the postacquisition IT integration phase; rather, it was to explore the

strategies used by those participants to achieve operational and strategic synergies.

Ethnography designs best suit research studies that require capturing the language,

values, beliefs, norms, rituals, and practices of cultural groups (Marshall & Rossman,

2016). This design was not the optimal choice because I did not intend to focus on the

culture of a particular group. Narrative research designs best suit research studies that

require studying an individual by gathering data through the collection of stories and

discussing the meaning of those experiences for the individual (Marshall & Rossman,

2016). This design was not an appropriate choice for this study because I needed to

interview more than one individual to explore the strategies used to achieve operational

and strategic synergies during the postacquisition IT integration phase.

Research Question

The central research question was: What strategies do healthcare payer

organization managers used to achieve operational and strategic synergies during the

postacquisition IT integration phase?

Interview Questions

1. Please describe the various projects during the postacquisition IT integration

phase in which you were involved.

2. Please describe strategies you have used to achieve operational and strategic

synergies during the postacquisition IT integration phase.

3. Please tell me about your experiences with the strategies that you pursued to

achieve operational and strategic synergies.

4. What obstacles have you encountered while implementing the strategies to

achieve operational and strategic synergies?

5. What process did you follow while formulating the postacquisition IT

integration strategy?

6. Please describe your experiences managing key types of risks during the

planning of integration.

7. Please share your learnings that may have influenced, informed, and otherwise

shaped the strategy.

8. Describe your experiences with the role of innovation, intrapreneurship, and

creativity in achieving operational and strategic synergies.

9. What additional experiences have you had that would help me understand the

strategies used to achieve operational and strategic synergies during the

postacquisition IT integration phase?

Conceptual Framework

The conceptual framework for this study was the acquisition integration

approaches model developed by Haspeslagh and Jemison (1991). The primary

proposition of Haspeslagh and Jemison was that success or failure of M&A lies in the

leaders’ ability to conceive the strategic intent of M&A, which subsequently informs and

influences the post-M&A integration strategies and guides the leaders’ decision-making

process during the vital post-M&A integration phase. Haspeslagh and Jemison indicated

that a company’s strategy for integration can be explained by examining two central

dimensions of the acquisition: (a) strategic interdependence and (b) organizational

autonomy. The first dimension (strategic interdependence) relates to the nature of

interdependence that needs to be established to enable the proper transfer of strategic

capabilities between the two companies, acquirer and acquired (Haspeslagh & Jemison,

1991). Examples of strategic capabilities that acquirers may be looking to expand include

R&D, innovation, technology, or products and services. The second dimension

(organizational autonomy) refers to the need to preserve an acquired company’s strategic

capabilities after the postacquisition integration phase (Haspeslagh & Jemison, 1991).

Based on the relationship between the two dimensions, Haspeslagh and Jemison proposed

four approaches to acquisition integration pursued by the acquirer: preservation,

absorption, symbiosis, and holding. Haspeslagh and Jemison’s acquisition integration

approaches model was appropriate for this study because I was able to use the model to

better understand and organize my data and identify strategies that managers used to

achieve the desired outcomes for their strategic acquisitions.

Operational Definitions

Acquisition: A corporate action in which one company, the acquirer, gains

possession of another company, the acquired (Filho, 2014).

Core competencies: A collection of skills, capabilities, resources, and knowledge

in a particular subject area with which a company creates a product or service to deliver

unique value to customers (Hsu, Tan, Jayaram, & Laosirihongthong, 2014).

Corporate entrepreneur: An individual with an entrepreneurial mindset who

works within an organization; an intrapreneur (Haar & White, 2013).

Entrepreneur: An individual who assumes all risks and rewards in the pursuit of a

business enterprise (Pinchot & Pellman, 1999).

Human capital: The capabilities, experience, and qualities of an individual that

contribute to performance on the job; these include interpersonal skills; business

ownership experience; managerial capabilities; and personality traits (e.g., decisiveness,

enterprise, and orientation toward learning) but not physical assets (Marvel, 2013).

Innovation: An idea, method, or concept that aids in solving an existing problem

in new ways to create economic value (Sokołowska, 2015).

Integration: The process of coordinating the business processes, corporate

cultures, and IT systems of two organizations (i.e., acquirer and acquired) into a single

entity (Chang, Chang, & Wang, 2014).

Intrapreneur: An individual within an organization who converts an idea into a

business enterprise (Pinchot & Pellman, 1999).

Merger: A combination of two or more companies into a single company, in

which one company retains its identity and the other loses its corporate existence (Filho,

2014).

Synergy: A term used in the context of M&As. The value created from the merger

would be greater than the sum of the value created if the companies were to operate

separately (Garzella & Fiorentino, 2014).

Assumptions, Limitations, and Delimitations

Assumptions

Assumptions are concepts that are presumed to be true, and that fall outside of a

researcher’s control (Kirkwood & Price, 2013). This research rested on four main

assumptions:

•A case study design would: (a) allow for an in-depth exploration of the case,

(b) help reveal a wide range of experiences, (c) help reach data saturation

through the use of member checking, and (d) potentially increase study

validity through triangulation of data sources.

•Participants would (a) provide accurate, relevant, and honest perceptions;

experiences; and views in response to interview questions and (b) participate

ethically and truthfully.

•Semistructured interviews and a focus group would offer an opportunity to

explore common themes involving the strategies managers in healthcare payer

organizations used to achieve operational and strategic synergies and the

effectiveness of these strategies.

Limitations

Limitations are potential weaknesses of the study that are mostly outside of a

researcher’s control (Kirkwood & Price, 2013). Acknowledging and defining the

limitations of the research study allow the future researchers to better able to replicate the

study findings (Kirkwood & Price, 2013). This research study had four major limitations.

The first limitation was the possible unavailability of participants due to organizational

restructuring, health issues, or busy schedules. The case study design rests heavily on the

data collected from interviews exploring participants’ description of their experiences

(Cronin, 2014). A second limitation was the possible unwillingness of participants to

share the full extent of their strategies to achieve operational and strategic synergies. A

third limitation of the research was the industry specificity. In this research study, I

focused on healthcare payers; therefore, findings of the study may not be reflective of the

overall healthcare industry and may limit the transferability of findings. A fourth

limitation was the lack of access to internal documents related to healthcare payers’

corporate M&A strategy and postacquisition IT integration strategy due to legal and

privacy concerns. I addressed these limitations by triangulating data from multiple

sources (semistructured interviews of individuals, discussion points made by the focus

group, and relevant information related to the phenomenon under study gleaned from

M&A periodicals) pertaining to the case under study.

Delimitations

Delimitations help narrow the scope and outline the boundaries of the research

study (Yin, 2014). Unlike limitations, the researcher controls delimitations of a research

study. I focused solely on the postacquisition IT integration phase for healthcare payers,

the last phase of an M&A. This research study was restricted to a purposive sample of at

least 16 individuals who, within the last 5 years, had worked for a large healthcare payer

in the midwestern United States and who were involved with their company’s strategic

acquisition activities. This demographic allowed me to remain narrowly focused and

facilitated an increased level of participation. Participants were qualified based on their

experience of implementing strategies to achieve operational and strategic synergies

during the postacquisition IT integration phase. For this study, I collected and analyzed

the data collected from multiple sources (i.e., semistructured interviews, a focus group,

and M&A periodicals).

Significance of the Study

Contribution to Business Practice

The manifestation of majority of potential acquisition synergies is dependent on

the success of the postacquisition IT integration phase—the third most critical reason for

M&A failures (Alaranta & Mathiassen, 2014). Alaranta and Mathiassen’s (2014) study

on managing risks was grounded in empirical observation of postmerger IT integration

cases and was informed by the theory of postmerger IT integration. They identified key

risks associated with 17 postmerger IT integration cases published in scholarly journals

and proposed risk mitigation strategies.

Despite the importance and relevance of postacquisition IT integration, there is

limited empirical research on managing the challenges that arise during the

postacquisition phase (e.g., Chang et al., 2014; Yetton, Henningsson, & Bjørn-Andersen,

2013), especially for strategic acquisitions. Every strategic acquisition is unique with

respect to business model; brand image; core competencies; and characteristics such as

size, location, resources, organizational behavior, and the corporate culture that drives

employee behavior (Angwin & Meadows, 2015). Because of these idiosyncrasies, the

strategies to uncover the business opportunities and manage the challenges vary (Gomes

et al., 2013).

The results of this research study may contribute to M&A business knowledge in

multiple ways. First, the findings of the study could create awareness and a deeper

understanding among healthcare leaders regarding the unique challenges and business

opportunities brought by strategic acquisitions. Second, through the findings of this study,

leaders may be exposed to a broader set of strategies that allow them to more fully realize

the intent of the strategic acquisition.

Implications for Social Change

M&A failure carries high risks with consequences for employees, vendors,

business partners, shareholders, and communities (Eaton & Kilby, 2015; Osarenkhoe &

Hyder, 2015). A higher proportion of M&A success might support a business

environment where companies can expand to new products and better choices for the

consumer (Osarenkhoe & Hyder, 2015). A healthier business environment should serve

the consumer’s interests with better healthcare options, resulting in improved well-being,

quality of care, health outcomes, and longevity.

A Review of the Professional and Academic Literature

According to Duobiene (2013) and McCue et al. (2015), M&As offer a unique

potential to transform companies—a key strategy for self-renewal. Companies rely on

M&As as tools to cope with industry disturbances (e.g., the ACA), to address increased

competition, and to make technological advancements (Brueller, Carmeli, & Drori, 2014;

Jo, Park, & Kang, 2016). Companies also use M&As to drive growth, renew their market

positions, or innovate at speed not achievable through organic growth (Brueller et al.,

2014; Jo et al., 2016). In addition to providing new capabilities to an organization,

acquiring a new company may maximize the wealth of shareholders by increasing an

organization’s market presence, M&A’s also provide access to additional resources such

as human capital, infrastructure, and new clients (Rogan & Sorenson, 2014). For the

purposes of this research study, the literature provided sufficient evidence that M&A is a

growth strategy for organizations across various industries. However, often companies

struggled to use M&A effectively (Friedman, Carmeli, Tishler, & Shimizu, 2016).

The core objective of any acquisition is value creation that is only possible when

two companies (acquirer and acquired) are combined (Cartwright & Cooper, 1992;

Haspeslagh & Jemison, 1991; Mirvis & Marks, 1992). The two key phases of M&A are:

(a) pre-M&A, which includes strategy, due diligence, negotiation, and purchase and (b)

post-M&A, which includes integration (Haspeslagh & Jemison, 1991). Integration is a

process of combining two companies (acquirer and acquired) into a single company,

which typically involves people, processes, and information technology (Haspeslagh &

Jemison, 1991). Acquirers often fail to realize many of the projected synergies

(Haspeslagh & Jemison, 1991; Zaheer, Castaner, & Souder, 2013). In particular cases

where value creation did occur, there is a risk that the integration process can diminish

the value and threaten the survival of the very strategic capabilities that formed the basis

of the acquisition (Garzella & Fiorentino, 2014; Zaheer et al., 2013). Acquisitions may

not reach their full potential due to the failure of the leaders to create an environment that

aids unhindered exchange of strategic capabilities and knowledge transfer between the

two companies, acquirer and acquired (Gunkel, Rossteutscher, Schlaegel, & Wolff, 2014;

Zhang et al., 2015).

Acquisition integration leaders often attribute their struggles in integrating the two

companies (acquirer and acquired) to the post-M&A integration phase (Gunkel et al.,

2014; Zhang et al., 2015). According to Zhang et al. (2015), most of the challenges and

struggles faced by acquisition integration leaders in the critical integration phase are due

to the leaders’ failure to link M&A to a strategy for the future. The success or failure of

M&A lies in the leaders’ ability to conceive the strategic intent of M&A, which

subsequently informs and influences the post-M&A integration strategies and guides the

leaders’ decision-making process during the vital post-M&A integration phase

(Haspeslagh & Jemison, 1991). Organizations’ ability to effectively manage the

decisionmaking process during the critical postacquisition integration phase has farther-

reaching impacts than having a comprehensive strategic integration plan (Vasilaki, Tarba,

Ahammad, & Glaister, 2016; Zhang et al., 2015).

The manifestation of majority of potential acquisition synergies is dependent on

the success of the postacquisition IT integration phase—the third most critical reason for

M&A failures (Alaranta & Mathiassen, 2014). According to Yetton et al. (2013), only

24% of acquirers include IT leadership during the pre-M&A phases (due diligence,

negotiation, and purchase). The postacquisition IT integration phase is highly complex

and unpredictable, yet this phase is vital to the success of acquisition and plays an

essential role in value creation (Angwin & Meadows, 2015; Cartwright & Cooper, 1992;

Haspeslagh & Jemison, 1991; Mirvis & Marks, 1992). However, it is the least researched

phase of M&A (Angwin & Meadows, 2015). This phase requires leaders to create

strategies that enable them to achieve desired synergies even when working in chaotic

and unstructured conditions (Clayton, 2010; Osarenkhoe & Hyder, 2015). Many of the

challenges of the postacquisition IT integration phase arise from (a) differences in

cultural values, (b) lack of strategic alignment, (c) lack of employee trust, (d) lack of

leadership, (e) ineffective communication, (f) inability to transfer and retain knowledge,

and (g) loss of human capital, between the two companies, acquirer and acquired

(Angwin & Meadows, 2009; Caiazza & Volpe, 2015).

This review of the literature section will include literature from scholarly

peerreviewed journals and seminal books relevant to the following research question:

What strategies do healthcare payer organization managers used to achieve operational

and strategic synergies during the postacquisition IT integration phase? I organized the

literature review in six main parts. My objective in the first part, the strategic lens of

M&A, was to provide a brief background about Gort’s (1969) industry shock theory,

which concerns the various types of shocks that trigger M&A activity across different

industries. I will highlight the profound impact some of these shocks have on healthcare

industry M&A activity (specifically payer organizations). In the second part, I will

provide a brief background of the various M&A typologies along with their limitations

and the rationale for selecting Haspeslagh and Jemison’s (1991) typology as the

conceptual framework for this study. In the third part, I will provide an in-depth analysis

of Haspeslagh and Jemison’s postacquisition integration framework, a discussion of the

applicability of the framework to the integration strategies to achieve synergies, and its

limitations. This part will conclude with a synopsis of Haspeslagh and Jemison’s

postacquisition integration framework along with their recommendations for synergy

realization. The fourth part will include a review of three other prominent postacquisition

integration typologies along with a summary of contrasts and coherences with

Haspeslagh and Jemison’s framework. In this part, I will also provide information about a

new postacquisition integration framework developed by Angwin and Meadows (2015).

The fifth part will include a review of the literature on M&A trends and methods. My

objective with this part was to review empirical evidence from recent M&A studies that

emphasized the critical role of innovation, leadership and performance, trust,

communication, culture, knowledge transfer, and intrapreneurship in achieving the

desired synergies during the postacquisition integration phase. In the sixth and last part of

this section, I will review the factors that influence the organization’s performance and

competitive ability during the M&A postacquisition integration phase, such as human

capital and innovation, which are not new to the business or academic world.

Considerable research has been reported already on these themes individually and on the

importance of human capital and innovation in M&A. In the six parts of this review, I

focused on the current trends associated with each of the topics, as they related to this

study. Having a holistic understanding of the overall M&A process, integration concepts,

and critical success factors for synergy realization enables healthcare organization

managers to make informed decisions about appropriate strategies used to achieve the

desired synergies in the postacquisition integration phase.

Table 1 shows a summary of the topics in the research study and the methodology

I used to identify the relevant research. The databases used in the research were

ABI/Inform, Business Source Complete, ProQuest, Emerald Management Journals,

EBSCOhost, and ProQuest Dissertations and Theses Global. The keyword search terms I

used were M&A, mergers, acquisitions, healthcare, healthcare insurance, integration,

postacquisition, postmerger, human capital, innovation, leadership, Patient Protection

and Affordable Care Act (ACA), Haspeslagh and Jemison integration framework, M&A

typologies, and employee retention.

Table 1

Literature Review by Research Topic

Peer-reviewed Other

Research topic journals Dissertations Books sources

Mergers and

20 0 0 0 acquisitions

Post-M&A integration 51 0 4 0

Human capital 8 0 0 0 Innovation 9 0 0 0

Intrapreneurship 4 0 1 0 Research methodology 27 0 5 0

Total 119 0 10 0

According to Walden University’s literature guidelines, 85% of the sources

(peerreviewed journal articles and dissertations) must have a publication date of no more

than 5 years from the anticipated graduation date. This study contains 129 sources, of

which 93% or 119 were peer-reviewed journal articles. Of the total sources (129), 110

(85%) are peer-reviewed journal articles published between 2013 and 2017. Table 2

shows the various types of literature I reviewed for this study, categorized by age and

percentage of the total. The literature review section consists of 76 peer-reviewed journal

articles published between 2013 and 2017.

Table 2

Literature by Type and Age

Between Before % of

Source Total 2013 2013 total

and

2017

Peer-reviewed journal articles 119 110 9 93

Dissertations/theses 0 0 0 0

Books 10 1 9 7

Nonpeer-reviewed journal articles 0 0 0 0

Total 129 111 18 100

Strategic Lens of M&A

Gort (1969) proposed the original industry shock theory of M&A. Gort argued

that industry disturbances generate valuation discrepancies (e.g., company’s stock value,

shareholders’ expectation of future stock values, and uncertainty of the future), which

creates an unpredictable environment and eventually leads to industry restructuring. As

part of the industry restructuring, companies (e.g., healthcare payer organizations) are

using a self-renewal process, commonly seen in companies across the globe, to address

increasing competition, globalization, changes in technology, and government regulations

such as those mandated by the ACA (Woodlock, 2014). In this unpredictable

environment, the information about the past becomes extraneous for managers to rely

upon to predict the future, which can increase the range of alternative predictions (Gort,

1969). This unpredictable environment may simply be adequate to spawn M&A activity,

paving the way for the emergence of merger waves clustered across different industries.

According to Park and Town (2014), four major shocks (economic, regulatory,

technology, and financial innovation) have a profound influence on M&A activity.

According to Gort (1969), companies that undergo economic stress are likely to engage in

an M&A activity, a key predictor of the industry shock theory. Gort asserted that

companies impacted by industry shocks typically are motivated to expand their strategic

capabilities by using their accumulated cash flows to acquire other company’s products

and services. An economic shock is an event that produces notable changes within an

economy (Gort, 1969). These shocks are unpredictable and known to affect a company’s

supply and demand needs across markets (Gort, 1969). For example, in a strong

economy, to meet the growing needs of a consumer, companies engage in M&A activity

to improve their business models and diversify their product portfolios (Ahern & Harford,

2014; Park & Town, 2014). For example, before the ACA became law; healthcare payers

were mostly involved in horizontal homogeneous acquisitions (when two companies have

similar business models, products, and services; Park & Town, 2014). The primary intent

of these horizontal homogenous acquisitions was to drive growth and increase market

share to achieve economies of scale (Park & Town, 2014).

A regulatory shock is an event triggered by a change in regulations and laws

(Gort, 1969). These shocks are known to have a significant impact on the industry (Park

& Town, 2014). For example, regulatory changes mandated after ACA became law has

disrupted the U.S. healthcare industry. To meet the tumultuous healthcare market

demands, healthcare payers are pursuing both types of horizontal acquisitions

(homogenous and heterogeneous; Park & Town, 2014). Unlike homogenous acquisitions,

heterogeneous acquisitions occur between two companies that have related products and

services but have fundamentally diverse business models (Park & Town, 2014). The

primary intent of these horizontal heterogeneous acquisitions is to diversify business

portfolios and expand strategic capabilities of the acquirers (Park & Town, 2014). An

acquisition of a wellness company, healthcare analytics company, a disease management

company, or a chronic care management company by a healthcare payer is an example of

a heterogeneous acquisition (strategic acquisition).

A technology shock is an event triggered by sudden changes in technology (Gort,

1969). These shocks are known to impact companies’ productivity and performance

positively (Park & Town, 2014). The healthcare industry is experiencing a proliferation

of technology innovations aimed at improving the effectiveness of care and quality of life

(Mas & Valentini, 2015). Consequently, the United States saw an upsurge in healthcare

technological acquisitions across the healthcare industry after ACA became law (Mas &

Valentini, 2015). According to Wubben, Batterink, and Omta (2016), healthcare payers

are heavily reliant on healthcare technology innovations to meet some of the ACA

requirements (incentives based on health outcomes, improving the cost and quality of

care, or tighter reimbursement standards).

Financial innovation is the creation of new financial instruments, technologies,

and institutions (Park & Town, 2014). These innovations make it easier for smaller

companies (acquirers) to borrow capital, which in turn allows these companies to expand

their strategic capabilities by engaging in M&A activity (Park & Town, 2014). The two

key drivers of financial innovation are regulatory changes and advances in technology

primarily in the areas of business process and product innovation (Park & Town, 2014).

Gort’s industry shock theory is pertinent to this study as it provided me with

insights into the significant impact industry shocks have on the industry M&A trends

(e.g., healthcare payers’ M&A activity to diversify their business portfolios and expand

strategic capabilities after ACA became law). The absorption integration approach

proposed by Haspeslagh and Jemison (1991) is best suited for integrating horizontal

homogeneous acquisitions, typically motivated by economic shocks. The preservation or

symbiosis integration approach proposed by Haspeslagh and Jemison is also best suited

for integrating horizontal heterogeneous acquisitions, typically motivated by either

regulatory or technology shocks.

M&A Typologies

Despite extensive research efforts on M&A over the past decades, findings from

the extant M&A literature offer inconclusive answers to some fundamental questions

(Angwin, 2012). For example, is acquisition a good growth strategy? What is the success

and failure rate of acquisitions? What is the recommended speed of acquisition

integration? Should acquirers buy related or unrelated acquisitions? Should the acquired

leadership be released or retained (Angwin, 2012)? The inconclusive M&A findings

along with the lack of support for causality within the M&A literature is partly due to the

vast number of confounding variables at work (Angwin, 2012). For this reason,

typologies offer broad perspectives and valuable insight into the multifaceted M&A

process in a holistic way (Angwin, 2012).

The extant literature on M&A typologies focuses on the two most important

phases of M&A: preacquisition strategies and postacquisition integration. The focus of

this study is postacquisition integration. The four prominent postacquisition integration

typologies are cultural integration, human resource integration, strategic and

organizational fit, and speed of integration (Angwin, 2012). Haspeslagh and Jemison

(1991) asserted, “Acquisitions create value when the competitive advantage of one firm is

improved through the transfer of strategic capabilities” (p. 28). Companies can only

realize the full value of M&As through the transfer of strategic capabilities, and that

transfer can only occur in a favorable environment (Haspeslagh & Jemison, 1991).

Haspeslagh and Jemison’s postacquisition integration framework draws attention to the

resource-based perspective, a strategic approach to value creation through the transfer of

strategic resources and capabilities between the acquirer and acquired companies. As

such, I selected Haspeslagh and Jemison’s postacquisition integration framework to

understand and explore the strategies used by healthcare payer organization managers to

create and preserve the value of the acquired strategic capabilities.

Limitations of Typologies

The postacquisition integration phase is the most critical part of M&A and plays

an essential role in value creation (Angwin & Meadows, 2015). However, it is the least

researched phase of M&A (Angwin & Meadows, 2015). The primary focus of extant

M&A literature is on M&A strategies and motivation (Angwin & Meadows, 2015).

According to Angwin and Meadows (2015), research studies conducted by Haspeslagh

and Jemison (1991), Mirvis and Marks (1992), Nahavandi and Malekzadeh (1988), Siehl

and Smith (1990), and Zaheer et al. (2013) on postacquisition integration strategies

remained merely conceptual, or lacked enough data, or focused on a specific integration

strategy. Angwin and Meadows stated that the existing postacquisition integration

typologies might have little empirical support and are not comprehensive. Zaheer et al.

stated that challenges and complications in obtaining quality rich data might also have

contributed to the limited research in the integration phase. As a result, Angwin and

Meadows proposed development of a robust postacquisition strategy typology.

Haspeslagh and Jemison’s Postacquisition Integration Framework

Evolution. Strategic fit is the degree to which the target company augments the

acquirer’s strategy and in turn, contributes to the financial and nonfinancial goals of the

acquirer (Haspeslagh & Jemison, 1991). Acquirers ascertain the potential value of their

acquisitions by doing a strategic fit analysis (Bauer & Matzler, 2014; Bauer, Strobl, Dao,

Matzler, & Rudolf, 2016; Haspeslagh & Jemison, 1991). Organizational fit is the degree

of match between the administrative and cultural practices of the acquirer and target

company. Organizational fit analysis informs the integration leaders of the challenges in

realizing the anticipated benefits (Bauer & Matzler, 2014; Bauer et al., 2016; Haspeslagh

& Jemison, 1991). According to Haspeslagh and Jemison (1991), at the end of the day,

the acquirers’ capacity to effectively manage the overall acquisition process helps them to

capture the anticipated value of the acquisition. Acquirers can develop the capacity to

effectively manage the overall acquisition process by adopting Haspeslagh and Jemison’s

two-method approach: context and mindset. In the context method, the business strategy

should drive the decision-making process during the entire acquisition process

(Haspeslagh & Jemison, 1991). Using the mindset method, the role of the acquired

company’s strategic capabilities and knowledge is recognized and bolstered while

furthering the business strategy (Haspeslagh & Jemison, 1991). The insights from the

acquisitions provide acquirers with an opportunity to assess and enhance their strategic

direction as well as learn to adapt to their organizational approaches (Friedman et al.,

2016).

Haspeslagh and Jemison (1991) stated that the best integration method would be

contingent on the levels of strategic interdependence and organizational autonomy

targeted by the two companies (acquirer and acquired). According to Haspeslagh and

Jemison, the two central dimensions of the integration are the acquirer’s relationship with

the target (acquired) company, and the mechanisms used to create expected value. The

first dimension (strategic interdependence), a core construct of strategic fit, relates to the

nature of interdependence that needs to be established to enable the proper transfer of

strategic capabilities between the two companies, acquirer and acquired (Haspeslagh &

Jemison, 1991). The second dimension (organizational autonomy), a core construct of

organizational fit, refers to the need to preserve acquired company’s strategic capabilities

after the postacquisition integration phase (Haspeslagh & Jemison, 1991). The efficient

management of strategic interdependencies between the two companies, acquirer and

acquired, during the postacquisition integration phase is a decisive factor in value

creation (Haspeslagh & Jemison, 1991).

Value creation occurs when the transfer of strategic capabilities occurs between

two companies, acquirer and acquired (Bauer et al., 2016). Preserving the strategic

capabilities after the transfer is essential to value creation (Bauer et al., 2016). One of the

“paradoxes” (p. 142) is that the transfer of strategic capabilities may lead to the

destruction of the very strategic capabilities that are being transferred (Haspeslagh &

Jemison, 1991). This paradox is evident when acquired strategic capabilities reside in

individuals or within a specific team (Haspeslagh & Jemison, 1991; Oyemomi, Liu,

Neaga, & Alkhuraiji, 2016). Key individuals may decide to leave the company when they

sense and experience a change from loss of organizational autonomy (Krug, Wright, &

Kroll, 2014). Typically, the acquiring company’s leaders respond to the demands of

acquired company’s leaders for organizational autonomy by setting wrong expectations

(Krug et al., 2014). However, these wrong expectations often miscarry and pave the way

to upheaval in the organization resulting in unrealized synergies (Haspeslagh & Jemison,

1991).

The various types of strategic capability transfers are resource sharing, functional

skill transfer, and general management skill transfer (Haspeslagh & Jemison, 1991).

Resource sharing involves creating economies of scale by combining and rationalizing

assets from both the companies (acquirer and acquired), resulting in lowering the

operating costs (Tanriverdi & Bülent Uysal, 2015). One of the primary reasons behind the

acquisition of Charles Schwab by Bank of America was to cross-sell each companies’

products into the other's markets by leveraging each other’s market distribution channels

(Haspeslagh & Jemison, 1991). To achieve economies of scale, companies (acquirer and

acquired) must work together to identify and remove duplicate assets and capabilities

(Tanriverdi & Bülent Uysal, 2015).

The transfer of functional skills involves bringing in functional skills (strategic

capabilities) from the acquired company (Haspeslagh & Jemison, 1991). For example,

transfer of advanced manufacturing expertise in the merger of two manufacturing

companies, transfer of comprehensive knowledge of a distribution channel in the merger

of two consumer goods companies (Haspeslagh & Jemison, 1991). Functional skills are

deeply rooted in individuals and not in assets (Ahammad, Tarba, Liu, & Glaister, 2016;

Haspeslagh & Jemison, 1991). Emulating the functional skills of an individual is a

difficult task (Ahammad et al., 2016; Haspeslagh & Jemison, 1991). An individual

develops these functional skills over time (Haspeslagh & Jemison, 1991). The

nonreplicability of the functional skills can be a competitive differentiator for the acquirer

(Brueller et al., 2014; Weber & Tarba, 2014). Leaders can address the challenge of

nonreplicability by transferring individuals with particular functional skills across

organizational boundaries to facilitate knowledge sharing (Haspeslagh & Jemison, 1991;

Junni, Sarala, Tarba, & Weber, 2015).

General management skill transfer involves the transfer of strategic capabilities

from one company to another (acquirer to acquired or vice versa) with the intent to

increase the value and competitiveness of a company (Haspeslagh & Jemison, 1991).

These strategic capabilities can range from corporate strategy, strategic planning,

financial planning, human resources (HR), research and development (R&D), innovation,

product design, analytics, or logistics management (Haspeslagh & Jemison, 1991).

According to Haspeslagh and Jemison, transferring general management skills is

comparatively easier than transferring functional skills. General management skills

transfer primarily involves vertical interactions at the general management level between

the acquirer and acquired companies (Haspeslagh & Jemison, 1991). While the functional

transfer of skills involves horizontal interactions among the operational managers

between the acquirer and acquired companies (Haspeslagh & Jemison, 1991). Contrary to

general management skills transfer, operational managers involved in functional skills

transfer often lack the interest and motivation to participate in the learning due to the

nonexistence of direct hierarchical relationship (Haspeslagh & Jemison, 1991).

Haspeslagh and Jemison (1991) proposed four different integration approaches

applicable to multiple contexts. The first approach is preservation, an integration

approach that is pursued by the acquirer when there is a high need for organizational

autonomy and a low need for strategic interdependence between the combining

companies (acquirer and acquired). Acquirers preserve the value of the acquired

companies’ strategic capabilities by granting the acquired companies high levels of

autonomy and only integrate areas where strategic interdependence is needed, typically

financial and risk sharing (Haspeslagh & Jemison, 1991). In this strategy, the acquired

company’s strategic capabilities are kept intact and protected from being depreciated.

Haspeslagh and Jemison used the metaphor of “nurturing” (p. 209) to describe the value

creation that occurs using this approach. In reality, when there is a high need for

organizational autonomy and low need for strategic interdependence, this strategy is

difficult to achieve at the fullest (Haspeslagh & Jemison, 1991).

The second approach is absorption, an integration approach that is pursued by the

acquirer when there is a high need for strategic interdependence and a low need for

organizational autonomy between the combining companies, acquirer and acquired

(Haspeslagh & Jemison, 1991). Absorption integration approach entails full consolidation

of operations, organization, and culture of both companies. The primary intent behind

using absorption strategy is to ultimately disband the boundaries between the two

companies (Haspeslagh & Jemison, 1991). Eliminating all the differences between the

two companies may take an extended period. The key integration issue faced by the

leaders is to determine the speed of integration rather than the extent of integration.

According to Haspeslagh and Jemison (1991), unification in management along with

successful culture integration plays a key role in bringing about the strategic

interdependence of the two companies (acquirer and acquired).

Puranam and Srikanth (2007) conducted a quantitative case study that focused on

the acquisition efforts of large established U.S. manufacturing companies connected to

computing, communications, and pharmaceuticals in attempts to gain access to

technology from small high technology-based acquisitions. The sample size consisted of

97 small high technology-based acquisitions (firms with fewer than 500 employees) by

43 large acquirers between 1988 and 1998. For acquirers to leverage technology

acquisitions, Puranam and Srikanth proposed “two archetypes” (p. 2) of postacquisition

integration: structural integration and structural separation. In structural integration, the

acquirer is typically interested in leveraging the knowledge and experience of the

acquired company, whereas, in structural separation, the acquirer is typically interested in

learning how the acquired company performs specific tasks by relying on the acquired

company’s innovative capabilities (Puranam & Srikanth, 2007). The strategic intent

behind the acquisition is the primary driving factor in leaders’ choice of a specific

archetype as proposed by Puranam and Srikanth. According to Wubben et al. (2016),

realization of innovation synergies is likely to transpire when there is a high degree of

technology relatedness between the two companies (acquirer and acquired). Haspeslagh

and Jemison’s (1991) absorption and preservation integration strategies align with the

“two archetypes” (p. 2) proposed by Puranam and Srikanth.

The third approach is symbiosis, an integration approach that is pursued by the

acquirer when there is a high need for both strategic interdependence and organizational

autonomy between the combining companies, acquirer and the acquired (Haspeslagh &

Jemison, 1991). According to Haspeslagh and Jemison (1991), this integration approach

presents most complex managerial challenges. In symbiosis acquisitions, two companies

(acquirer and acquired) coexist for a period of time and then start to gain strategic

interdependence (Haspeslagh & Jemison, 1991). Leaders play a vital role in balancing the

identity and character of the acquired company during the period of coexistence

(Haspeslagh & Jemison, 1991). Mutual dependency develops and gradually helps with

the cross-transfer of strategic capabilities and resources while maintaining the autonomy

of the two companies, acquirer and the acquired (Haspeslagh & Jemison, 1991).

Ellis and Lamont (2004) conducted a study to identify the integration strategies

relevant for related acquisitions. Ellis and Lamont’s study provided ample evidence and

supported Haspelagh and Jemison’s three integration strategies (preservation, symbiosis,

and absorption). They identified a transformation strategy as a subset of Haspeslagh and

Jemison’s symbiosis integration strategy. Although the symbiosis integration approach

accounts for some degree of changes for both companies (acquirer and acquired), in

certain cases, the integration process may entail major changes to the organizational

culture and operating practices of the acquirer and the acquired companies (Ellis &

Lamont, 2004). The term transformation strategy refers to such cases, where both

companies (acquirer and acquired) undergo a major business transformation as part of the

postacquisition integration process (Ellis & Lamont, 2004).

The fourth approach is holding, an integration approach that is pursued by the

acquirer when there is a low need for strategic interdependence and organizational

autonomy between the combining companies, acquirer and acquired (Haspeslagh &

Jemison, 1991). In this case, the acquirer has no intention to integrate, and no need for

strategic capability transfer (Haspeslagh & Jemison, 1991). The value creation is

achieved strictly through financial transfers, risk-sharing, and general management. An

acquirers’ use of a holding integration approach is a rare occurrence (Haspeslagh &

Jemison, 1991).

The nature and characteristics of healthcare payers’ strategic acquisitions require

leaders to consider either the preservation or the symbiosis integration approach. Both

integration approaches allow the acquired company to create value and realize synergies

through the transfer of strategic capabilities. However, they also pose unique challenges

during the IT integration phase. Despite such challenges, the postacquisition IT

integration phase of strategic acquisition presents leaders in healthcare payer

organizations with copious process and product innovation opportunities that are key to

synergy realization.

Figure 1. Acquisition integrated approach model. Reprinted from Managing

Acquisitions–Creating Value Through Corporate Renewal (p. 145), by P. Haspeslagh and

Reprinted with permission.

The capacity of the acquirer to effectively integrate the acquired company’s

strategic capabilities, people, and practices during the postacquisition integration phase

can help create a sustainable competitive advantage (Haspeslagh & Jemison, 1991).

Weber and Tarba (2010) built upon Haspeslagh and Jemison’s original insight and

developed a theoretical understanding of the role of HR practices in the knowledge

creation process. The new theory developed by Weber and Tarba was intended to address

the chaotic and unpredictable integration process, that is often branded HR problems.

Weber and Tarba stated that during the integration process, individuals from both

companies (acquirer and acquired) must cooperate and collaborate to transfer the

resources and capabilities. The success of the postacquisition integration phase is

determined by the leader’s ability to resolve conflicts that arise due to differences in

cultural values, ineffective communication, employee resistance, and employee and

executive turnover (Angwin & Meadows, 2009; Caiazza & Volpe, 2015). Weber and

Tarba argued that extant M&A literature failed to consider acquirers’ HR practices to

explain how acquirers can improve M&A performance and their understanding of the

ways in which postacquisition integration should be managed. Weber and Tarba

suggested that acquirers could improve M&A performance during the postacquisition

integration phase by employing good HR practices. The findings from the study

conducted by Weber and Tarba on Israeli M&A’s suggested that changes in acquirers’

HR practices, such as training methods, communication, and increased autonomy of HR

managers could positively impact M&A performance (see Figure 2).

Figure 2. Interaction effects of HR practices on M&A performance. Adapted from

“Human Resource Practices and Performance of Mergers and Acquisitions in Israel,” by

Y. Weber, S. Y. Tarba, 2010, Human Resource Management Review, 20(3), p. 203–211.

Angwin and Meadows (2009) stated that academics and practitioners have a

different sentiments concerning retention of top executives from the acquired or merged

companies. Angwin and Meadow addressed the gap in the M&A literature by examining

the link between the types of top executives (insider and outsider) and postacquisition

integration strategies proposed by Haspeslagh and Jemison (1991). The two overarching

research questions that were examined by Angwin and Meadows were (a) whether there

was an association between the nature of a top executive and their retention and (b) what

was the influence of postacquisition integration strategy on retention of a top executive.

An insider is a type of top executive who is from the acquired company. An

outsider is a type of top executive who does not belong to the acquired company.

According to Angwin and Meadows (2009), Haspeslagh and Jemison’s (1991)

postacquisition integration framework identifies various organizational change

implications using two key dimensions: strategic interdependence and organizational

autonomy. Angwin and Meadows’s study included a sample dataset of 232 acquisition

cases from the U.K. A mixed methodology (quantitative surveys and qualitative

interviews) was used to collect and analyze the data.

The findings from Angwin and Meadows’s (2009) study suggested that insiders

are preferred when the objective of the acquisition is value capture versus value creation

(low strategic interdependence). Insiders can readily contribute because of their intimate

subject knowledge, as well as the ability to manage change effectively; consequently,

improving the overall organizational performance (Angwin & Meadows, 2009). Their

findings also suggested that outsiders are preferred when the objective of the acquisition

is value creation versus value capture (high strategic interdependence). Outsiders can

offer fresh alternative perspectives, challenge the status quo, and work across

organizational boundaries (Angwin & Meadows, 2009). Angwin and Meadows also

stated that insiders are preferred when the objective of the acquisition is to maintain

acquired company’s strategic capabilities (high organizational autonomy). However, their

findings failed to provide clarity on the top executive balance in cases of low

organizational autonomy.

Angwin and Meadow’s (2009) findings also suggested the different roles insiders

and outsiders play in postacquisition integration strategies as proposed by Haspeslagh and

Jemison (1991). In preservation acquisitions (maintain the value of the acquired strategic

capabilities from being diminished), the distinct skills possessed by the insiders set them

apart from the acquiring leaders. Hence, insiders are preferred. In absorption acquisitions

(full consolidation of acquired company’s strategic capabilities with the acquirer),

outsiders play a critical role in realizing acquisition synergies through the consolidation

of shared capabilities. Hence, outsiders are preferred. In symbiosis acquisitions (acquirer

and acquired companies coexist for a certain duration), insiders provide value in the early

stages of the acquisition. Upon capturing the value from the acquired company’s strategic

capabilities, insiders are replaced by outsiders to create value from the acquired strategic

capabilities. In holding acquisitions (value creation is achieved strictly through financial

transfers, risk-sharing, and general management), insiders play an active role in achieving

organizational performance by providing subject knowledge, effectively manage change,

and building relationships through their social networks. Hence, insiders are preferred.

The author’s findings shed light on the role the type of top executives (insider or outsider)

have when implementing postacquisition integration strategies proposed by Haspeslagh

and Jemison.

Zaheer et al. (2013) stated that determining the appropriate level of integration is

key to synergy realization from acquisitions. Wei and Clegg (2014) stated that strategic

resources share two basic features, similarity and complementarity. Similarities of

strategic resources between the acquirer and acquired companies results in synergies

gained from economies of scale (Haspeslagh & Jemison, 1991; Wei & Clegg, 2014).

According to Wei and Clegg, the similarity is associated with high-value creation and

positive organizational performance due to a high degree of business relatedness between

the acquirer and acquired. Complementarity, on the other hand, involves filling resource

gaps and creating strategic value for acquiring companies (Haspeslagh & Jemison, 1991;

Wei & Clegg, 2014). Similarity and complementarity of the strategic resources possessed

by the acquirer and acquired have a major influence on the integration approach (Wei &

Clegg, 2014). Zaheer et al.’s sample dataset included survey data from 86 acquisitions.

The findings from Zaheer et al.’s study suggested that when high levels of similarity exist

between the two companies (acquirer and acquired), there is a need for a high degree of

postacquisition integration and a low degree of autonomy granted to the acquired

company. The findings from Zaheer et al.’s study also suggested that when high levels of

complementarity exist between the two companies (acquirer and acquired), there is a

need for a high degree of postacquisition integration and a high autonomy granted to the

acquired company (see Figure 3). Zaheer et al. acknowledged that high integration might

inhibit to grant acquirer autonomy, which in turn may constrain the ability to consolidate

the companies (acquirer and acquired) and realize synergies.

Figure 3. Taxonomy of implementation strategy based on relatedness in mergers and

acquisitions. Adapted from “Synergy Sources, Target Autonomy, and Integration in

Acquisitions,” by A. Zaheer, X. Castaner, and D. Souder, 2013, Journal of Management,

Wei and Clegg (2014) explored the integration approaches for international

acquisitions in the medical technology (MT) industry. Wei and Clegg used the

resourcebased view (RBV) as a theoretical approach in exploring the integration

approach of international acquisitions. The RBV is a strategic approach to attaining

competitive advantage of a company by bundling strategic resources and capabilities

(Wei & Clegg,

2014). According to Wei and Clegg, decomposing the strategic resources and capabilities

(primary drivers behind most acquisitions) enables us to understand their role and

influence on the integration approaches. Wei and Clegg’s study included six in-depth

case studies using a sample dataset of MT industry acquisitions that occurred from July

2011 to June 2012. Wei and Clegg stated that Haspeslagh and Jemison (1991) failed to

reveal the conditions for choosing each of the integration approaches or combined

approaches in certain situations (preservation, absorption, symbiosis, and holding). Wei

and Clegg’s study filled a gap in the literature by revealing the conditions for choosing a

specific integration approach. The integration strategies employed by the leaders of

healthcare payer organizations during the postacquisition integration phase have a

profound impact on the healthcare payers’ ability to achieve the intended synergies of

their strategic acquisitions (Haspeslagh & Jemison, 1991). The strategic intent behind the

acquisition typically drives the leaders' postacquisition integration choices (Haspeslagh &

Jemison, 1991).

Wei and Clegg (2014) developed four integration approaches. The first approach

is capability maintenance, an integration approach that is pursued by the acquirer when

the objective of the integration is to preserve acquired company’s strategic resources that

can increase production capabilities. The second approach is capability building, an

integration approach that is pursued by the acquirer when acquired company’s strategic

resources are complementary to the acquirers. The third approach is product focus, an

integration approach that is pursued by the acquirer when the objective of the integration

is to eliminate duplicate strategic resources and to achieve economies of scale. The fourth

approach is R&D focus, an integration approach that is pursued by the acquirer when the

objective of the integration is to reduce the business of the acquired company into a cost

center by only retaining the R&D.

Strategic alignment. Angwin, Paroutis, and Connell (2015) studied why

companies (i.e., acquirers) reject favorable M&A opportunities. They examined

companies that failed to pursue potentially major opportunities as part of their strategic

renewal process. Angwin et al. reviewed 28 cases of reversed mergers and acquisitions’

decisions across three continents. According to Angwin et al., companies’ leaders lack

the understanding of why acquirers chose not to advance to the negotiation phase with

some prospective M&A candidates (i.e., targets) even though those targets satisfy

essential strategic and financial criteria. Angwin et al. coined the term authorization

routine and defined it as a period between satisfactory diligence and formal engagement

in negotiations. This routine plays a prominent role in M&As as the authorized committee

from the acquirer seeks permission from its board of directors to engage in formal

acquisition negotiations with the target. The focus of Angwin et al.’s study was to address

two primary issues of the preacquisition decision-making process: (a) the role of

authorization routine in pursuing attractive targets and (b) the reasons for and

identification of individuals who may interrupt the authorization routine from proceeding

with the negotiation of targets. The findings from their study show that strategic

disconnect is one of the key reasons for disruptions during the authorization routine.

Therefore, a strategic disconnect is key to the enactment of the authorization routine

(Gomes et al., 2013). Despite having a well-informed leadership about their corporate

M&A strategy and a good strategic planning process, it is difficult to ensure decisions

made during the pre and post M&A process are consistent with the corporate M&A

strategy. The integration leaders should strive to minimize the extent of strategic

disconnect throughout the M&A process.

Baker and Niederman (2014) conducted an exploratory, positivist study using

multiple case design to examine the impact of business and IT strategic alignment during

the M&A process. Baker and Niederman’s study was grounded in alignment theory. They

hypothesized that acquirers and targets could successfully integrate if both companies

align their business-IT strategies. Baker and Niederman used two integration models to

explain the business and IT integration strategies. First was the M&A integration model,

developed by Haspeslagh and Jemison (1991), that consisted of the four integration

approaches of preservation, absorption, symbiosis, and holding. The second was the IT

integration model, developed by Henderson and Venkatraman (1992) that consisted of the

four IT integration strategies of transformation, consolidation, combination, and

coexistence. Further, they proposed that transformation IT integration strategy best suits

M&A when the objective is not to consolidate existing IT systems but, rather, to create

entirely new information systems (IS) that align with the business strategy of the

combined entity (Baker & Niederman, 2014). Consolidation IT integration strategy is

best suited when the objective is to eliminate the target company’s IT systems and expand

the acquirer’s IT systems to meet the needs of the combined entity (Baker & Niederman,

2014). Combination IT integration strategy is best suited when the objective is to use the

best-in-class IT systems from both the companies (acquirer and acquired) (Baker &

Niederman, 2014). Coexistence IT integration strategy best suited when the objective is

to leave the IT systems intact from both the companies, acquirer and acquired (Baker &

Niederman, 2014).

Baker and Niederman (2014) studied 22 cases of which 14 had strategic business

and IT alignment. Seven of these 14 cases fell into the reinventing business model

(RBM), which means the cases fit Haspeslagh and Jemison’s symbiosis integration

strategy. The remaining seven fell into the leverage business model, which means they fit

the absorption IT integration strategy. None of the cases qualified for the conglomeration

model, which means none fit the preservation IT integration strategy. The findings of

Baker and Niederman’s study showed that successful company M&A integration

included a mix of both strategically aligned and nonaligned IT integration strategies. The

strategic nonalignment of IT integration strategy occurred due to the exclusion of IT in

the due diligence phase, which created a gap in IT’s understanding of the acquired

ITassets. In successful M&A integrations, tight strategic alignment between business and

IT integration strategy helped mitigate system integration challenges.

Bauer, Hautz, and Matzler (2015) conducted a quantitative study to understand the

challenges that arise during the postacquisition integration phase. They spent 4 years

studying M&A projects and integration processes of more than 400 companies in the

German-speaking part of central Europe (Bauer et al., 2015). Data collected from surveys

and interviews provided deep insights into the integration challenges. Bauer et al. stated

that the strategic intent behind the acquisition should be the primary driver of the

postacquisition integration approach, which is consistent with the recommendation

provided by Baker and Niederman (2014). Bauer et al. suggested that the commonly

accepted postacquisition integration approaches fail to consider the interdependencies

between the two organizations (acquirer and acquired). According to Bauer et al., many

integration leaders rely on their prior experiences and painstakingly develop integration

approaches that foster speed and depth of integration. However, results from the Bauer et

al. study revealed that leaders often fail to create M&A value when they adhere to

established integration approaches and common integration myths.

Postacquisition integration phase. The last phase of the acquisition process, the

integration phase, is the most critical, complex, and challenging (Chang et al., 2014).

Success in this phase enables the acquiring organization to accomplish the objective of

the acquisition (Capron, 2016). However, the magnitude of change is highest and its

challenges most prevalent in this phase, in which the acquired organization faces

monumental changes to its vision, business strategy and objectives, operational processes,

IT systems, and company culture (Weber & Tarba, 2013). The integration phase consists

of various interdependent activities spanning different business areas within the two

organizations, acquirer and acquired (Lee, Kim, Kim, Kwon, & Cho, 2013). The

collaboration of these two organizations on the issues brought about by their joining

creates an unstable environment (Lee et al., 2013). Yet this is the phase most influential

for the outcome of an acquisition. Despite the importance of this phase and the risks

involved in overlooking it, the postacquisition integration phase is one of the leaststudied

subjects of the acquisition process (Angwin & Meadows, 2015).

Because the IT integration phase impacts the outcome of an acquisition, it also

impacts the acquirer’s performance (Ertugrul, 2013; Lahiri & Narayanan, 2013).

Therefore, the acquirers’ leaders need to (a) communicate to the integration team and

other employees involved in the process what their vision for the acquisition is, (b) help

them understand their role, and (c) ensure that the employees feel part of an enterprise in

which much is at stake (Buiter & Harris, 2013; Lahiri & Narayanan, 2013). Angwin and

Meadows (2015) and Weber and Tarba (2013) found employee resistance to be high

during the necessary acculturation of the postacquisition integration phase. Therefore,

sociocultural integration plays a key role in the outcome of an acquisition (Weber &

Tarba, 2013; Yildiz, 2014).

Tanriverdi and Bülent Uysal (2015) suggested a five-dimension IT integration

framework for companies that, like this study’s chosen company, have high crossbusiness

IT integration capabilities. The five dimensions of IT integration that such acquirers must

achieve with their acquired companies are (a) infrastructure, (b) applications and data, (c)

human resource management, (d) vendor management, and (e) strategy. The synergy

necessary for the two companies to become one stems from the integration of these five

dimensions (Tanriverdi & Bülent Uysal, 2015). The integration teams can improve

efficiencies, competitive advantage, and performance through developing and embracing

innovative strategy solution (Tanriverdi & Bülent Uysal, 2015).

According to Lohrke et al. (2016), the outcome of integration depends on the

decisions made regarding the differences in culture, IT systems, and processes between

the two organizations. Lohrke et al. studied the causal link between these integration

decisions and their performance outcomes. The lack of clarity regarding this relationship

results in what the researchers termed intrafirm linkage ambiguity. Lohrke et al.

examined the idea that intermediate goals can serve as a mechanism to reduce the

ambiguity. In their quantitative study, Lohrke et al. analyzed a sample set of 129

horizontal acquisitions (i.e., those sought for increasing market share); the researchers

found that the achievement of two intermediate goals—(a) internal reorganization and (b)

market expansion—mediated the relationship between integration decisions and the

desired acquisition performance. Regarding the first goal, they found that the greater the

extent of structural and cultural integration (integration depth) and speed with which key

IT systems are integrated (integration speed), the greater the internal reorganization. The

second intermediate goal, market expansion, depends on retaining senior management

and existing customers (Lohrke et al., 2016). Together, these goals help define a strong IT

integration strategy (Lohrke et al., 2016).

Meticulous planning, along with adequate leadership support, is necessary for

success in the critical postacquisition phase (Rogan & Sorenson, 2014). The speed of

postacquisition IT integration depends on the acquirer’s M&A objectives and the

acquired organization’s characteristics (Bauer & Matzler, 2014). If the primary objective

of the acquisition is to gain competitive advantage, then the acquirer would be under

pressure to integrate speedily with the acquired organization (Bauer & Matzler, 2014).

Gomes et al. (2013) stated that the acquisition failure rate is consistently high

despite due diligence conducted by acquirers during the preacquisition process. One

reason for postacquisition failure can be that acquirers’ leaders harbor the delusion that

everything would fall into place once they settle the financial issues (Gomes et al., 2013).

Gomes et al. emphasized that, to be successful, acquirers should cultivate innovative

ways to address postacquisition integration. Leaders cannot predict organizations’

behavior and, therefore, cannot design or control every detail in advance of an M&A

integration (Angwin & Meadows, 2015). Therefore, meticulous planning plays a

significant role as it enables the leaders to create a comprehensive plan for achieving both

short-term synergies (financial) and long-term synergies (operational and strategic)

essential in creating sustained value for the customers and stakeholders.

Alaranta and Mathiassen (2014) suggested that the postmerger IT integration

process is often complex, chaotic, and painful. Integration leaders can increase the

success rate of mergers by adopting risk frameworks because these frameworks bring a

common understanding of the risks among the stakeholders (Alaranta & Mathiassen,

2014). These frameworks also assist integration leaders address potential causes of

failures and provide potential actions. Alaranta and Mathiassen’s study on managing risks

was grounded in empirical observation of postmerger IT integration cases and was

informed by the theory of postmerger IT integration. They identified key risks associated

with 17 postmerger integration cases published in scholarly journals and proposed proper

mitigation strategies. They identified the three key risks in postmerger integration as

process, content, and context. The process risks (i.e., how) occur primarily during the

planning, particularly during the consolidation and transition of multiple disparate

systems and stakeholder interaction (Alaranta & Mathiassen, 2014). Resource shortfall

and process drift are only two examples of process risks (Alaranta & Mathiassen, 2014).

The content risks (i.e., what) occur primarily due to leadership bias and lack of strategic

view around the configuration of the newly integrated information systems. The context

risks (i.e., where) occur primarily during execution and arise due to conflicts between the

stakeholders, culture mismatches, and lack of consensus on IT systems and practices

(Alaranta & Mathiassen, 2014). Alaranta and Mathiassen proposed five risk mitigation

strategies that they distilled from the existing theory of managing risks in a complex

technology-related change process. These five-risk mitigation strategies are adjusting

goals, modifying approach, mobilizing stakeholders, increasing knowledge, and

reorganizing processes (Alaranta & Mathiassen, 2014).

Lu’s (2014) study filled a gap in the M&A literature regarding postacquisition IT

integration by conducting a case study of the postacquisition IT integration process

between HSBC and Mercantile Bank (1959–1984). Lu explored the impact of

institutional environment and organizational transformation on the speed of integration.

Lu found that institutional environment and organizational transformation have a

significant impact on the speed and nature of the integration, through influencing the best

integration approach for value creation. Lu also found that human integration and task

integration in the banking sector might not occur at the same speed. According to Lu,

government’s regulation and policy changes have a direct influence on task integration,

which is outside of acquirer's control. Lu emphasized the key role effective

intercommunication channels in reducing integration resistance between the two

companies (acquirer and acquired).

Uzelac, Bauer, Matzler, and Waschak’s (2016) study filled a gap in the extant

M&A research by enhancing the factors that contribute to the M&A performance. Uzelac

et al. sample data consisted of 99 M&A transactions from the German-speaking part of

Europe (2007–2010). They examined the various effects of human and task integration on

the intended M&A performance. Uzelac et al. found that speed of human and task

integration had a varied impact on the M&A performance. Uzelac et al. suggested that

quick human integration has a positive effect on the M&A performance, while fast task

integration can result in less than desirable M&A performance. Uzelac et al. also found

that individual decision-making styles had a varied impact on the human and task

integration. Uzelac et al. suggested that intuitive decision-making has a positive

moderating effect on task integration speed, while deliberate decision-making has a

positive moderating effect on human integration speed. The findings from Lu’s (2014)

and Uzelac et al.’s study emphasize the critical role of task integration in value creation, a

concept that aligns and echoes strongly with strategic interdependence (transfer of

strategic capabilities and resources between the two companies) of Haspeslagh and

Jemison’s (1991) postacquisition integration framework.

Limitations of Haspeslagh and Jemison’s postacquisition integration

framework. According to Angwin and Meadows (2015), Haspeslagh and Jemison’s

(1991) acquisition integration approach model is one of the prominent models and had

been cited 1703 times as of May 2014. Angwin and Meadows discussed some of the

limitations with Haspeslagh and Jemison’s integration framework. RBV (strategic

approach to attaining competitive advantage of a company by bundling strategic

resources and capabilities) is foundational to Haspeslagh and Jemison’s integration

framework (Angwin & Meadows, 2015; Wei & Clegg, 2014). The reliance on the RBV

poses a limitation as strategic capability transfer between the two companies (acquirer

and acquired) may not always be the strategic intent behind the acquisition (Angwin &

Meadows, 2015). As a result, Haspeslagh and Jemison may have ignored other potential

integration styles (Angwin & Meadows, 2015). Angwin and Meadows stated that

Haspeslagh and Jemison’s integration framework focused on related acquisitions (driven

by value creation strategy) and failed to examine the unrelated acquisitions (not driven by

value creation strategy). Angwin and Meadows suggested that acquirers might acquire

target companies to capture value rather than create it as proposed by Haspeslagh and

Jemison. Another limitation raised by Angwin and Meadows is the lack of consideration

to the predeal conditions between the two companies (acquirer and acquired). Angwin

and Meadows stated that the target company’s financial health has a direct impact on the

postacquisition performance. Angwin and Meadows stated that the target company’s

financial health has a direct impact on the postacquisition integration style and

performance. According to Angwin and Meadows, in circumstances where target

company’s financial health is poor, acquirers may be required to make direct investments

into improving organizational infrastructure, including structural and functional changes

to senior management. Angwin and Meadows stated that although the integration

approach proposed by Zaheer et al. (2013) takes into consideration the predeal conditions

between the two companies (acquirer and acquired), it also limits itself to value creation

acquisitions (related acquisitions) and fails to consider other types of M&As.

Synthesis of Haspeslagh and Jemison’s postacquisition integration

framework. According to Haspeslagh and Jemison (1991), “Acquisitions have a unique

potential to transform firms and to contribute to corporate renewal” (p. 3). Having a

thorough understanding of the acquisition process helps to effectively manage the

acquisition strategy. Complete value creation occurs during the post-deal (i.e., within the

integration phase). As a result, having an effective postacquisition integration process is

critical to value creation and realization of synergies through the transfer of strategic

capabilities. Leaders should carefully balance the need for strategic interdependence

between the two companies (acquirer and acquired) and organizational autonomy to

transfer and preserve the strategic capabilities.

The success of an integration approach is determined by how well the interactions

between the two companies (acquirers and acquired) are managed. Integration plans

should be prescriptive rather than restrictive to realize value creation. Integration leaders

should not treat all acquisitions alike. Rather they should acknowledge and be conscious

of the nuances of each company. It is important for all the integration leaders to capture

their learning’s by reflecting on their acquisition integration experiences. The strategic

intent behind the acquisitions drives the choice of integration approach. The type of

integration approach has a profound influence on the speed of the integration and degree

of business change. Leaders should put effective strategies in place to manage the

challenges and maximize the opportunities presented in this critical phase, a key

component to synergy realization (Garzella & Fiorentino, 2015).

Other Postacquisition Integration Typologies

Acculturation. Cartwright and Cooper (1992), Nahavandi and Malekzadeh

(1988), and Siehl and Smith (1990) developed integration typologies to understand the

role and influence of culture in the postacquisition integration phase. Mirvis and Marks’s

(1992) typology focused on managing the psychological impact of M&A. Nahavandi and

Malekzadeh (1988) derived their typology based on the concept developed by Berry

(1983) concerning employee conflict management, and alignment of organizational

cultures between the two companies (acquirer and acquired) during the postacquisition

integration phase. The four acculturation strategies defined by Nahavandi and

Malekzadeh are (a) separation (acquirer preserves the acquired company’s culture and

organizational practices by keeping it independent and autonomous); (b) assimilation

(acquired company willingly embraces the identity, cultural norms, organizational

practices, and IT systems of the acquirer); (c) integration (acquired company’s employees

try to preserve their unique cultural norms, beliefs, and organizational practices.

However, they are eager to get integrated into the acquirer’s organization); and (d)

deculturation (involves losing cultural and psychological contact between the acquirer

and acquired). The strength of this typology is that it examines the level of acculturative

stress experienced by employees in both companies (acquirer and acquired) during the

integration phase (Angwin & Meadows, 2015). The weaknesses of this typology are as

follows: (a) assumption of acculturative stress negatively impacts M&A integration

performance, (b) methods to create and capture value are ignored, (c) fails to account for

the impact of structural and functional changes within the two companies (acquirer and

acquired), and (d) relies on an outdated copy of organizational cultural data taken at the

beginning of the integration phase (Angwin & Meadows, 2015).

Organizational culture. Siehl and Smith (1990) explored the interpersonal

relations and conflicts among the employees of the two companies (acquirer and

acquired). The four integration strategies defined by Siehl and Smith are (a) pillage and

plunder or asset stripping (retain the valuable assets of the acquired company and dispose

of the nonvaluable assets); (b) one night stand (relationship between the two companies

(acquirer and acquired) is driven purely from a financial perspective with limited focus

on integration); (c) courtship/just friends (acquirer strives to establish a steady working

environment while preserving operational and cultural differences between the acquirer

and acquired); and (d) love and marriage (deep integration of the two companies

(acquirer and acquired) with an aim to create new and stronger entity). One of the

strengths of this typology is its reliance on the key attribute of M&A, the concept of

autonomy regarding decision-making (Angwin & Meadows, 2015). The other strength is

its focus on the two key qualities of integration, emotional and moral (Angwin &

Meadows, 2015). The typology also highlights the significance of senior management

retention and the prominent role they play during the postacquisition integration phase

(Angwin & Meadows, 2015). The weaknesses of this typology are as follows: lack of

clarity about (a) how value is created, captured, or destroyed; (b) the impact of structural

and functional changes within the two companies (acquirer and acquired); and (c) the

typology dimensions (Angwin & Meadows, 2015).

Mirvis and Marks (1992) conceptualized five different postacquisition integration

strategies by comparing and contrasting the cultural and operations changes experienced

by the two companies (acquirer and acquired). The five integration strategies defined by

Mirvis and Marks are (a) preservation (retain acquired company’s culture by performing

minimal integration), (b) absorption (integrate acquired company’s organization and

culture into the acquirer), (c) transformation (acquirer and the acquired undergo

fundamental changes to their culture and operations in the spirit of reinventing a new

entity), (d) reverse takeover (an exceptional case where the acquirer let’s the acquired

company take the lead on postacquisition integration strategy and execution), and (e) best

of both (a case where acquirer and acquired companies are of equal stature and possess

similar capabilities with complete cultural integration and partial to complete

organizational consolidation). The strengths of this typology are its appreciation for the

cultural diversity between the two companies (acquirer and acquired) during the

integration and the significance of senior management retention and the prominent role

they play during the postacquisition integration phase. The weaknesses of this typology

are as follows: (a) untested conceptual framework, (b) fails to account for the impact of

structural and functional changes within the two companies (acquirer and acquired), and

Comparing and contrasting postacquisition integration typologies. To

generate clues about the missing postacquisition integration strategies, Angwin and

Meadows (2015) compared the above mentioned as the leading postacquisition

integration typologies. Haspeslagh and Jemison’s absorption strategy is comparable to the

strategies identified by Mirvis and Marks’s (absorption), Nahavandi and

Malekzadeh's (assimilation), and Siehl and Smith’s (pillage and plunder). The common

objective of these strategies is to retain and transition the acquired company’s strategic

capabilities by the acquirer. Once the transition is complete, the acquired company loses

its identity and existence. Haspeslagh and Jemison’s preservation strategy is comparable

to the strategies identified by Mirvis and Marks’s (preservation), Nahavandi and

Malekzadeh’s (separation), and Siehl and Smith’s (courtship/just friends). The common

objective of these strategies is to sustain the culture and practices of the acquired

company by keeping it autonomous. Haspeslagh and Jemison’s symbiotic strategy is

comparable to the strategies identified by Mirvis and Marks’s (transformation),

Nahavandi and Malekzadeh’s (integration), and Siehl and Smith’s (love and marriage).

The common objective of these strategies is to allow the acquired company to retain its

core values, beliefs, cultural norms, and organizational practices. The two companies

(acquirer and acquired) work mutually together to develop an integration plan. Figure 4

illustrates the contrast between the typologies.

Coherence and differences between the postacquisition integration

typologies. The variation between the typologies happens in the fourth integration

strategy. Nahavandi and Malekzadeh’s deculturation strategy is comparable to the one

night stand strategy identified by Siehl and Smith (1990). The common objective of both

these strategies is the loss of cultural and psychological contact between the two

companies (acquirer and acquired). In the reverse takeover strategy proposed by Mirvis

and Marks, the acquired company takes the lead on postacquisition integration strategy

and execution. Zaheer et al. (2013) proposed an integration strategy but failed to offer

empirical evidence to explain the objective of the strategy. Angwin and Meadows (2015)

stated that there is a possibility for substrategies to exist within some of the categories.

For instance, in Haspeslagh and Jemison’s symbiotic strategy, both (acquirer and

acquired) work as coequal partners to achieve the common goals and objectives. Mirvis

and Marks’s best of both strategy is comparable to Nahavandi and Malekzadeh’s

integration strategy. Ellis and Lamont (2004) identified a transformation strategy as a

subset of Haspeslagh and Jemison’s symbiosis integration strategy. According to Ellis

and Lamont, the objective of the transformation strategy is to enable the two companies

(acquirer and acquired) to reinvent themselves. Figure 4 illustrates the coherence and

differences between the typologies. The boxes shaded in gray signify coherence between

the typologies. The box in white indicates an area within the typology that needs further

investigation, and the circle represents a subset of an integration strategy.

Figure 4. Coherence and differences between the postacquisition integration typologies.

Adapted from “New Integration Strategies for Post-Acquisition Management,” by D. N.

by Elsevier. Reprinted with permission.

Evolution of a new postacquisition integration framework. The postacquisition

integration phase is the most critical part of M&A and plays an essential role in value

creation (Angwin & Meadows, 2015). However, it is the least researched phase of M&A

(Angwin & Meadows, 2015). The primary focus of extant M&A literature is on various

motivations and strategies for pursuing M&A (Angwin & Meadows, 2015). According to

Angwin and Meadows (2015), research studies conducted by Haspeslagh and Jemison

(1991), Mirvis and Marks (1992), Nahavandi and Malekzadeh (1988), Siehl and Smith

(1990), and Zaheer et al. (2013) on postacquisition integration strategies remained merely

conceptual, or lacked enough data, or focused on a specific integration strategy. Angwin

and Meadows stated that the existing postacquisition integration typologies might have

little empirical support and are not comprehensive. As a result, they proposed

development of a robust postacquisition strategy typology. According to Angwin and

Meadows, findings from the recent M&A studies showed the nuances and complexities

that exist within the critical integration phase. Zaheer et al. stated that challenges and

complications in obtaining quality rich data might also have attributed to the limited

research on the integration phase.

Angwin and Meadows (2015) conducted a mixed method study to assess the

health, limitations, strengths, and weaknesses of some of the prominent postacquisition

strategy typologies. Angwin and Meadows asserted that most of the leading

postacquisition integration typologies fail to capture all the nuances. They also proposed

the possible existence of newer integration strategies that may not have been captured by

the existing typologies. Angwin and Meadows’s study included a sample dataset of 232

acquisition cases from the U.K. Angwin and Meadows chose Haspeslagh and Jemison’s

integration framework as their focus and analysis, primarily because of its prominence.

The data analysis conducted by Angwin and Meadows (2015) using several

cluster techniques resulted in the identification of five integration strategies. Three of the

five integration strategies (absorption, preservation, and symbiotic) are comparable to the

strategies identified in Haspeslagh and Jemison’s integration framework. As suggested by

Haspeslagh and Jemison, Angwin and Meadows’s data analysis also recognized the

existence of holding strategy. Angwin and Meadows stated that contrary to the holding

strategy as defined by Haspeslagh and Jemison, their data analysis showed that the

acquirers were highly engaged and played an active role in the restructuring efforts of the

acquired company. Angwin and Meadows stated that swift action by acquirers is critical

to reviving the acquirer company’s health. Their data also revealed that some acquirers

retained the acquired companies without selling them and in few cases, acquired

companies were integrated once their health condition improved. Angwin and Meadows

suggested that intensive care appropriately describes this type of integration compared to

the holding strategy proposed by Haspeslagh and Jemison.

Angwin and Meadow’s (2015) cluster analysis revealed a new integration

strategy, which was termed reorientation. Although reorientation strategy has some

similarities with absorption and intensive care, it is limited in scope, less directive and not

as far-reaching and widespread in comparison to absorption and intensive care (Angwin

& Meadows, 2015). Unlike preservation and symbiotic integration strategies, where

acquirer tries to shield the acquired by minimizing the impact of business change.

According to Angwin and Meadows, reorientation integration strategy proposes a rapid

harmonization of the key administrative functions (finance, human resources, and

communications) between the two companies (acquirer and acquired), including the

integration of outward facing business functions (marketing and sales). Angwin and

Meadows stated that the reorientation postacquisition integration strategy is particularly

beneficial when value capture and value creation, a concept proposed by Haspeslagh and

Jemison, needs to coexist during the postacquisition integration. The integration

framework proposed by Angwin and Meadows slightly alters the prominent

postacquisition integration framework by Haspeslagh and Jemison (see Figure 5). The

integration framework proposed by Angwin and Meadows captures and fully recognizes

perspectives of other frameworks, as well as addresses some of the gaps and limitations

with Haspeslagh and Jemison framework.

Figure 5. Five postacquisition integration strategies. Adapted from “New Integration

Strategies for Post-Acquisition Management,” by D. N. Angwin & M. Meadows, 2015,

permission.

M&A Trends and Methods

In this section, I will present findings from recent studies about (a) the chances of

success or failure with M&A, (b) the role of leadership in M&A performance, (c) the role

of trust in M&A, (d) the role of communication in M&A, (e) the role of culture in M&A,

(f) the role of knowledge transfer in M&A, (g) the relationship between M&A and

innovation, and (h) the role of individuals within M&A. Researchers have focused on

strategies for navigating the challenges of the postacquisition IT integration phase of

M&A. Most researchers, however, have failed to recognize the abundance of

opportunities that go unseen in this critical phase. The existing research provides few

recommendations for how companies can take advantage of those unseen opportunities.

My research study would fill the gap by establishing a link between the postacquisition IT

integration phase and those individuals with human capital specific to its requirements—

intrapreneurs. With this knowledge, companies should be better equipped to tackle the

challenges and realize the full potential of their M&A by engaging intrapreneurs in the

postacquisition integration phase.

Success and failure. The failure rate of corporate M&A is consistently high

(Brinckmann, Müller, & Rosenbusch, 2013; Himmelsbach & Saat, 2014). Whether

successful or not, M&A impacts acquirers’ financial stability and the economies of their

surrounding communities (Eaton & Kilby, 2015). According to Stahl et al. (2013),

existing research on M&A fails to identify the key factors for M&A success and or

failure. Managing M&A activity is not a trivial task (Stahl et al., 2013). Friedman et al.

(2016) found that there are as many reasons for M&A failure as there are potential

benefits to engaging in M&A. Acquirers should take into account the factors that could

derail their M&A objectives, including (a) difference in size between the two

organizations (acquirer and acquired); (b) strategies used to manage noncore

competencies; (c) inefficient strategies for integrating personnel; (d) lack of experience

with M&A; (e) improper alignment between the two organizations’ visions, values,

processes, and leadership styles; (f) lack of post-M&A integration strategy; (g)

inadequate due diligence, pre-M&A; (h) lack of leadership; and (i) urgency to maximize

shareholder value (Friedman et al., 2016).

Clayton (2010) provided a conceptual model that explained the relationship

among openness, shared vision, positive emotional attractor, and adaption to change (see

Figure 6). M&As create stress for the personnel of the acquirer and the acquired

companies because of the magnitude of changes that take place, especially in the

postM&A phase (Clayton, 2010). Clayton suggested that M&A actors’ openly

communicating and collaborating creates a positive emotional environment that allows

the company’s members to adapt to the changes caused by the M&A. Open

communication helps build trust between the M&A actors. Also, open communication

allows M&A actors not only to share their organization’s vision but also to lay plans to

realize it.

Figure 6. Conceptual model of individual level interactions within successful M&A.

Adapted from “Understanding the Unpredictable: Beyond Traditional Research on

Mergers and Acquisitions,” by B. C. Clayton, 2010, Emergence: Complexity and

Coping with change is one of the biggest and most difficult challenges acquired

organizations face (Kansal & Chandani, 2014). Clayton (2010) conducted a study to

identify the mystery behind the unpredictability of M&A outcomes. Clayton described

organizations in the postacquisition (and postmerger) integration phase as complex

adaptive systems; Clayton discussed the work of Stacey and colleagues (1995), who

studied the link between complexity theory and organizational research (see Figure 7).

Complexity theorists suggested that complex adaptive systems can display three

behaviors: (a) stable, or rigid, (b) unstable, or fragmented, and (c) both at the same time

(Stacey et al., as cited in Clayton, 2010). In the stable, or rigid behavior, M&A actors are

not flexible in their interactions, and the outcomes are predictable. In the unstable, or

fragmented behavior, M&A actors are flexible and open to change in the face of different

stimuli, creating a system that is unstable, fragmented, and unpredictable (see Figure 7).

The researchers called the third behavior (stable and unstable)—prevalent in the

postacquisition phase—by many names: bounded instability, edge of chaos, chaotic

interaction, and between order and disorder (Stacey et al., as cited in Clayton, 2010).

Organizations perform at the highest level with the third behavior (see Figure 8) because

M&A actors, displaying both behaviors, are brought together by shared purpose or vision

(positive emotional attractors) and can adapt with openness to the change stimuli brought

about by the collaboration (Clayton, 2010; Stacey, as cited in Clayton, 2010). Clayton

offered two suggestions for company leaders: (a) Acquirers should apply the same rigor

to the postacquisition phase as in the preacquisition phase and (b) Acquirers should

encourage and periodically assess their employees’ commitment to change.

Figure 7. Mergers and acquisitions as complex adaptive systems. Adapted from

“Understanding the Unpredictable: Beyond Traditional Research on Mergers and

Acquisitions,” by B. C. Clayton, 2010, Emergence: Complexity and Organization, 12, p.

Figure 8. Interaction between agents in their local environment. Adapted from

“Understanding the Unpredictable: Beyond Traditional Research on Mergers and

Acquisitions,” by B. C. Clayton, 2010, Emergence: Complexity and Organization, 12, p.

Leadership and performance. Effective leadership is key to M&A success

(Zhang et al., 2015). Vasilaki et al. (2016) ascertained a link between transformational

leadership and postmerger success. Even before the merger, leaders should give cultural

integration the same priority and assistance they give to financial aspects (Ovseiko,

Melham, Fowler, & Buchan, 2015). Also, leaders should provide clarity on the scope and

extent of integration—of people, of culture, and IT—during the post-M&A integration

phase (Krug et al., 2014). Aklamanu, Degbey, and Tarba (2016) stated that, in the

postM&A integration phase, human resource problems not only can impede collaboration

but can also dampen the potential synergy that otherwise would be attainable. Zhang et al.

(2015) studied the impact of various leadership styles on human resource problems,

specifically in the case of a Chinese company seeking to retain its talented employees.

These researchers selected a case study research design to study a cross-border

acquisition (CBA) conducted in China by a European company in 2008. The European

company relied on absorption strategy (proposed by Haspeslagh & Jemison, 1991), where

the target company adapts its culture, managerial system, and working style to that of the

acquirer. Zhang et al. conducted interviews with the senior executives responsible for the

acquisition at different stages of the acquisition. The findings from their study suggested

that authoritative coaching as well as task-focused, and relationship-focused leadership

styles are appropriate for accomplishing an effective postmerger integration. Lahiri and

Narayanan (2013) suggested different techniques that leaders can use to calculate

organizations’ performance, including event study methodology, accountingbased

measures, the residual-income approach, innovative performance, questionnaires, data

envelopment analysis, and a balanced scorecard approach.

Trust. According to Cording, Harrison, Hoskisson, and Jonsen (2014),

uncertainty and distrust are high during the postacquisition integration phase. Bansal

(2016) studied the role of trust in M&A activity and in the process, extended the existing

research on the sociocultural dynamics of M&A. Bansal acknowledged that building trust

is an incremental process and that leaders need to take appropriate measures to protect it

over time. The Cording et al. study highlighted the importance of organizational

authenticity (constancy between a company’s values and perceived practices) and its role

in gaining the employee trust and improving organizational performance during the

postM&A integration phase. Cording et al. further suggested the need for executives and

integration leaders to maintain constancy between what a company says and what it does

to gain employees’ trust during the post-M&A integration phase. Consistent with the

Cording et al. findings, Bansal’s study concluded that integration strategy has a profound

impact on the trust of the acquired organizations’ employees. The speed of integration,

effective communication strategy, and openness to cultural diversity are key factors with

which post-M&A integration strategy can help win the confidence and trust of acquired

organizations’ employees (Cording et al., 2014; Stahl et al., 2013).

Communication. Angwin, Mellahi, Gomes, and Peter (2014) focused on the role

of communication in African M&A performance. Despite consensus on the critical role

of communication in M&A performance, Angwin et al. found little research in Africa on

this pivotal concern when they examined the link between different communication

strategies and M&A outcomes. Their study was the first to examine the critical role of

communication strategies in African M&A, and their conclusions contributed to the

nascent literature in developing economy. Focusing on M&As that occurred in the

banking sector in Nigeria, Angwin et al. conducted a systematic empirical study to

evaluate the links between the various communication approaches and M&A outcomes.

They proposed a conceptual typology that classified the interactions between process and

content of communication strategies to the actual M&A outcomes, particularly employee

commitment towards the merged company strategy and M&A survival. Their findings

suggested that effective communication strategies should be flexible and expand

throughout the M&A process. Furthermore, these findings are in line with the findings of

the research conducted by Hajro (2015) that showed effective communication strategies

contribute to better employee commitment to the new organization and confirmed that

good communication has a positive effect on employee psychology and behavior.

Culture. Postacquisition cultural integration plays a critical role in determining

the success or failure of an M&A (Lee et al., 2013). M&A activity has surged between

emerging market acquirers and developing country targets (Bauer, Matzler, & Wolf,

2016). Caiazza and Volpe (2015) conducted a study that focused on examining the

motivation, postmerger integration challenges, especially the culture issues that occur

with the cross-border M&A. Bauer et al. found no clear empirical evidence about the

impact of cultural differences on M&A performance. Caiazza and Volpe suggested that

acquisition of innovative capabilities was one of the primary motivational factors in the

cross-border transactions. Bauer et al. studied the innovation-driven M&A in the

German-speaking part of Europe and examined the various effects of human and task

integration on the intended innovation outcome. Integration is a complex process, one

that involves many activities that require extensive care during execution to meet the

M&A strategic objectives (Caiazza & Volpe, 2015; Cording et al., 2014). Caiazza and

Volpe suggested that increased due diligence and key stakeholder involvement during the

entire M&A process would alleviate and address the cultural challenges that occur during

the integration process. Executives should clearly communicate the rationale behind the

M&A transaction (Caiazza & Volpe, 2015; Gunkel et al., 2014). Also, executives should

create a conducive environment, one that encourages employees from both companies

(acquirer and target) to collaborate, to have a shared identity, and to increase job

satisfaction (Gunkel et al., 2014). Bauer et al. defined this process as human integration.

Task integration enables innovation by transferring and sharing of resources and

capabilities from both the companies (Bauer et al., 2016). The results from the Bauer et

al. study suggested human integration negatively impacts innovation while task

integration has a positive impact. Human integration involves an integration of culture

and organizational structures; nevertheless, human integration often results in employee

turnover, loss of resources, and inflexibility (Bauer et al., 2016). Executing strategies for

human and task integration is key to realizing synergy of innovation and technology.

Bauer et al. also suggested that managing the cultural differences between the two

companies (acquirer and target) allows smooth human and task integration.

Bauer et al.’s (2016) findings are in line with the study conducted by Hajro (2015)

as well as the study conducted by Eaton and Kilby (2015). Hajro studied the influence of

culture, both national and organizational, and the mediating role of socio-cultural

integration process on the performance of cross-border M&As. Bauer et al. (2016)

intended to broaden business leaders’ understanding of cross-border mergers and

acquisitions outcomes. Hajro studied the impact of cultural differences in the integration

phase and the factors that can aid or impede successful socio-cultural integration in

M&As. Hajro conducted a longitudinal case study (2005–2011) of a merger between an

Austrian and a German energy provider. Hajro developed a model for the socio-cultural

integration process. Participants in the study, employees of both acquiring and target

companies, were interviewed at four different points in time: during the initial negotiation

talks, immediate before the buyout, and one year after, three years after, and six years

after the buyout. M&A researchers cited high failure rate of domestic and cross-border

M&As attributed to cultural differences, both national and organizational. To explain

cross-border M&A outcomes, Hajro developed a model of cultural dynamics using

national and organizational cultural categories including independent variables,

sociocultural integration process as the mediating variable, and M&A outcomes as the

dependent variable. When compared to the previous M&A literature, Hajro’s findings

demonstrated a high degree of complexity between national and organizational cultural

differences and M&A outcomes. Empirical findings from the study also suggested that

specific socio-cultural integration processes—such as the creation of interpersonal

relationships, trust, and shared identity—are impacted by specific national and

organizational cultural categories. The specific socio-cultural integration processes, in

turn, have an impact on the employees’ levels of cooperation, resistance, perceived stress,

and the turnover rate. Hajro’s findings suggested that the M&A outcomes are

predominantly shaped by organizational cultural differences rather than national cultural

differences. People and culture are critical factors in making cross-border M&As

successful. Hajro’s findings are in line with Eaton and Kilby’s study on the influence of

organizational culture on M&A performance.

Knowledge transfer. Ahammad et al. (2016) examined the influence of

knowledge transfer in CBA and the factors that aid or hinder the knowledge transfer

process. Ahammad et al. tried to uncover the relationship between knowledge transfer

and CBA performance. Prior M&A researchers had failed to explain the role and

influence of culture and employee retention on knowledge transfer and CBA performance

(Stahl et al., 2013). In a cross-sectional survey using a questionnaire as a data collection

method, Ahammad et al. sampled U.K. companies that had acquired North American and

European companies. Their findings suggested a positive relationship between employee

retention, knowledge transfer, and CBA performance. Furthermore, their findings

suggested that organizational cultural differences have a negative relationship to

knowledge transfer and CBA performance. To understand the interconnections,

Ahammad et al. developed a conceptual framework that considered elements such as

national culture distance, organizational culture differences, employee retention, and

knowledge transfer as it related to CBA performance. Ahammad et al. identified how

national cultural distance and organizational culture differences affect the knowledge

transfer process and CBA performance. Knowledge transfer contributes to CBA success

positively (Ahammad et al., 2016). Transfer of knowledge between the merged

companies ensures sustainable competitive advantage and enhances CBA performance

(Ahammad et al., 2016). To allow for smooth knowledge transfer between the merging

companies, the integration leaders should provide necessary support and resources.

Junni et al. (2015) filled a gap in the M&A literature by studying the role of

strategic agility and its effects on knowledge transfer in the context of post-M&A

integration. Their study also examined the relationship between knowledge transfer and

organization performance. Strategic agility is the organization’s ability to adapt to the

chaotic environment and uncertain market conditions (Brueller et al., 2014; Weber &

Tarba, 2014). Organizations can achieve strategic agility by being nimble and flexible,

and relentlessly adjusting their strategic direction, and by developing innovative solutions

that create value and help cope with the competition (Brueller et al., 2014; Weber &

Tarba, 2014). Junni et al. found that complementary knowledge bases between the two

companies (acquirer and acquired) enhanced the acquired knowledge transfer more than

the acquirer. Junni et al. also found that asymmetric knowledge between the two

companies (acquirer and acquired) resulted in the transfer of knowledge from the stronger

knowledge base to the weaker one. Junni et al. findings also suggest that deeper

integration did not result in mutual knowledge transfer between the two companies

(acquirer and acquired). Junni et al.’s study also tested the impact of cultural acceptance

and cultural learning on knowledge transfer. The results from Junni et al. suggested that

cultural acceptance between the two companies (acquirer and acquired) had no bearing on

the knowledge transfer. Junni et al. also found that acquirer’s knowledge transfer

contributed to increased performance following the acquisition.

Sarala, Junni, Cooper, and Tarba (2016) filled a gap in the M&A literature by

further clarifying the multifaceted role of sociocultural factors in M&A. A study

conducted by Stahl et al. (2013) called for further exploring and examining the role of

sociocultural factors in M&As. Stahl et al. stated that the sociocultural factors are

important determinants of M&A outcomes. Sarala et al. suggested that sociocultural

interfirm linkages between the two companies (acquirer and acquired) influence the level

of knowledge transfer in the post-M&A integration phase. Sarala et al. proposed that (a)

complementary employee skills are likely to be shared between the two companies

(acquirer and acquired), (b) trust and collective teaching enable transfer of tacit

knowledge, and (c) cultural integration facilitates knowledge transfer. Sarala et al. argued

that HR flexibility with three components (employee skills, employee behavior, and HR

practices) is vital in the development of the sociocultural interfirm linkages in M&As.

Sarala et al. maintained that cultural differences between the two companies (acquirer and

acquired) are important antecedents of HR flexibility in M&As.

M&A and innovation. Cefis and Marsili (2015) filled a gap in the literature

regarding the relationship between M&A and innovation by suggesting that M&A and

innovation, although interdependent, can be seen as two different forms of investment,

both fundamental to competitive and growth strategy. Studies conducted by Szücs (2014)

align with Cefis and Marsili’s findings regarding the interdependencies between M&A

and innovation. Acquiring technological innovations is one major factor driving

organizations’ M&A strategy (Szücs, 2014). Organizations that are more technologically

innovative are less inclined to make such acquisitions (Szücs, 2014). Szücs found that

acquirers seek to correct deficiencies in their own technological innovation by acquiring

organizations with that core competency. Once an acquisition is complete, however, some

acquirers do not keep up the R&D of the acquired capabilities. Szücs’s study shed light

on some of the reasons acquirers’ R&D declines. One reason Szücs found is a delay in

completion of the postacquisition phase fueled by integration problems. Delays in this

phase can add significant costs to the acquisition, as well as loss of the window of

opportunity within which to capture the market share (Szücs, 2014). When such delays

happen, acquirers tend to reassess their plans for investing in continued R&D (Szücs,

2014). Acquirers find incentive to invest in R&D efforts once the two organizations begin

to reach synergy through integrating their people, processes, and IT systems (Szücs,

2014). Such synergy is achievable only when the postacquisition integration phase,

specifically IT integration, is successful (Garzella & Fiorentino, 2015).

Szücs (2014) investigated whether acquirers benefit from their technology

acquisitions. This researcher’s sample size consisted of 265 acquiring companies and 133

merger targets from the European Commission or the US Federal Trade Commission

between 1990 and 2009 that engaged in M&A to expand their technological capabilities

and market share. Szücs’s study found that the less innovative acquirers showed an

increase in patents and unusually good returns on them over a period of 3 years

postacquisition. These findings confirmed one of the assumptions of the research study:

Organizations engage in strategic acquisitions to expand their core competencies.

Intrapreneurs. According to Podgorski and Sherwood (2015), the “people

factor” is a key contributor to M&A failure. Podgorski and Sherwood filled a gap in the

literature by developing a comprehensive people-integration process model for postM&A

integration. They proposed that companies should nurture talented individuals to manage

the challenges of integration effectively. In the research study, I examined the ideas that

(a) intrapreneurs are among those talented individuals to be tapped and (b) their talent for

managing those challenges needs nurturing. Ragozzino and Reuer (2010) confirmed a

link between intrapreneurs (whom they referred to as individual entrepreneurs) and M&A

performance in their study of how some organizations are effectively managing the

challenges that arise during post-M&A integration. These researchers stated that the

benefits of embedding intrapreneurs in the post-M&A integration phase are two-fold.

First, intrapreneurs play a critical role in managing the challenges. Second, they explore

and exploit opportunities, such as those for process or product innovation. Organizations

that engage in M&A activity need to identify individuals with an entrepreneurial mindset

and insert them early into the M&A process

(Ragozzino & Reuer, 2010).

Human Capital

Intrapreneurs, sometimes called corporate entrepreneurs, possess specific human

capital skill sets that set them apart from other employees; their ideas and work habits

motivate and enable them to engage in the discovery and exploitation of opportunities

(Pinchot & Pellman, 1999). Human capital can positively impact a company’s (a) outlook

on innovation, (b) organizational performance, and (c) competitive advantage (Marvel,

2013). Many companies have acknowledged the importance of human capital and put in

place initiatives to help company executives identify and nurture their companies’

internal talent (Marvel, 2013). In terms of human capital, the postacquisition IT

integration phase presents a blend of challenges and opportunities. To be successful in

this critical phase, companies need to tap into the human capital embodied within its

employees—specifically, employees with an intrapreneurial mindset (Marvel, 2013).

History. According to Klein and Daza (2013), suppositions about human capital

have only been developed in the past few decades. Nonetheless, the concept of human

capital itself can be traced to 17th century. T.W. Schultz, one of the early pioneers, placed

the idea of investment in the human capital at the core of economic development. Well-

respected economist and Noble Laureate, G. S. Becker, later expanded on the original

insights provided by T.W. Schultz and developed an urbane theoretical and empirical

analysis of human capital. Becker converted human capital into a framework for

understanding numerous facets of lifetime human behavior and provided an efficient and

robust example of the capacity of economics to deal with social issues. Becker considered

education as an investment that has costs and returns. The idea of analyzing an

individual’s education from an economic perspective received significant resistance and

skepticism among economists and noneconomists. The concept of human capital was

unwelcomed at first since it associated and treated individuals as nonemotional objects

such as machines or houses. Eventually, academics, media, and politicians have accepted

the term human capital. According to Becker, research on human capital and the

economies of education are essential to wellbeing and important in public policy

discussions. Becker posited that human capital analysis would stay relevant and generate

excitement with the increased importance of knowledge, skills, and information in the

modern era.

Knowledge. Intellectual capital of a company, as defined by Ling (2013), is a

combination of employee creativity, general knowledge, operational skills, and

knowledge of organizational applications that its leaders can transform into company

profit. Boon, Van der Klink, and Janssen (2013) explained that any leaders in an

organization can help augment its competencies and improve performance by

encouraging employees to apply their knowledge, skills, and abilities (i.e., their human

capital) toward either generating new ideas or enhancing and reshaping existing processes

and products. Di Fabio (2014) agreed, noting that the global economy has become more

knowledge-based. Di Fabio argued that for companies to sustain their competitive

advantage, their leaders must identify and nurture intrapreneurial talent within a company

—and ensure that they retain this talent.

Kato and Honjo (2015) provided insights into the role of entrepreneurs’ human

capital in identifying and pursuing an opportunity, as well in the post-entry performance

of companies in high-tech and low-tech sectors. The dataset employed by Kato and Honjo

came from Tokyo Shoko Research, one of the major credit investigation companies in

Japan. The data consisted of information related to the survival and exit routes for

manufacturing companies founded between 1997 and 2004. Entrepreneurspecific human

capital encompasses technical, managerial, and business ownership experience and

capabilities; and concluded general human capital comprises education, skills, and work

experience (Kato & Honjo, 2015). External knowledge, such as that derived from keeping

up with field publications, also plays a role in an entrepreneur’s quest to identify business

opportunities, although not necessarily in pursuing them (Kato & Honjo, 2015). The

findings from Kato and Honjo suggested that (a) human capital unique to entrepreneurs

enables them to identify and pursue an opportunity, (b) entrepreneur’s human capital

played a key role in reducing the probability of bankruptcy in high-tech sectors compared

to low-tech sectors, and (c) entrepreneurs with high levels of human capital are more

likely to exit via merger than others, particularly in high-tech sectors.

Marvel’s (2013) findings suggested that IT entrepreneurs’ specific and general

human capital enable companies to generate radical innovations—breakthrough insights

that transform markets, create new ones, and stimulate growth. Marvel found that the

likelihood of IT entrepreneurs’ engaging in radical innovations depends on their

education and deep domain knowledge rather than on their broad experience across

multiple domains (Marvel, 2013). Kato and Honjo (2015) suggested that the human

capital that entrepreneurs apply to identifying business opportunities might not be the

same entity they use to pursue those opportunities. Kato and Honjo suggested that

entrepreneur-specific human capital serves as a better tool for identifying opportunities

than does general human capital and enables the entrepreneur to reject less viable

opportunities that might present a low return on investment.

To create a setting for innovation, organizational leaders need to offer (a)

flexibility with time, (b) rewards, (c) encouragement, (d) tolerance for failure, and (e)

decision-making authority (Boon et al., 2013). According to Boon et al., organizations

can best cope with and benefit from constantly changing market conditions by

establishing a culture that supports the entrepreneurial spirit. Only with an internal

climate that cultivates intrapreneurs’ opportunity-seeking and innovative behavior can

organizations create that spirit of innovation (Boon et al., 2013).

Fox and Royle (2014) conducted a quantitative research study to examine if the

human capital investment is a better predictor of innovation versus traditional investments

in R&D and marketing. Fox and Royle’s study drew on the human capital theory as

developed by Gary Becker. The human capital theory was widely accepted and applied to

fields such as strategic management, organizational behavior, sociology, and economics.

However, the human capital theory was not applied to areas that have a heavy

dependency on humans, such as innovation and services. Fox and Royle made the initial

attempt at linking human capital as it pertains to innovation. The sample size consisted of

251 goods companies and 367 service companies that were matched between the

databases of Compustat and Fortune. Regression analysis was used to examine and

explain the impact of human capital investments on innovation. Fox and Royle’s findings

suggested that R&D and marketing were not a useful predictors of innovation as

suggested by the prior research. The study results also indicated that human capital

investments tend to produce grander innovation irrespective of the industry (Fox &

Royle, 2014).

Chatterji and Patro (2014) explored the management of human capital with a

particular emphasis on the emerging phenomenon “acqui-hiring” through the lens of a

dynamic capabilities framework. Acqui-hiring typically refers to the acquisitions of small

startup companies purely with intent to acquire the human capital of the acquired

organization. Chatterji and Patro reviewed recent trends in “acqui-hiring” by examining

1,964 acquisitions data collected from Zephyr and Crunchbase platforms from 2009 to

2012 and in the first quarter of 2013. Chatterji and Patro also presented two qualitative

case studies to demonstrate the process of acqui-hiring practice at Google and Facebook.

Chatterji and Patro explained how companies are employing acqui-hiring to sustain

competitive advantage by drawing on prior research in strategic management that focused

on dynamic capabilities. Chatterji and Patro stated that there was not enough empirical

data available to understand how acqui-hiring links to the corporate strategy or to

determine and understand what conditions acqui-hiring produces desired value. They

called for future research to analyze and provide insights into the impact of acqui-hiring

on a company’s performance. The authors also suggested an alternative approach to

measuring the impact of acqui-hiring on the careers of the entrepreneurs who join the

acquired company.

Innovation

The term innovate stems from the Latin word innovare—to renew or change

(Sokołowska, 2015). Innovation is an essential ingredient in creating an effective

postacquisition IT integration strategy because it has a potential to decrease integration

and operational costs, accelerate time to market, increase differentiation, and generate

new revenue streams (Wubben et al., 2016). This section presents a discussion of the

research on four aspects of innovation: (a) the significance, (b) the risks and rewards, (c)

the impact on performance, and (d) the role that knowledge and learning play in

innovation. Sponsorship and innovation drivers are essential for innovation. Companies

should not isolate innovation from their business and IT strategies (Wubben et al., 2016).

To thrive, innovation requires a culture conducive to creativity, risk, and ideas that

challenge the status quo.

Knowledge and learning. Innovation relies on the thinking and learning styles of

an organization’s employees (Xie, Gao, & King, 2013). Learning equips individuals with

knowledge that influences the way they approach a problem or challenge (Camelo-Ordaz,

Garcia-Cruz, & Sousa-Ginel, 2015). Knowledge sharing is the reprocessing and

transmitting of explicit (recorded) knowledge and tacit (experience-based) knowledge

and making the combined knowledge sources available within an organization (Oyemomi

et al., 2016). Wang, Sharma, and Cao (2016) developed a research model to investigate

the relationships among knowledge-sharing practices, innovation, and organizational

performance. Wang et al. used the quantitative method to analyze data collected from 800

high-technology companies in China. They found that collaborating and exchanging

information rapidly and efficiently (i.e., sharing knowledge) were essential to

organizations’ performance, including to innovation. However, promoting a

knowledgesharing culture within an organization is a challenge (Wang et al., 2016).

Organizations can meet that challenge, by incorporating knowledge sharing into their

business strategy and educate their employees about its significance (Wang et al., 2016).

Most organizations have already institutionalized explicit knowledge-sharing practices

because employees can easily articulate and transmit these practices (Oyemomi et al.,

2016). Tacit knowledge, however, is difficult to extract and share because it resides

within an individual (Oyemomi et al., 2016). Oyemomi et al. (2016) findings showed that

explicit knowledge sharing increases financial performance and innovation speed,

whereas tacit knowledge contributes better to innovation quality and operational

performance.

Learning style depends on thinking style—how people choose to make daily

decisions and solve problems consciously, given their understanding of the circumstances

(Xie et al., 2013). Individual learning and thinking styles contribute to overall

organizational learning. Organizational learning is, in part, the collective tacit knowledge

employees share while working toward a common goal (Oyemomi et al., 2016). It

enables organizations to react to market changes and sustain competitive advantage

(Oyemomi et al., 2016). In their study, Ettlie, Groves, Vance, and Hess (2014) identified

a relationship between individual learning and innovative corporate culture. According to

these researchers, corporate culture is the collection of an organization’s vision and

values, its procedures and business processes, and its employees’ behavior and actions.

The interactions among individual learning, organizational learning, and innovative

corporate culture can create a milieu for successful innovation (Ettlie et al., 2014).

Results from the Ettlie et al. study also showed that more effective innovations come

from teams with both linear and nonlinear thinking styles.

Transition

Healthcare payers have undergone a major transformation driven primarily by

government reform—the ACA (Muppalla & Capobianco, 2010). To cope with the

disruption and compete in this climate, healthcare payers are relying on M&A

(Woodlock, 2014). Healthcare payers’ leaders need to be cognizant of M&A’s

challenges, especially those of the postacquisition IT integration phase because the

success or failure of the investment rests in this critical phase. Many opportunities surface

in this phase that can engage and empower employees with an entrepreneurial talent to

maximize a company’s investments, but these opportunities may be lost unless leaders

embrace effective strategies. The purpose of this qualitative single case study was to

explore strategies healthcare payer organization managers used to achieve operational and

strategic synergies during the postacquisition IT integration phase.

In Section 2, I will provide a comprehensive background for how I conducted the

research study. The discussion in Section 2 will include (a) reiteration of the purpose

statement; (b) the role of the researcher; (c) profile of the participants; (d) overview of the

research methodology and design; (e) identification of the population and sampling; (f)

issues of ethical research; (g) the data collection, organization, and analysis techniques;

and (h) analyses of reliability and validity. Section 3 will include the findings and

conclusions drawn from my analysis of the data collected to explore the central research

question. The discussion in Section 3 will also include (a) presentation of findings, (b)

show the findings can be applied to professional business practice, (c) their implications

for social change, (d) recommendations for steps to useful action, (e) a discussion of who

can benefit from the results, (f) recommendations for future study, and (g) reflection on

my experience.

Section 2: The Project

In this section, I will provide a comprehensive description of how I performed the

research study, including a reiteration of the purpose of the study; a description of the role

of the researcher; an illustration of my strategy to select study participants; and

explanations of the research methodology and design, population sample size, and ethical

research. This section will also include a step-by-step description of the data collection

instruments, data organization techniques, and data analysis processes. The section will

end with an explanation of the measures for ensuring reliability and validity of the

research.