The results of this study have implications for existing research in several areas including the acquisitions literature, the organizational learning literature and the capabilities development literature.
First, this research has implications for several unresolved questions in the acquisitions literature. One unanswered question in the acquisitions literature concerns how acquisitions impact organizational performance. Research to date remains mixed about the potential for acquisitions to contribute to firm performance. In a meta-analysis by King et al. (2004), results revealed that the most common variables studied to explain post-acquisition performance had little impact on post-acquisition performance. In addition, while the Dynamic Capabilities perspective supports the notion that acquisitions contribute to firm performance by allowing a firm to adapt its capabilities to improve a firm’s fit with the environment (Helfat et al., 2007), research to date has not explicitly examined how a change in a firm’s capabilities through acquisition impacts post-acquisition firm performance. A significant volume of research has theoretically linked post-acquisition performance with the improvement in a firm’s capabilities following acquisition (Haspelsagh and Jemison, 1991; Ahuja and Katila, 2001; Karim and Mitchell, 2004; Capron and Mitchell, 1997; Cloodt et al., 2006), yet few studies have actually
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measured the change in capabilities as the mediating factor (see Karim and Mitchell (2004) and Ahuja and Katila (2002) for exceptions). This research contributes to research on acquisitions by not only explicitly linking post-acquisition performance to the change in the acquiring firm’s capability scope and capability effectiveness, but it also uncovers how the respective changes in the scope and effectiveness of capabilities differentially impact alterative types of performance (i.e. market share and ROA).
This research also informs current debates in the acquisitions literature concerning the effect of acquisitions on the acquiring firm’s capabilities. While some research has found that acquisitions provide firms with the opportunity to break rigidities and incorporate new knowledge (Vermeulen and Barkema, 2001; Karim and Mitchell, 2000), other research has found that organizational changes that follow an acquisition have a negative impact on firm capabilities (Lei and Hitt, 1995). To date, research has failed to reconcile these two perspectives to explain why some firms overcome the potentially harmful structural changes in the organization following acquisition to benefit from the learning opportunities of acquisitions while other firms fall victim to these harmful changes. Results of this study help reconcile these findings by revealing that a firm’s internally-oriented and externally-oriented absorptive capacity are key determinants in whether a particular acquisition helps a firm improve and/or expand its capabilities, leads to the decline of firm capabilities, or has a negligible impact on the acquirer’s capabilities.
The results of this research also help to inform the discrepancy in existing acquisitions research concerning the impact acquisition has on a firm’s internal development capabilities. While some acquisitions research has found that acquisitions complement a firm’s internal development capabilities (Vermeulen and Barkema, 2001; Prabhu et al., 2005; Hagedoorn and Duyster, 2002), other research suggests that acquisitions hinder a firm’s ability to grow through organic means and as a result, firms begin to substitute acquisitions for internally generated growth (Lei and Hitt, 1995; Hitt et al., 1996; Hitt et al., 1990). This study contributes to our understanding of how a single acquisition impacts the likelihood of future internal development by examining the impact that the focal acquisition had on the acquiring firm’s capabilities. This study also contributed to our understanding how a firm’s history of acquisitions impacts the firm’s internally focused learning capabilities that subsequently impact the firm’s ability to grow through organic means.
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Additionally, this dissertation advances the learning literature by explicitly and empirically linking a firm’s learning capacity to learning from an acquisition. While learning has been the dependent variable of interest in a wide range of research, to date little research has examined how a firm’s capacity for learning impacts whether a firm learns from a given experience.
Perhaps the most noteworthy implications of this study involve the absorptive capacity literature and the various dimensions of absorptive capacity. Zahra and George’s (2002) original conceptualization of absorptive capacity outlined two primary dimensions of absorptive capacity—potential absorptive capacity and realized absorptive capacity—and proposed that the effectiveness of potential (externally-oriented) absorptive capacity depends on the firm’s ability to leverage that new knowledge through its realized (internally-oriented) absorptive capacity. Additionally, Zahra and George’s conceptualization suggests that the level of realized (internally-oriented) absorptive capacity, and consequently its effectiveness, depends on the level of the firm’s potential (externally-oriented) absorptive capacity. This study suggests that unlike the conceptualization advanced by Zahra and George (2002), the level and sophistication of realized (internally-oriented) absorptive capacity may far exceed the level and sophistication of potential (externally-oriented) absorptive capacity. Also, unlike the complete dependence between the two dimensions suggested by Zahra and George (2002), results from this research suggest that in certain situations, high levels of one dimension of absorptive capacity may substitute for low levels of the other dimension. Consequently, results suggest that scholars begin to rethink the dimensions of absorptive capacity.
This dissertation also contributes to absorptive capacity research by advancing our understanding of the independent and joint effects of the various dimensions of absorptive capacity. While Cohen and Levinthal (1990) originally proposed that dominance of externally- oriented absorptive capacity over internally-oriented absorptive capacity would be potentially detrimental, the authors did not elaborate. This dissertation explicitly addresses the roles of both internally-oriented and externally-oriented absorptive capacity and explores the potential outcome of various combinations of internally- and externally-oriented absorptive capacity. This study revealed that indeed dominance of one dimension over the other dimension can be harmful to an organization’s ability to renew its capabilities, but in some situations firms may use a dominance of one dimension to make up for weaknesses in the other dimension. This research
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also advances our understanding of absorptive capacity by uncovering the fact that each absorptive capacity dimension may take on different functions if the strength of one dimension greatly outweighs the strength of the other dimension.