Gaining Legitimacy by Telling Stories: The Power of Narratives in Legitimizing Mergers and Acquisitions

Article excerpt

ABSTRACT

This paper uses narrative theory to examine the role of narratives in legitimating organizational change. Specifically, the author examines the influence of organizational narratives - narratives from an organization's management to its employees - on the legitimacy employees give to merger or acquisitions (M&A). It is argued that as the narrativity of organizational communication increases, the cognitive legitimacy of M&A activity will increase. Further, the author identifies a potential moderator of this relationship: employees' perceived uncertainty. It is argued that the higher employees' uncertainty about the future the more influence organizational narratives will have on the cognitive legitimacy of M&A activity.

INTRODUCTION

In addition to the financial and economic aspects of mergers and acquisitions (M&As), there is also a "human side" (Buono and Bowditch, 2003; Marks, 1982) to these activities. In particular, one determinant of M&A success is the degree to which employees ofmerging organizations "buy in" to both the integration process and the newly formed organization (Gole and Morris, 2007). More specifically, if employees are not committed to the integration of the merging organizations (Mottola et al., 1997), or do not identify with the merged organization (Van Knippenberg et al, 2002), then this will have a deleterious impact on the overall success or failure of a merger or acquisition. Yet both identification and commitment are, in part, dependent on employees' perception that the actions of their organization are desirable, proper, and appropriate (Tyler, 1 997). Hence, employees' support will be a function of the perceived legitimacy of a merger or acquisition (Suchman, 1995). It is therefore critical to understand the factors that influence, and help to establish, the legitimacy employees grant to a merger or acquisition.

One factor that influences the legitimacy of organizations' actions is organizational communication (Massey, 2001). Research examining the link between organizational communication and legitimacy has focused primarily on organizations' external stakeholders and external influences (e.g. Massey, 2001). Specifically, research has examined how the communication used to inform groups outside the organization about organizational events, such as mergers and acquisitions, influences the firm's legitimacy. For instance, studies have examined how organizations attempt to gain legitimacy for a merger or acquisitions from the media (Vaara and Tienari, 2002; Leonardi and Jackson, 2004), within their industry (Massey, 2001), and more generally, within their organizational field (Suddaby and Greenwood, 2005). Another stream of research has examined the influence of communication during M&As on organizations' internal stakeholders; however, these studies have not examined legitimacy (e.g. Schweiger and DeNisi, 1991; Ivancevich et al., 1987). Unfortunately, research has devoted little or no attention to integrating these two topics. In other words, the influence of organizational communication on M&A legitimacy among employees has not received significant attention. However, given communication's ability to influence employees during M&As (Schweiger and DeNisi, 1991; Ivancevich et al., 1987)), and given the importance of employees legitimizing other organizational actions (Chakravarthy and Gargiulo, 2002), it seems a logical extension to examine the ways in which communication can influence employees' perceived legitimacy of an organization's M&A activity.

From this starting point, several questions become critical: (1) Why might an organization (or more accurately, an organization's leadership) use communication to legitimize M&A activity to its employees? (2) What form of organizational communication is most likely to influence the legitimacy employees' give to their organization's M&A activity? And, perhaps most importantly, (3) How does communication, and particularly a specific form of communication, influence employees' perceived legitimacy of an M&A? …