Key Successful Factors in Knowledge Transfer during M&A in Traditional Industries: An Empirical Study
Huang, Jun, Ling, Juan, Yang, Jiaqin, Zhao, Quanwu, Journal of International Technology and Information Management
With increased competition in the marketplace, mergers and acquisitions (M&A) have helped organizations gain and sustain competitive advantage via acquiring valuable knowledge (Kanter, 2009). However, since the global economic recession started in 2008, the worldwide M&A activities have been declined (over 40%) in the first half of 2009 comparing to a year ago, including those cross-border M&A activities (Platt, 2009). Such a decline has been mainly attributed to the limited access to syndicated loans to finance larger transactions and the risks involved in current recessionary environment. But as the global economy on its way to the recovery, there will be extremely opportunistic situations or mergers of necessity, when many international corporations facing the challenge that their key suppliers are going out of business or they need to further strengthen their supply chain networks (Lea et al., 2007; Platt, 2009). Furthermore, it is believed that because not all governmental stimulus packages are created equal, larger scale M&A transactions will be seen in emerging market countries like China and India, focusing on transport and commodities, very strategic to their continued economic growth. Specifically, private equity funds will play a more important role in the future M&A activities as a source of capital, as it is reported that currently there are about $1 trillion such funds waiting to be deployed in the global capital market (Hannan & Pilloff, 2009). While there are reports for both failed and successful M&A deals in recent years, it is predicted that as economy recovers, successful M&A will belong to those that have focused on gaining the best talents and key core knowledge and integrating and motivating all of their human resources talents (Kanter, 2009).
As such, the success of knowledge transfers in an M&A process has attracted a significant attention recently in both academic studies and industrial practice (Wang, et al., 2009). During the last two decades, business organizations have attempted to effectively integrate their knowledge through knowledge transfer to develop core competences, increase synergy, and create value for customers (Bennett, et al., 2008; Galup, et al., 2004; Haspeslagh & Jemison, 1994). M&A activities and knowledge transfer have also drawn much interest from management researchers (e.g., Argote & Ingram, 2000; Cohen & Levinthal, 1990; Osterloh & Frey, 2000). However, after a comprehensive review of the relative literature, we find that most published work in this area is either explorative in nature or a simple case study. Even though a few have investigated knowledge transfer during M&A with empirical data and analytic results, they have not provided a comprehensive model to theorize and examine key factors in knowledge transfer during pre and post-M&A stages. As such, in this paper, we investigate six key factors that influence the success of knowledge transfer, including prior-gained knowledge of merging companies, prior-gained knowledge of merged companies, motivation for M&A, levels of knowledge to be transferred, investments in transfer, and the implementation process. These key factors exist in three basic stages associated with knowledge transfer during M&A--initiation, preparation, and implementation, which lead to the performance of knowledge transfer in the outcome stage. In addition, we are aware of that existing literature on the importance of knowledge transfer on the M&A process have focused on the high-technology industries, few actually addressing the possible issues in those well-established traditional industries, such as the textile and steel and iron industries.
So the motivation for this research is twofold. First, we theorize and examine key factors that play an important role in the success of knowledge transfer during pre and post-stages of M&A. …