Following the human integration described above, the structural integration of the acquired firm has to be considered. The two basic options regarding the post‐
acquisition organization are structural integration and structural separation. Basically, the acquired firm is either completely absorbed by the acquirer, or it retains its distinct identity and separate structure within the merged firm (Haspeslagh/Jemison 1991;
Ranft/Lord 2002).
Structural integration allows for better exploitation of the acquired firm’s knowledge by linking it to the acquirer’s own complementary knowledge base (Teece 1986; Doz 1988). Mechanisms of structural integration, such as the homogenization of organiza‐
tional processes, common hierarchical control and the rotation of key personnel, can be used to leverage the acquired knowledge base. By forming joint organizational units, hierarchy and feedback, the coordination mechanisms can be effectively used to enable knowledge transfer and coordination (Puranam/Srikanth 2004).
However, such mechanisms often have negative side‐effects. Structural integration involves changes to the organizational processes and procedures that cause disrup‐
tions of existing organizational routines (Ranft/Lord 2002). Due to the lowered task autonomy, integration may lead to a foundering employee motivation (Haspes‐
lagh/Jemison 1991). Therefore, structural integration may damage the acquired firm’s ability and willingness to produce new and innovative knowledge (Puranam/Srikanth 2004). Intensive integration efforts furthermore require the acquiring firm’s manage‐
ment and financial resources considerably and will subsequently divert them from internal growth and innovation (Hitt et al. 1991; Graebner 2004). Consequently, struc‐
tural integration may harm the ability to innovate in both the acquiring and the ac‐
quired organization. In other words, structural integration increases the transfer of existing knowledge to the acquiring firm, but harms the innovative capability to create future knowledge.
The organizational form of the merged entity is thus dependent on the underlying knowledge‐related acquisition motives. If the target firm’s superior capabilities in respect of ongoing innovation and knowledge creation are critical for the acquisition’s success, the autonomy of the acquired unit has to be preserved (Puranam/Srikanth 2004). In this case, a network structure with relatively autonomous units might be best.
The knowledge integration is achieved through rather informal coordination mecha‐
nisms, such as virtual teams or communities of practices that share knowledge be‐
tween the different units. Such lateral network linkages between organizational sub‐
units provide experts and projects with direct and rapid access to other units that possess related knowledge (Gupta/Govindarajan 2000; Hansen 2002). Network struc‐
tures thus enable knowledge transfer without destroying the acquired units’ distinc‐
tive capabilities and knowledge.
5 Conclusion
Access to new knowledge sources is fundamental to an organization’s ability to im‐
plement innovative strategies that ensure the firm’s future success. Mergers and acqui‐
sitions are often the only practicable way to rapidly gain access to fresh knowledge.
Moreover, they are critical to the revitalization and renewal of an organization’s knowledge base. However, the integration of knowledge from acquired firms is com‐
plicated by a number of considerable obstacles that regularly cause the failure of ac‐
quisitions.
In this paper, we have shown that the inherent obstacles to knowledge integration can be overcome through deliberate managerial actions along the acquisition process.
Initially, a careful evaluation and selection of target companies in respect of their stra‐
tegic and organizational fit is mandatory. Once the transaction has been completed, the human integration of the two entities takes center stage. Employee retention measures, as well as active communication are essential to contribute to the evolution of a com‐
mon culture of cooperation and trust. Following a successful human integration, the right choice of organizational arrangements is critical to the acquired firm’s structural integration. Network structures represent an interesting alternative that allows knowl‐
edge sharing while preserving the acquired unit’s distinctive capabilities.
Knowledge can be merged; however, the ability to do so is contingent on manage‐
ment’s consideration of the fundamental “rules of the game” that we have touched upon in this article. Value creation in knowledge‐based acquisitions is far from being an automatic effect. The justification of knowledge acquisition as a key rationale in mergers and acquisitions is not limited to the acquired knowledge itself, but has to be derived from the ongoing knowledge integration process through active management efforts.
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