The Impact of Knowledge Codification, Experience Trajectories and Integration Strategies on the Performance of Corporate Acquisitions

Harbir Singh and Maurizio Zollo

Center for Financial Institutions Working Papers from Wharton School Center for Financial Institutions, University of Pennsylvania

Abstract: This study addresses the following questions: (1) can organizations learn how to manage infrequent and heterogeneous tasks ? (2) If they can, then what are the mechanisms that might explain learning under these circumstances ?, and (3) what are the limitations under which these mechanisms operate ? A model based on explicit knowledge codification and tacit experience accumulation is submitted and tested using data from a sample of 183 acquisitions in the US banking industry. Measures of post-acquisition integration strategies and of pre-acquisition resource characteristics are included in the model. We find that tacit knowledge accumulation significantly impacts performance when the experiences are highly homogeneous, and that knowledge codification improves acquisition performance in the context of high post-acquisition integration, i.e. when the organizational challenge is particularly complex. Also, the level of integration between the two firms involved in the acquisition positively influences performance, while the replacement of top managers in the acquired firm impacts performance in a negative fashion. Implications are drawn for organizational learning theory and for a knowledge-based view of corporate acquisitions.

Date: 1998-08
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