Economic Action Does Not Take Place in a Vacuum: Understanding Cisco's Acquisition and Development Strategy

David Mayer and Martin Kenney

Industry and Innovation, 2004, vol. 11, issue 4, 299-325

Abstract: The literature and common belief holds that the acquisition of high- technology firms in rapidly evolving markets normally results in failure. Cisco, however, has successfully grown through the conscious and deliberate use of acquisitions to become the dominant global networking equipment provider. The crux of our argument is that Cisco's success cannot be fully explained by economic and financial variables, or by acquisition target selection, alone. Managing social and organizational processes has been central to Cisco's success. Cisco's success is attributed to an active involvement by both the firm and its employees in its ecosystem. We explain the operation of Cisco's multiplex intelligence gathering function, and characterize it as a "high surface area strategy". This is followed by highlighting how Cisco's due diligence process treats human resource issues as central to calculating the true value of the acquisition. Whereas, most firms consider the process as complete when the decision to acquire has been made, this study explains how Cisco's integration process is staged to ensure that the core product development teams in the acquired firm suffer minimal disruption. Finally, Cisco's success is measured through the use of retention and market share data.

Date: 2004
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DOI: 10.1080/1366271042000289333

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