Int. J. of Human Resource Management 15:8 December 2004 1355– 1370
The role of human resource management in cross-border mergers and acquisitions Ruth V. Aguilera and John C. Dencker
Abstract Cross-border mergers and acquisitions (M&As) have become the dominant mode of growth for ﬁrms seeking competitive advantage in an increasingly complex and global business economy. Although human resource management (HRM) can play a value-adding role in the merger process, existing research and evidence does not clearly demonstrate how it can do so. This paper addresses the neglected human side of M&As by providing a strategic ﬁt framework to assess the link between M&A strategy and HRM strategy. Because cross-border M&As are of an order of magnitude more complex than domestic mergers, we examine contingencies in national contexts that inﬂuence outcomes in the merger process. We draw on recent empirical evidence to highlight HRM roles in terms of resources, processes and values that reﬂect the inﬂuence of both strategic ﬁt and national context in the integration stage of cross-border M&A. Keywords Human resource management; mergers and acquisitions; corporate governance; international management; varieties of capitalism.
Introduction Mergers and acquisitions (M&As) have become the dominant mode of growth for ﬁrms seeking competitive advantage in an increasingly complex and global business economy (Adler, 1997). Nevertheless, M&As are beset by numerous problems (Newburry and Zeira, 1997), with 50 per cent of domestic acquisitions – and 70 per cent of cross-border acquisitions – failing to produce intended results (Capron, 1999). Scholars have examined these problems in terms of strategic market entry choice (Hennart and Park, 1993), market valuations (Jensen and Ruback, 1983), value creation (Haspeslagh and Jemison, 1991) and ﬁrm performance (Galbraith and Stiles, 1984; Chatterjee, 1986; Blackburn and Lang, 1989), ﬁnding that difﬁculties in M&As trace to a lack of a compelling strategic rationale, unrealistic expectations of possible synergies and paying too much for acquired ﬁrms. However, although ﬁnancial and strategic studies have signiﬁcantly increased our knowledge of M&As, this research is incomplete, in large measure due to a failure to account for personnel issues. Frequent calls within the human resource management ﬁeld and international business, to study the human side of international M&As, have generated studies exploring the role of HRM in M&As, such as studies of personnel issues surrounding M&As that focus on top management turnover following an acquisition (Walsh, 1988; Krug and Hegarty, 2001). Ruth V. Aguilera, Department of Business Administration, College of Business and Institute of Labor and Industrial Relations, University of Illinois at Urbana-Champaign, 1206 South Sixth Street, Champaign, IL 61820, USA (tel: þ217 333 7090; fax: þ217 244 9290; e-mail: firstname.lastname@example.org). John C. Dencker, Institute of Labor and Industrial Relations, 504 E. Armory Avenue, Champaign, IL 61820, USA (tel: þ217 333 2383; e-mail: email@example.com). The International Journal of Human Resource Management ISSN 0958-5192 print/ISSN 1466-4399 online q 2004 Taylor & Francis Ltd http://www.tandf.co.uk/journals DOI: 10.1080/0958519042000257977
1356 The International Journal of Human Resource Management However, most of the existing research within the HRM ﬁeld relies on anecdotal evidence of personnel issues in M&As, resulting in little systematic theory (Hunt and Downing, 1990; Buono and Bowditch, 1989; Marks and Mirvis, 1998) that focuses on domestic M&As. In part, this lack of attention with regard to HRM in M&As stems from the marginal role that CEOs have designated to the HRM function in M&As, particularly in the early stages of the M&A process. Perhaps reﬂecting the sometimes low relative standing of the personnel function within the ﬁrm, the M&A literature has focused primarily on ﬁnancial due diligence and strategic issues in...
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