Conflicting Subcultures in Mergers and Acquisitions: a Longitudinal Study of Integrating a Radical Internet Firm into a Bureaucratic Telecoms Firm
| DOI | http://doi.org/10.1111/1467-8551.12135 |
| Published date | 01 April 2016 |
| Date | 01 April 2016 |
British Journal of Management, Vol. 27, 338–354 (2016)
DOI: 10.1111/1467-8551.12135
Conflicting Subcultures in Mergers
and Acquisitions: a Longitudinal Study
of Integrating a Radical Internet Firm into
a Bureaucratic Telecoms Firm
Alfons van Marrewijk
Department of Organization Sciences, Faculty of Social Sciences, VU University Amsterdam,
De Boelelaan 1081, 1081 HV Amsterdam, The Netherlands
Email: a.h.van.marrewijk@vu.nl
Media and telecommunications companies face the problem of how to integrate diamet-
rically opposite radical internet firms after acquisition. Extant mergers and acquisitions
(M&A) studies report that dierences in the organizational culture are important in the
cultural integration process. Frequently, M&A research assumes organizational cultures
to be homogeneous and unified, but a large body of organizational literature suggests
that organizations should be understood as heterogeneous living worlds in which employ-
ees construct their own subcultures. The paper focuses on the question of how such sub-
cultures aect the long-term cultural integration of merged firms. A 12-year longitudinal
field study in the Netherlands examinedthe integration of iPioneer into Telcom. The find-
ings of the study showhow three subcultures in iPioneer influenced the cultural integration
process. The paper makes a contribution to the academic debate on cultural integration
in domestic M&A by acknowledging that the numerous coexisting subcultures influence
cultural integration in the complex process of post-acquisition integration.
Introduction
Mergers and acquisitions (M&A) studies fre-
quently note that the integration of organizational
cultures is important to the outcomes of acqui-
sitions (Cartwright and Cooper, 1993; Larsson
and Lubatkin, 2001; Nahavandi and Malekzadeh,
1988; Sarala, 2010; Weber, 1996; Weber, Shenkar
and Raveh, 1996). In the extant research into
M&A, a realistic and positivist approach to
culture prevails, which is based on the assumption
that organizations have a homogeneous culture
(e.g. Cartwright and Cooper, 1993; Weber, 1996).
In contrast, some organization studies suggest
that organizational cultures should be understood
as heterogeneous living worlds in which employ-
ees construct their own subcultures in constant
interaction with the cultural system (Frost et al.,
1991; Hatch, 1993; Martin, 2002; Smircich, 1983).
Therefore, acquired and acquiring firms can be
perceived as cultures, which are made up of how
organizational members perceive and understand
the realities around them (Vaara, 2000). When
culture is conceptualized and interpreted in this
way, organizations can be regarded as consisting
of multiple cultures (Trice and Beyer, 1993).
In the literature on cultural integration in
M&A, dierent modes of cultural integration
have been identified. Cultural integration is said
to occur when changes are made in two dierent
cultural systems because particular elements of
culture have spread from one system to the other,
in both directions (Berry, 1980, p. 215). Drawing
on the work of Berry (1983), Nahavandi and
Malekzadeh (1988) identified four strategies for
acculturation: integration, when the two cultures
© 2016 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
Conflicting subcultures in mergers and acquisitions 339
are integrated each retain their individual identity;
assimilation, when one culture absorbs the other;
separation, when the two cultures are entirely
separate; and deculturation or marginalization,
when a culture disintegrates. In line with these,
Buono and Bowditch (1989) defined four strate-
gies for integrating cultures in M&A: taking
over, blending, pluralism and resistance. For
20 years these strategies have remained dominant
in our understanding of the cultural dynamics
of domestic M&A (Teerikangas and V´
ery, 2012).
However, there have been few very fine-grained
interpretive and critical studies of how organiza-
tional cultures and subcultures interact and aect
cultural integration (Teerikangas and V´
ery, 2012).
Post-acquisition integration research tends
to group all types of acquisitions together
(e.g. Teerikangas and V´
ery, 2006), thus risking
overgeneralization and oversimplification of post-
acquisition integration (Schweizer, 2005). The
present paper therefore focuses on acquisitions
in one particular sector, media and telecom-
munications, which provides a valuable context
for examining organizational integration. This
sectorial lens has been applied previously to M&A
by,for example, Faulkner, Teerikangas and Joseph
(2012) and Lodorfos and Boateng (2006).
The media and telecommunications sector was
dramatically transformed in the 1990s, resulting in
strong competition among media and telecommu-
nications companies (Wirtz, 2001). The number
of acquisitions rose spectacularly, and there was
a growing eagerness to obtain new technologies,
capabilities, know-how and markets (Ranft and
Lord, 2002). To keep up with the pace and scale
of innovation, mobile technology and changing
consumer behaviour, media and telecommunica-
tions companies started to acquire radical internet
firms (Uhlenbruck, Hitt and Semaden, 2006).
Many of the firms that were taken over in this way
were rooted in hacker culture (Jordan and Taylor,
1998), which meant they were the polar opposite
of the companies that acquired them.
The goal of this paper is to understand the
long-term cultural integration of a radical internet
firm into a telecommunications company, two
firms whose characteristics are polar opposites.
The central research question concerns how or-
ganizational subcultures aect long-term cultural
integration during a post-acquisition integra-
tion process. To answer this question, a 12-year
longitudinal field study was conducted by the
author, looking at the domestic post-acquisition
integration of the telecommunications company
Telcom and the radical internet firm iPioneer
in the Netherlands. Between 1998 and 2010 he
was aliated first to Telcom as an employee and
later to iPioneer as a consultant. Longitudinal
fieldwork is an in-depth research method in which
the researcher is present in the organization being
studied over a long period of time (Pettigrew,
1990). Except for a few examples of studies on
post-acquisition integration (Greenwood, Hinings
and Brown, 1994; Kavanagh and Ashkanasy,
2006; Mantere, Schildt and Sillince, 2012; Vaara,
2003; Yu, Engleman and Van de Ven, 2005), lon-
gitudinal studies on integration or cultural change
are rare in the M&A literature (Vaara, 2003;
Zueva-Owens, Fotaki and Pervez Ghauri, 2012).
The paper makes a threefold contribution to
the academic debate on cultural integration in do-
mestic M&A. First, it acknowledges the numerous
coexisting subcultures that each play a role in the
complex processes of post-acquisition integration.
Second, existing strategies for acculturation are
extended by the revitalization strategy. During
revitalization, employees recreate and re-form a
culture or subculture by mixing elements of their
existing cultural frameworks with other elements
required to adapt to the M&A process. Third, it
adds a longitudinal perspective with an insider
view to M&A literature on methodology.
The paper is structured as follows. First, the
causes and consequences of the transformation
of the media and telecommunications sector are
discussed. Then, the cultural integration literature
of M&A is discussed. In the methodological sec-
tion, the distinct roles of employee, consultant and
ethnographer are theorized and problematized.
The findings of the post-acquisition integration
are presented and, finally, the conclusions of this
study are set out.
Transformation of the media and
telecommunications sector
Three key factors have brought about a dramatic
transformation of the media and telecommunica-
tions sector: policies of deregulation, technological
innovationand changes in user preferences (Wirtz,
2001). First, in the late 1980s the American gov-
ernment restructured the US telecoms market,
breaking down the divisions between telephone
© 2016 British Academy of Management.
To continue reading
Request your trial