Integration of Non‐market and Market Activities in Cross‐border Mergers and Acquisitions

Date01 October 2017
DOIhttp://doi.org/10.1111/1467-8551.12228
Published date01 October 2017
British Journal of Management, Vol. 28, 629–648 (2017)
DOI: 10.1111/1467-8551.12228
Integration of Non-market and Market
Activities in Cross-border Mergers
and Acquisitions
Mohammad F. Ahammad, Shlomo Y. Tarba,1Jedrzej George Frynas2
and Andrew Scola3
International Business Division, Leeds University Business School, University of Leeds, UK, 1Birmingham
Business School, University of Birmingham, UK, 2Roehampton Business School, University of Roehampton,
London, UK, and 3Global PMI Partners, UK
Corresponding author email: tarba2003@gmail.com
Drawing on resource dependence theory and the resource-based view, we investigate the
interactions between market and non-market activities of firms in the context of the
post-merger integration phase in cross-border mergers and acquisitions (M&As). Based
on a cross-country survey of 111 M&A practitioners who were personally involved in
cross-border M&As around the world, we test seven hypotheses on various market and
non-market aspects of post-merger integration. We find a positive correlation between
buering strategies and adaptive capabilities in the non-marketenvironment and between
bridging and adaptive capabilities in the market environment.However, we could not find
any significant correlation betweenb ueringand adaptive capabilities in the market envi-
ronment and bridging and adaptive capabilities in the non-market environment. We also
find that adaptability in the non-market environment is positivelycorrelated with adapt-
ability in the market environment, and in turn adaptability in the market environment
leads to positive organizational performance of a cross-border M&A. These results pro-
vide further support for the value of the alignment between market and non-market ac-
tivities and help to fill a gap in the literature on the marketnon-market interactions in
post-merger integration.
Introduction
The interdependence between market and non-
market environmentsand the organizational value
of integrating market and non-market activities
have been explored in the business literature since
the work of David Baron (1995, 2001, 2012), even
though the market and non-market elements of
company strategies arestill largely studied in isola-
tion (Mellahi et al., 2016). Baron (1995, pp.4748)
defined market strategy as ‘a concerted pattern of
actions taken in the market environment to create
This paper was separately managed by the regular BJM
editorial team.
value by improving its overall performance’ and
explained that ‘the market environment includes
those interactions between the firm and other
parties that are intermediated by markets of
private agreements’. Baron defined non-market
strategy as ‘a concerted pattern of actions taken
in the non-market environment to create value by
improving its overall performance’, whereas ‘the
non-market environment consists of the social,
political, and legal arrangements that structure the
firm’s interactions outside of, and in conjunction
with, markets’.
However, while scholarly studies have largely
focused on the integration between market and
non-market strategies, some more recent empirical
research has pointed to some tensions between
© 2017 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.
630 M. F. Ahammad et al.
market and non-market strategies, demonstrating
inter alia that managerial political connections
may be a liability rather than an asset (e.g. Li,
Zhou and Shao, 2009; Sun, Hu and Hillman, 2016;
Sun, Mellahi and Thun, 2010), and it has been
suggested that ‘developing a capabilityto generate
influence rents [related to non-market strategies]
may well imply a weakeningin the development of
some other productive capabilities [related to e-
ciency improvements or innovation]’ (Ahuja and
Yayavaram, 2011, pp. 16481649). Consequently,
a recent review of the field suggested that ‘our
understanding of the role of complementarity and
tension between market and non-marketstrategies
remains limited’ (Mellahi et al., 2016, p.158).
Simultaneously, the two principal components of
non-market strategy – corporate social respon-
sibility (CSR) and corporate political activity
(CPA) – have largely been studied in isolation
despite repeated calls for their integration (Baron,
2001; McWilliams, van Fleet and Cory, 2002;
Rodriguezet al., 2006) and, only recently,research-
ers have started to investigate the interactions
between the social and political aspects of non-
market strategies (Dentchev, van Balen and
Haezendonck, 2015; Frynas and Stephens, 2015;
den Hond et al., 2014). Recent reviews suggest
that we still have limited knowledge of the circum-
stances under which firms may purposefully man-
age CSR and CPA to benefit from their comple-
mentarities, or treat CSR and CPA as substitutes,
or view CSR and CPA as distinct arenas and thus
ignore their interactions (Frynas and Stephens,
2015; Mellahi et al., 2016).
The resource-based view (RBV) has emerged as
the main theoretical perspective for illuminating
the integration of market and non-market strate-
gies, as scholars have postulated that valuable
firm-specific resources for integrating activities
across the market and the non-market arenas
(Clougherty, 2003; McWilliams, van Fleet and
Cory, 2002) and for integrating CSR and CPA
activities (den Hond et al., 2014; Rehbein and
Schuler, 2015) can lead to valuable complemen-
tarities and competitive advantages for the firm
(cf. Mellahi et al., 2016). While this scholarship
has provided us with a strategic perspective on
the integration of market and non-market strate-
gies, research from other, environment-focused,
theoretical lenses has suggested that positive
performance eects from such integration depend
on the nature of a firm’s external relationships.
In particular, the positive eects of integration
are said to arise in environmental contexts when
governments control critical resources on which
the firm is dependent and there is considerable
value in aligning the firm’s interests with those of
government (Kostka and Zhou, 2013; Marquis
and Qian, 2013; Wang and Qian, 2011). Reviews
of the dominant paradigms in non-market re-
search specifically suggested that the integration
of environmental and strategic theoretical lenses
provides a logical pathfor the continued future de-
velopment of non-market strategy research (Doh,
Lawton and Rajwani, 2012; Mellahi et al., 2016),
and specifically ‘the integration between RDT
[resource dependence theory] and RBV perspec-
tives can result in a more nuanced understanding
of when and how firm-specific [non-market]
resources impact on organizational outcomes’
(Mellahi et al., 2016, p. 156). While the RBV can
explain the creation and nurturing of resources
and capabilities in relation to a firm’s social and
political environments, the RDT can explain how
the value of these resources will be contingent on
the power relationships and resource interdepen-
dences between focal firms and non-marketactors;
hence the RBV and RDT provide complementary
insights that can extend our understanding of how
a firm’s ability to develop non-market capabilities
is limited by non-market actors, or conversely
how firms can develop and deploy non-market
capabilities to counteract stakeholder pressures
or even proactively influence non-market actors
(cf. Mellahi et al., 2016).
Therefore,there is ample need for more rigorous
empirical research that investigates the organiza-
tional value of interactions between market and
non-market strategies, taking the role of environ-
mental context into account and combining the
RDT and the RBV lenses. We specifically build
on the current state-of-the-art integrative model
of the non-market strategy–performance rela-
tionship by Mellahi et al. (2016). Consistent with
Hillman’s (2002) argument that advancement of
non-market strategy scholarship is more likely
by accepting a common dependent variable –
performance outcomes this model focuses on
the organizational performance outcomes of non-
market strategies, highlighting the importance of
studying more closely the mediators between non-
market strategy and performance. Following this
model, our paper specifically investigates the re-
lationships between boundary spanning bridging
© 2017 British Academy of Management.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT