A CORPORATE LEVEL PERSPECTIVE ON ACQUISITIONS AND INTEGRATION

Abstract

Most research of post-acquisition integration examines integration of individual business units. The research pays less attention to corporate level integration processes, by which we mean the standardization of integration routines and synchronization of integration activities across a firm's business units. We argue that corporate level acquisition activities and post-acquisition integration processes strongly influence long term corporate performance, particularly as a firm which comprises interdependent business units becomes geographically diffuse. Acquisitions tend to increase system diversity and goal diversity across business units. Some goal diversity is beneficial, but excessive goal diversity and the existence of system diversity can reduce long run corporate performance by requiring greater managerial effort and increasing the opportunity cost of managerial efforts. The negative effects become stronger as a firm becomes geographically diffuse or if business units are interdependent. Firms that employ active corporate level integration processes - particularly firms that acquire frequently and have interdependent business units - can enhance the benefits and eliminate some of the problems of diversity. © 2005 Elsevier Ltd. All rights reserved.