Acquisitions and Organizational Purpose

Abstract

Purpose is undergoing a resurgence of interest across research and practice. Yet we know little about how it relates to strategy, and specifically how strategic actions reinforce or undermine purpose in organizations. This study explores this question in the context of acquisitions. We examine 831 transactions, using data from approximately 1.6 million employees to construct our measure of purpose. We find that, on average, employees’ sense of purpose drops after acquisitions. This drop is particularly pronounced among firms that undertake unique acquisitions, those involving unusual industry combinations. This relationship has implications for the performance of the transaction. Altogether, our findings suggest a possible tension between strategic and motivational consequences of boundary changes. Firms may benefit strategically from these changes, particularly those that enable expansion into unique areas. These same actions, however, may also erode the purpose of the organization, with consequences for downstream performance.

Keywords: Mergers and Acquisitions, Corporate Purpose, Corporate Strategy