Organizing for Innovation: Managing the Coordination-Autonomy Dilemma in Technology Acquisitions

Abstract

The management of technology acquisitions - acquisitions of small technology based firms by large established firms - poses a dilemma in terms of how to organize for innovation. Acquirers must integrate acquired firms in order to exploit their capabilities and technologies in a coordinated manner; at the same time, they must preserve organizational autonomy for acquired firms in order to avoid disrupting their capacity for continued exploration. In this study, we suggest that the coordination-autonomy dilemma can be better managed by recognizing that the effect of a structural form on innovation outcomes is contingent on the stage of development of the innovation trajectory of the acquired firm. Specifically, we show that structural integration lowers the hazard of new product introductions for acquired firms that have not launched any products prior to acquisition and for all acquired firms in the immediate aftermath of the acquisition, but these adverse effects disappear as the innovation trajectory evolves beyond these stages. We discuss implications for our understanding of post merger integration, and the organizational challenges of balancing exploration and exploitation in high velocity environments.

Keywords: Coordination, Acquisitions, Organization Design

JEL Classification: D23, L22, L23