35 Pages Posted: 26 Nov 2006
Date Written: November 2006
We examine the dynamics of post-merger organizational integration. Our basic question is whether there is evidence of conflict between employees from the two merging firms. Such conflict can arise for several reasons, including firm-specific human capital, corporate culture, power, or favoritism. We examine this issue using a sample of Danish mergers. Controlling for other effects, employees from the acquirer fare better than employees from the acquired firm, suggesting that they have greater power in the newly merged hierarchy. As a separate effect, the more that either firm dominates the other in terms of number of employees, the better do its employees fare compared to employees from the other firm. This suggests that majority/minority status is also important to assimilation of workers, much as in ethnic conflicts. Finally, greater overlap of pre-merger operations decreases turnover. This finding is inconsistent with the view that workers of the two firms substitute for each other, creating efficiencies from merger. However, that result and our other findings are consistent with the view that more similar workers (in terms of either firm- or industry-specific human capital) are easier to integrate post merger.
Keywords: mergers, internal organization, conflicts
JEL Classification: M5, G34, J63, M14
Suggested Citation: Suggested Citation
Smeets, Valerie and Ierulli, Kathryn and Gibbs, Michael, Mergers of Equals and Unequals (November 2006). IZA Discussion Paper No. 2426. Available at SSRN: https://ssrn.com/abstract=947081