Mergers and acquisitions as a human resource strategy

Bou‐Wen Lin · Shih–Chang Hung · Po‐Chien Li

39 citations0/0 files storedInternational Journal of Manpower

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Corporate Finance and Governance Human Resource and Talent Management Management and Organizational Practices

Abstract

Purpose This paper investigates how a firm's human resource capability can affect the deployment and effectiveness of corporate mergers and acquisitions strategy. Design/methodology/approach Mergers and acquisitions (M&A) is treated as a long‐term strategic orientation based on human resource advantage rather than a tactic to pursue short‐term goals. Using a sample of 267 US banking firms, the main and interaction effects of M&A intensity, HR capability, and in‐state propensity on four firm performance measures were examined. Findings The findings confirm that banking M&A could be very effective when the firm had high HR capability. Evidence was also found that HR capability had a direct impact on firm performance. Although in‐state M&A strategy was in general superior to out‐of‐state M&A strategy, a firm with excellent HR capability might narrow the performance difference between in‐state and out‐of‐state M&A. Research limitations/implications An obvious drawback of using this sample of banking firms is that it raises questions about the generalizability of these findings to smaller financial firms and firms in other industries. This study considers firms having at least one M&A over a three‐year period, so we should not generalize our findings to those firms preferring to use internal growth strategies or greenfield start‐ups. Practical implications The main message of this paper is that human resource capability is critical for M&A strategy to be effective. Originality/value By extending previous investigations which showed that M&A strategy and HR capacity should be independently treated, this study highlights the critical role of internal HR capability in performance implications of M&A strategy.

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References

1991Firm Resources and Sustained Competitive Advantage 2004Firm resources and sustained competitive advantage 1984A resource‐based view of the firm 1995THE IMPACT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON TURNOVER, PRODUCTIVITY, AND CORPORATE FINANCIAL PERFORMANCE.1999The Human Resource Architecture: Toward a Theory of Human Capital Allocation and Development 1981Risk Reduction as a Managerial Motive for Conglomerate Mergers 2001DIRECT AND MODERATING EFFECTS OF HUMAN CAPITAL ON STRATEGY AND PERFORMANCE IN PROFESSIONAL SERVICE FIRMS: A RESOURCE-BASED PERSPECTIVE.2004Knowledge Networks as Channels and Conduits: The Effects of Spillovers in the Boston Biotechnology Community

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