Upgrading without formal integration in M&A  : the role of social integration

Torres de Oliveira, Rui and Sahasranamam, Sreevas and Figueira, Sandra and Paul, Justin (2020) Upgrading without formal integration in M&A  : the role of social integration. Global Strategy Journal, 10 (3). pp. 619-652. ISSN 2042-5805 (https://doi.org/10.1002/gsj.1358)

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Abstract

Research summary: By adopting a phenomenon-based research approach, we examine the case of an emerging market (EM) supplier upgrading its position in the automotive global value chain (GVC) through the acquisition of a technologically advanced firm from a developed market (DM). Drawing on GVC and social integration literature, we explore the role of social integration adopted by the EM acquirer to achieve upgrading through acquisition. We develop a conceptual framework where we explain the different social integration mechanisms that EM multinationals employ before and after acquisitions to achieve upgrading. Managerial summary: When analyzing an EM firm acquiring a DM firm we found that social integration is a key factor that enables knowledge transfer, particularly if no formal or structural integration occurs. This suggests that the development of mechanisms to facilitate strong socially integrated relationships with acquired firms is central for such type of acquisitions. Our research shows that EM firm managers need to put in place combinations of social integration mechanisms during different phases of the acquisition. Environmental and cognitive social integration mechanisms are crucial for gaining initial legitimacy. Furthermore, affective social integration is important for initiating process and functional upgrading, while cognitive social integration mechanisms become important for initiating intersectorial upgrading.

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