Balancing Integration and Autonomy in the Post …823895/FULLTEXT01.pdf · Balancing Integration...

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Balancing Integration and Autonomy in the Post-acquisition Phase- A study of German firms acquired by Chinese firms

Master’s Thesis 30 credits Department of Business Studies Uppsala University Spring Semester of 2015

Date of Submission: 2015-05-29

Jing Liu Xiaohuan Chen Supervisor: Susanne Åberg

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ABSTRACT

Acquisitions as a commonly adopted tool enable Chinese firms to gain quicker and deeper

access to certain resources and capabilities from developed countries. The integration process

after acquisition plays a key role in creating the expected value for acquirers. In recent years,

Chinese acquirers have shifted their integration strategy from heavy involvement to high

autonomy. By examining six acquisitions done by Chinese firms in Germany, this study was

carried out in order to answer the question how integration and autonomy can be balanced in

the post-acquisition phase. Specifically, five key success factors were examined: culture

distance, communication, integration speed, leadership & top management team turnover and

resources complementarity. The results demonstrated that both high integration and high

autonomy could be simultaneously achieved in one acquisition case. Despite the fact, that in

general speed of integration was slow, all examined acquisition examples achieved a high

integration level after a certain period of time. The results also showed that the Chinese side

rather considered large cultural distance between the two countries a complementary factor as

they benefited from learning the German way of conducting business. The German side also

tended to learn from its Chinese acquirers, which stabilized top management teams during

this “co-learning process”.

Key Words: Post-acquisition Integration, Autonomy, China, Germany, Culture distance,

Communication, Resources Complementarity, Leadership, Integration speed.

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ACKNOWLEDGEMENTS

First, we are so grateful to have Susanne Åberg as our supervisor, who has guided us through

the whole semester and has always been responsive for any questions we have had. Secondly,

we also would like to thank all our interviewees for sharing their experience and knowledge

with us. They are Mr. Zhang from Sany, Mr. Grosch Sven in Waldrich Coburg, Mr. Degen

Rainer from Degen Machinery, Mr. Liu Zhong and Miss. Liu Leeco from SZXN. Due to the

non-disclosure agreement, we cannot name some interviewees or companies here, but we still

would like to express our gratitude to them. Thirdly, many thanks to our seminar group for

their critical comments and suggestions. Last but not least, we want to say thanks to Thomas

Seifert for proofreading our paper and providing support for our data access to some German

firms.

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ABSTRACT'........................................................................................................................................'1!

ACKNOWLEDGEMENTS'................................................................................................................'2!

1.'Introduction'................................................................................................................................'7!1.1'Problem'Statement'...........................................................................................................................'7!1.2'Research'Purpose'.............................................................................................................................'8!1.3'Research'Question'............................................................................................................................'9!

2.'Theory'Review'and'Framework'...........................................................................................'9!2.1'Acquisition'Motivation'....................................................................................................................'9!2.2'Integration'Approach'in'PostRacquisition'.............................................................................'10!2.2.1!Definition!of!integration!and!autonomy!..........................................................................................!10!2.2.2!Integration!approach!model!.................................................................................................................!11!

2.3'Theoretical'Framework'Background'......................................................................................'11!2.3.1!Culture!distance!.........................................................................................................................................!12!2.3.2!Communication!..........................................................................................................................................!13!2.3.3!Integration!speed!......................................................................................................................................!14!2.3.4!Leadership!and!TMT!turnover!............................................................................................................!15!2.3.5!Resource!and!capability!complementarity!vs.!similarity!.........................................................!16!

2.4'Conceptual'Framework'................................................................................................................'18!

3.'Methodology'..............................................................................................................................'19!3.1'Research'Approach'........................................................................................................................'19!3.2'Research'Design'.............................................................................................................................'19!3.3'Research'Strategy'..........................................................................................................................'19!3.4'Case'Selection'..................................................................................................................................'20!3.5'Data'Collection'................................................................................................................................'21!3.5.1!Primary!Data!collection!and!interview!process!...........................................................................!21!3.5.2!Choice!of!Interviewees!............................................................................................................................!22!3.5.3!Gaining!Access!............................................................................................................................................!23!3.5.4!Secondary!data!collection!......................................................................................................................!24!

3.6'Data'Analysis'...................................................................................................................................'24!3.7'Reliability,'Validity'and'Limitation'..........................................................................................'25!

4.'How'Chinese'Firms'Integrate'Acquired'German'Firms'..............................................'26!4.1'Schiess'AG'and'Shenyang'Machine'Tool'(SMTCL)'...............................................................'26!4.1.1!Culture!............................................................................................................................................................!26!4.1.2!Communication!..........................................................................................................................................!27!

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4.1.3!Integration!speed!......................................................................................................................................!27!4.1.4!Leadership!and!top!management!team!turnover!........................................................................!27!4.1.5!Resource!and!capability!.........................................................................................................................!28!

4.2'Waldrich'Coburg'and'Beijing'No.'1'Machine'Tool'Plant'...................................................'28!4.2.1!Culture!............................................................................................................................................................!29!4.2.2!Communication!..........................................................................................................................................!29!4.2.3!Integration!speed!......................................................................................................................................!30!4.2.4!Leadership!and!TMT!turnover!............................................................................................................!30!4.2.5!Resources!and!capability!complementarity!..................................................................................!30!

4.3'Putzmeister'and'Sany'...................................................................................................................'31!4.3.1!Culture!Distance!.........................................................................................................................................!31!4.3.2!Communication!..........................................................................................................................................!31!4.3.3!Integration!speed!......................................................................................................................................!32!4.3.4!Leadership!and!TMT!turnover!............................................................................................................!32!4.3.5!Resource!and!capability!complementarity!....................................................................................!32!

4.4'Degen'and'Suzhou'Xinneng'(SZXN)'..........................................................................................'32!4.4.1!Culture!............................................................................................................................................................!33!4.4.3!Communication!..........................................................................................................................................!33!4.4.3!Integration!speed!......................................................................................................................................!33!4.4.4!Leadership!and!TMT!turnover!............................................................................................................!34!4.4.5!Resource!and!Capability!Complementarity!...................................................................................!34!

4.5'Solar'Cell'and'Bestwind''(Anonymous)'...................................................................................'34!4.5.1!Culture!............................................................................................................................................................!34!4.5.2!Communication!..........................................................................................................................................!35!4.5.3!Integration!Speed!......................................................................................................................................!35!4.5.4!Leadership!and!TMT!turnover!............................................................................................................!35!4.5.5!Resource!and!capability!complementarity!....................................................................................!36!

4.6'Energy'and'Inno'(Anonymous)'..................................................................................................'36!4.6.1!Culture!............................................................................................................................................................!36!4.6.2!Communication!..........................................................................................................................................!37!4.6.3!Integration!speed!......................................................................................................................................!38!4.6.4!Leadership!&!TMT!.....................................................................................................................................!39!4.6.5!Resources!complementary!....................................................................................................................!39!

5.'Analysis'.......................................................................................................................................'41!5.1'Integration'types'of'the'six'acquisitions'................................................................................'41!5.2'Culture'Distance'.............................................................................................................................'41!

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5.3'Communication'...............................................................................................................................'43!5.4'Integration'Speed'...........................................................................................................................'45!5.5'Leadership'and'TMT'turnover'...................................................................................................'46!5.6'Resource'and'capability'complementarity'vs.'similarity'.................................................'48!

6.'Conclusion'..................................................................................................................................'52!

List'of'References'.........................................................................................................................'56!

Appendix I Interview Guide to Chinese Firm .................................................................. 64!

Appendix II Interview Guide to German Side ................................................................. 67!

Appendix III. Summary of Theoretical Background ....................................................... 68!

Appendix IV. Summary of Analysis Findings ................................................................. 72!

Figure 1. Integration approach model .............................................................................. 11!

Figure 2. Theory Framework ........................................................................................... 18!

Figure 3. Integration Approach Model and Six Acquisitions .......................................... 41!

Table 1. Description of Acquisitions ............................................................................... 20!

Table 2. Overview of the Interviews ................................................................................ 22!

Table 3. Resource Complementarity in Six Acquisitions ................................................ 49!

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List of Abbreviations

OFDI Outbound Foreign Direct Investment

M&As Mergers and Acquisitions

EMNCs Emerging Market Multinationals

OLI Ownership, Location and Internalization

TMT Top Management Turnover

SMTCL Shenyang Machine Tool Co., Ltd

SZXN Suzhou Xinneng

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1. Introduction In recent years, China has been proactively investing into highly developed economies. The

number of foreign acquisitions made by Chinese companies rose rapidly, it doubled from 40

in 2003 to 82 in 2006 and reached a peak of 298 in 2008. In 2012, Chinese Outbound Foreign

Direct Investment (OFDI) in Germany amounted to 1.93 Bio. Euros that represented 17% of

Germany’s total FDI. Germany became the most popular country which covered 64 percent

of all Chinese acquisition deals in the EU (Germany Trade and Invest, 2013). Therefore, we

put the focus of our study on Chinese companies acquiring German firms.

Acquisition is a common tool for firms to obtain quicker corporate growth and thus it

attracted substantial attention from scholars (Deng, 2007). According to Haspeslagh and

Jemison (1991) “all value creation takes place after acquisition”. Four integration strategy

approaches are frequently used in acquisition integration studies. They are “Preservation”,

“Symbiosis”, “Absorption” and “Holding”. Each approach defines a specific level of

autonomy granted to the acquired firms and a specific integration level. Prior research

identified several obstacles during the integration process, such as organizational

incompatibility (Datta and Grant, 1990; Jemison and Sitkin, 1986), high executive turnover

(Hambrick and Cannella, 1993), culture distance (Weber, Shenkar and Raveh, 1996),

operational disruption (Paruchuri et al., 2006) and leadership vacuum (Haspeslagh and

Jemison, 1991). Conflicts often occur during integrating and restructuring acquired firms,

because both are typically accompanied by loss of autonomy. The acquirers’ intensive

interference may lead to high top management turnover (TMT). These conflicts have a

negative impact on post-acquisition performance (Chatterjee, Lubatkin, Schweiger and

Weber, 1992; Very, Lubatkin and Calori, 1997; Hambrick and Cannella, 1993). The loss of

autonomy can even result in resentments and anger (Buono and Bowditch, 1989). The further

conclusion is made that integration strategy has to balance integration and autonomy

(Haspeslagh and Jemison, 1991; Graebner, 2004). Hence, five main success factors shall be

considered which are culture distance, communication, integration speed, leadership & top

management team turnover, as well as resource complementarity. (Gomes, Angwin, Weber

and Yedidia, 2013; Ranft and Lord, 2002)

1.1 Problem Statement The type of integration strategy determines how much value is created. Implementing an

efficient integration strategy has the goal to unlock potential synergies between the two firms.

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A non-existent or poor post-acquisition integration strategy can lead to acquisition failure

(Haspeslagh and Jemison, 1991). In order to achieve potential synergies, many acquirers used

to adopt integration strategies and plans such as typical 100 days plans which focused on the

integration of acquired firms into their own corporate structures and on making changes as

quickly as possible to reduce uncertainty of employees and customers (Reichheld and Henske,

1991; Clemente and Greenspan, 1997; InKpen, Sundaram and Rockwood, 2000). Yet, these

strategies and plans may also create many bad side effects on target firms, such as high

employee resistance and high top management turnover due to the loss of autonomy of the

acquired company and the parent firms’ excessive interference (Ranft and Lord, 2002). In

general more than 80 percent of acquisitions failed to achieve enough profits to cover annual

cost of capital. And only 23 percent of acquisitions can be considered successful (Bekier,

Bogardus and Oldham, 2001).

A study on Chinese mergers and acquisitions (M&As) in Germany found out that one third

of all acquisitions made between 2000 and 2010 were disastrous. Only about one third was

considered successful. As most of Chinese acquirers heavily involved in their subsidiaries,

these German factories closed down and no acquisition objectives were achieved (Liu and

Waldemar, 2011). However, Chinese acquirers learned from previous mistakes they made

when acquiring firms in developed countries. Some researchers find that in recent years these

acquirers shift to a different integration approach, in which they grant a high level of

autonomy to acquired firms, and try to preserve the boundaries between the two sides. This

resulted in fewer failures in comparison to previous acquisition deals (Bruche and Wallner,

2013; Otto, 2013; Liu and Woywode, 2013).

Although many researchers argue that high autonomy granted to acquired firms means loss

of control and limited integration, leading to unsatisfying results for the acquirers (Puranam,

Singh and Chaudhuri, 2009), some scholars highly support this integration approach, because

fewer bad side effects occur such as employee resistance and high top management turnover

(Kale, Singh and Raman, 2009). Hence we were very interested in investigating this topic and

to discover how the conflicts are handled when balancing the dilemma of autonomy and

integration in post acquisition stage.

1.2 Research Purpose Previous scholars mainly focused on acquisitions done by Western MNCs. There is a lack of

research in the area of acquisitions done by emerging market multinationals (EMNCs). Hence,

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the purpose of this thesis is to increase the understanding of post-acquisition integration made

by Chinese firms acquiring German firms, as well as to establish a sound foundation for

further theory development within the field of post-acquisition integration.

1.3 Research Question A case study of Chinese firms acquiring German firms with six acquisition examples is

carried out to answer the following research question:

How$do$Chinese$firms$balance$integration$and$autonomy$with$acquired$German$firms?!

2. Theory Review and Framework All theories about acquisition motivation and post acquisition integration concerning five

main concepts are critically reviewed, summarized and presented at Appendix III.

2.1 Acquisition Motivation Since the study of motivations in the pre-acquisition stage enhances the understanding of

integration in the post-acquisition stage (Napier, 1989), this section reviews reasons why

firms from emerging countries make M&As in developed countries.

The ownership, location and internalization (OLI) eclectic model (Dunning, 2000) says that

firms can exploit their assets overseas and increase their profits only when they have certain

ownership-specific advantages, which are not possessed by competitors from other countries

and by internalizing these advantages in a favorable location. OLI eclectic model represents

three types of advantages of enterprises that seek international expansion, namely ownership

advantages, locational advantages and internalization advantages.

Dunning’s eclectic paradigm could relevantly explain the EMNCs’ OFDI towards other

developing countries, as these EMNCs could leverage ownership advantages and search for

location-specific advantages (Luo and Tung, 2007). However, EMNCs do not have such

superior ownership advantages to leverage when they invest in developed countries (Amsden

and Chu, 2003; Goldstein, 2007; Mathews, 2006).

Instead, they take proactive actions to compensate for their competitive disadvantages by

acquiring firms from developed countries. A springboard perspective is used to explain

EMNCs’ motivations to acquire firms in developed countries. EMNCs use acquisitions as a

springboard to obtain strategic assets in order to strengthen their position in home markets

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where there is rapid growth (Luo and Tung, 2007). Strategic asset is defined as “the

specialized capabilities and resources, which belong to an enterprise which are hard for

competitors to imitate” (Amit and Schoemaker, 1993).

Obtaining strategic asset is proved to be the most crucial motive for Chinese MNCs’ OFDI.

Chinese MNCs prefer acquisition as a quicker way to access strategic capabilities and

resources such as advanced technology, managerial expertise, and market resources in

industrial countries (Deng, 2007).

In conclusion, the motives for M&As of MNCs from developed countries and of EMNCs

are different. The former intends to leverage ownership advantages, the latter aims at

acquiring strategic capabilities and resources.

2.2 Integration Approach in Post-acquisition

2.2.1 Definition of integration and autonomy

After acquiring another firm, integration strategy becomes the central focus, and it strongly

influences post-acquisition performance (Haspeslagh and Jemison, 1991; Gomes et al., 2013).

Integration strategy is about how to balance integration and autonomy (Haspeslagh and

Jemison, 1991; Graebner, 2004).

Integration is defined as “making changes in the functional activity arrangements,

organizational structures and systems, and cultures of combining organizations to facilitate

their consolidation into a functioning whole (Pablo, 1994). Integration can positively affect

post-acquisition performance by exploiting potential synergies between acquired firms and

acquirers (Capron, 1999; Larsson and Finkelstein, 1990; Birkinshaw, Bresman and Håkanson,

2000).

Autonomy in an acquisition by definition is the day-to-day freedom to make decisions

rather independently without parent firm's intensive involvement but in the same time to keep

a close and respective cooperation for the sake of post-acquisition objectives (Hayes, 1979;

Vancil, 1979). Autonomy encourages people to be more responsible and do more meaningful

work, as through it the needs for higher order of human beings, e.g. in terms of power and

freedom, can be met (Khandwalla, 1977; Stubbalt, 1983)

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2.2.2 Integration approach model

A commonly used model for acquisition integration approaches is Haspeslagh and Jemison

(1991), which reveals four types of integration approaches. Each approach represents

different levels of autonomy and integration. We will frequently refer to some of these types

in our theory framework. The terms “preservation” and “absorption” are used more

frequently in order to clearly distinguish between autonomy and integration.

In the model the vertical dimension represents autonomy granted to the acquired firms. The

horizontal dimension shows the strategic interdependence (integration) expected between

acquirers and acquired firms.

1. Preservation: acquirers keep the acquired firms intact, high autonomy is granted and

resources are provided if needed

2. Symbiosis: acquirers must simultaneously ensure boundary preservation and

boundary permeability. Target firms enjoy a certain degree of autonomy. Integration

is a gradual process

3. Absorption: acquirers dissolve the boundary between the two firms, assimilate

acquired firms into their own operation system, totally consolidate the operation of

the two firms and apply high level integration and low autonomy for the target firms.

Integration speed is high

4. Holding: acquirers have no intention to integrate and value creation is achieved

through financial transfer, application of general management skills or risk sharing.

Need for strategic interdependence

Low High

Nee

d fo

r autonomy

High

Preservation Symbiosis

Low

Holding Absorption

Figure 1. Integration approach model (Source: Haspeslagh and Jemison 1992 p.148)

2.3 Theoretical Framework Background Based on Haspeslagh and Jamison’s (1991) integration approach model, Gomes et al. (2013)

did further research and enhancement. He demonstrated six success factors in the post-

acquisition process, which are: integration strategies, post acquisition leadership, speed of

implementation, autonomy, communication and cultural distance. Since integration strategies

highly depend on leadership, speed, cultural distance and communication (Angwin, 2001;

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Weber et al., 1996; Waldman and Javidan, 2009; Schweiger and DeNisi, 1991), they can be

as well described as the balance between integration and autonomy (Haspeslagh and Jemison,

1991; Kale et al., 2009; Reich, 2013). Further more, some researches also put emphasis on

the importance of integrating and reconfiguring resources and capabilities from acquired

firms in the post acquisition stage (Kogut and Zander, 1992; Harrison, 2001; Zaheer,

Castaner and Souder, 2013). Hence, we have chosen culture distance, communication,

integration speed, leadership and top management team turnover, and resource

complementarity as the five criteria to analyze how Chinese companies balance integration

and autonomy. In the next five sections, we will review the literature about these five criteria

and critically discuss their impact on balancing integration and autonomy after acquisition.

2.3.1 Culture distance

Organizational cultures are closely associated with national cultures (Terpstra and David,

1991). If two countries have a great culture distance, there also is a big difference in

attributes of organizational cultures (Kogut and Singh, 1988). In terms of culture distance,

both national culture and organizational culture are put into consideration.

National cultural distance is the degree of shared values and customs between two

countries (Hofstede, 2001; Kogut and Singh, 1988; Morosini, Shane and Singh, 1998).

Organizational cultural distance can be defined as difference of how things are done in

different organizations (Miller, 2003). It influences how individuals and teams communicate

with each other, as well as with other stakeholders (Vazirani and Mohapatra, 2012).

Cultural distance is considered to be a critical determinant of integration after acquisition

(Björkman, Stahl and Vaara, 2007; Teerikangas and Very, 2006; Vermeulen and Barkema,

2001). Many studies have been done regarding relationships between cultural distance and

acquisition performance (Datta and Puia, 1995; Chakrabarti, Gupta-Mukherjee and

Jayaraman, 2008; Vaara, Sarala, Stahl and Björkman, 2012).

A big cultural distance could lead to poor post-acquisition performance (Chatterjee et al.,

2008; Olie, 1994; Vaara et al., 2012), because it is regarded as an obstacle during the

integration implementation process. It is more obvious in cross-border acquisitions

(Chakrabarti et al., 2008).

However, cultural difference could be seen as a sort of resource complementarity and lead

to value creation (Krishnan, Miller and Judge, 1997; Morosini et al., 1998; Vermeulen and

Barkema, 2001). Firms can learn from other firms with different cultures (Reus and Lamont,

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2009; Vaara et al., 2012). Hence, the increased diversification could result in a more intense

innovative spirit inside firms that allows them to improve marketing skills and acquire more

customers (Cox, 1991). Firms also become more adaptive towards changing environment by

acquisitions with firms of different culture (Barkema and Vermeulen, 1998).

When it comes to balancing autonomy and integration in terms of cultural distance,

Slangen (2006) argues that big national culture distance negatively affects acquisition

performance if the “absorption” approach is applied. Instead the adoption of the “preservation”

approach enhances acquisition performance under such circumstances.

2.3.2 Communication

Communication in a single organization facilitates firm performance as efficient internal

communication enables employees and managers to share insights and create conformity to

achieve common goals. Further more open and transparent communication increases

employee commitment (Mishra, Boynton and Mishra, 2014). Communication within one

company is already quite complex. As acquisition involves organizations, communication

challenges between acquirers and acquired firms are even higher. In comparison cross-border

acquisitions provide the highest level of difficulties and communication has an extremely

critical influence on post acquisition performance (Gertsen, Søderberg and Torp, 1998; Ranft

and Lord, 2002; Gomes et al., 2013).

Top managers normally are well informed about the acquisition. However, they have the

tendency to avoid discussions with employees due to many reasons (Miris and Marks, 1986).

Thereafter, employees seek information from other sources such as rumors due to the lack of

information and uncertainty towards their future (Napier, 1989).

D’Aprix (2009) emphasized that face to face communication could be a more credible

source of information for employees. Two-way communication formal as well as informal

between employees and managers is proved to be of highly valuable in organizations.

Open and transparent communication results in well informed employees. They obtain a

better understanding about the coming corporate changes and the difference in their work

responsibilities after acquisition, which enhances the integration process (Schweiger and

DeNisi, 1991; Eisenberg and Witten, 1987).

Ranft and Lord (2002) states that communication in the post-acquisition stage is proved to

be critical for reducing employee uncertainty, builds trust and facilitates knowledge exchange

between the two firms. Communication richness particularly compensates for the acquirers’

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limited control when “Preservation” integration type (acquired firms have high autonomy) is

adopted, as it establishes a cooperative and collaborative atmosphere in which the two firms

can achieve expected synergies under the internal organizational boundary. Haspeslagh and

Jemison (1991) emphasize that the atmosphere plays a key role in the integration

implementation process. When acquirers have a high integration and low autonomy plan,

which is called “Absorption”, the integrating process aims at assimilating target firms into the

acquirers’ systems, which requires a lot of communication work (Haspeslagh and Jemison,

1991).

2.3.3 Integration speed

Integration speed is considered to be critical in post-acquisition stage (Homburg and Bucerius,

2006; Schweizer and Patzelt, 2012). Either high speed or low speed could lead to good

performance (Inkpen et al., 2000).

Homburg and Bucerius (2006) argue that internal relatedness (management style, strategic

orientation, performance) and external relatedness (target market and market position) jointly

affect the relation between post acquisition performance and integration speed. High speed

could lead to better performance when higher internal relatedness comes with lower external

relatedness. In contrast high speed could strongly decrease performance if lower internal

relatedness as well as high external relatedness represent the situation of the two firms.

However, integration speed has a weak influence on post-acquisition performance when

internal and external relatedness are both high or both low.

Fast speed integration is especially beneficial when it comes to reducing customer

uncertainty after acquisition. Customer uncertainty originates from potential changes in

product related issues, different contact persons, rumors in the market and efforts of

competitors trying to gain over customers (Reichheld and Henske, 1991; Clemente and

Greenspan, 1997). Fast speed integration implementation e.g. conducted through a typical

100 day plan (Inkpen et al, 2000), could also increase employee commitment as it mitigates

the uncertainty for employees of the acquired firms. In addition, fast integration enables firms

to quickly benefit from economies of scale, and save cost (Capron, 1999; Homburg and

Bucerius, 2005).

In contrast, Ranft and Lord (2002) write that fast speed integration results in value

destruction e.g. because key employees and top managers with valuable knowledge leave the

organization soon after acquisition.

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Slow integration can leave a time period for mutual learning and trust building between

acquired and acquiring firms (Homburg and Bucerius, 2006). Mutual learning and trust

enable firms to achieve resource- as well as knowledge transfer (Haspeslagh and Jemison,

1991). Ranft and Lord’s (2002) further elaborate that slow integration has a positive impact

on cultural adaptation. Low speed and high autonomy given to the acquired firms could keep

the valuable knowledge inside the acquired firm for a period of time and therefore knowledge

transfer can be less difficult. Low speed enables the TMT (Top Management Team) to better

adapt the integrations plans and manage the team in accordance to the acquisition objectives.

However, for high-tech firms the first and prime motivation for acquisitions is to obtain new

technologies in order to combine them with their own business and create innovations. Hence

in this case, slow integration speed could be risky for acquirers (Lin, 2012).

2.3.4 Leadership and TMT turnover

2.3.4.1 Leadership

Leadership plays a vital role in creating substantial acquisition values towards acquisition

performance (Pablo, 1994; Strauss and Corbin, 1990; Waldman, Javidan and Varella, 2004).

Graebner (2004) conceptualized the acquisition values in two types, expected and

serendipitous. Acquired leaders are important for both types of values. On one hand,

Expected values can be achieved under the support of them, because they mitigate potential

conflicts and help to relieve employee anxiety that typically occurs in post-acquisition stage.

Acquisition can also catch serendipitous value, if leaders have the visibility to discover

unexpected synergies. Babić, Savović and Domanović (2014) emphasized that employee

needs support from leaders when there are new changes; leaders’ support could leads to a

better acquisition performance

2.3.4.2 TMT turnover

The TMT is a group of high position managers who have the responsibility to draft and

execute corporate strategies. They have the authority and power to comprehensively control

and influence firms. They are of high importance and influence (Smith, Smith, Olian, Sims Jr,

O’Bannon and Scully, 1994). When acquisitions take place, the TMT in the acquired firms

becomes a critical issue. Angwin and Meadows (2009) found that high-level integration as

conducted in the “absorption” approach might relate to high TMT turnover.

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From the acquired firm’s perspective, high-level integration indicates intensive

interventions from acquiring firms (Krug and Hegarty, 2001), less autonomy and lower

formal status (Hambrick and Cannella, 1993). As a result high-level TMT turnover increases

significantly.

In comparison, the integration approach with high autonomy granted to acquire firms

usually relates to low TMT turnover (Angwin and Meadows, 2009).

Low TMT turnover could come from two reasons. The first is that executives in acquired

firms have a positive outlook on the long-term benefits of the acquisition, which motivates

them to stay (Hambrick and Cannella, 1993). The Second is that the TMTs in both acquirers

and acquired firms have complementary functional backgrounds (Krishnan et al., 1997).

As stated above, the different TMT turnover rate after acquisition is caused by multiple

reasons. Whether TMT turnover has a positive or negative effect on post-acquisition

performance, there are also different opinions from previous researches. From corporate

control perspective, post-acquisition performance (Lowenstein, 1983) can be improved if

acquirers replace members of the acquired firm’s management team that are perceived

unnecessary to better exploit acquired assets. From a resource-based view, however, high

TMT turnover has a negative impact on post-acquisition performance, because the TMT in

acquired firms possesses unique and vital internal knowledge (Brockmann and Anthony,

2002; Michalisin, Karau and Tangpong, 2004; Kiessling and Harvey, 2006). Randel and

Ranft (2007) also emphasize that TMT turnover has negative effects on information

exchange and social capital in acquired firms. Butler, Perryman and Ranft (2012) examined

the relationship between top management turnover and the acquisition outcomes in acquired

companies. The result showed the same. The lower the turnover in an initial post acquisition

TMT, the greater the market expansion goals can be achieved (Cording, Christmann and

King, 2008).

2.3.5 Resource and capability complementarity vs. similarity

Firms make acquisitions to gain quick access to certain resources and capabilities in foreign

countries, in order to open up new markets and obtain new technologies. Kogut and Zander

(1992) put emphasis on the importance of integrating and reconfiguring resources and

capabilities from acquired firms in the post acquisition stage, e.g. new markets and

capabilities from acquired firms or mutual diversification of corporate resources (Morosini et

al., 1998; Kogut and Singh, 1988).

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2.3.5.1 Resource and capability complementarity

Resource and capability complementarity can be defined as two firms having complementary,

mutually enhancing elements, such as strong marketing abilities from one side combined with

advanced research and development abilities from the other side. Bringing two different

attributes together can potentially create greater joint values (Milgrom and Roberts, 1995).

To achieve such joint values, the two firms need to closely coordinate each other and

cooperate well (Kim and Finkelstein, 2009; Milgrom and Roberts, 1995). However, these can

only be achieved if acquirers and acquired firms can efficiently combine and integrate their

resources. Either side cannot create them alone (Cassiman, Colombo, Garrone and Veugelers,

2005; Conner, 1991). Thus, a certain level of integration is necessary to achieve potential

synergies between acquirers and acquired firms, when their resources and capabilities are

complementary (Harrison, 2001).

On the other hand, acquired firms have their own unique set of resources and capabilities,

which is embedded in its specific context and people as well as unfamiliar and new for the

acquirers. The acquirers have bigger challenges to be fully aware of the target’s resources and

capabilities than their own (Capron, 1999). These resources and capabilities should be well

maintained to achieve the aimed synergies. Acquirers should grant a certain level of

autonomy to the acquired firms in order to ensure the stability of the acquired firms (Harrison,

2001). This certain level of autonomy is also proved to be especially vital to deploy

complementary R&D resources and capabilities (Zaheer et al., 2013).

2.3.5.2 Resources and capability similarity

The extent of how much two firms overlap in terms of markets and technology is associated

with similarity. Two firms with high similarity of resources and capabilities have potential

synergies to achieve economies of scale and gain higher market power through integration

(Lubatkin, 1983). It has a positive impact on earnings for acquirers (Singh and Montgomery,

1987). A high integration level can be expected if two firms are similar. It is easier to go

through the integration process as the two firms share much of the same skills and

understanding of markets and technologies (Kogut and Zander, 1992; Makri, Hitt and Lane,

2010). Such high degree of integration means a lower level of autonomy (Datta and Grant,

1990). However, when firms acquire similar firms for the sake of gaining high-tech and

improving product quality by absorbing acquired knowledge, the target firms’ high loss of

18

autonomy will result in knowledge disruption. Therefore the expected objective to absorb

new technology cannot be realized (Puranam et al., 2009; Ranft and Lord, 2002).

Previous researches show that a high integration level means low autonomy granted to

acquired firms, and a high autonomy is always combined with a low degree of integration

(Datta and Grant, 1990; Pablo, 1994). However, Zaheer et al. (2013) argues that a high level

of integration and autonomy can coexist and are required to achieve great post acquisition

performance. Moreover, decisions on integration and autonomy levels are made separately,

especially when two firms match complementarily.

It can be said that balancing integration and autonomy is necessary, either when acquirers

and acquired firms are complementary or when they are similarly related in terms of

resources and capabilities.

2.4 Conceptual Framework We summarized our conceptual framework in Figure 2. As stated above, theories regarding

the implementation of integration have conflictive ideas as some scholars conclude that

different integration levels could all possibly lead to post-acquisition success or failures

(Child, Pitkethly and Faulkner, 1999; Hubbard and Purcell, 2001). We will take five factors

into consideration to explore Chinese acquirers’ integration approach. They are culture

distance, communication, integration speed, leadership and TMT turnover as well as

complementarity of resources and capabilities. These five key factors are vital for balancing

autonomy and integration (Gomes et al., 2013; Ranft and Lord, 2002).

Figure 2. Theory Framework

Autonomy'OR'Integration

Culture!Distance

Leadership and TMT turnover

Integration!Speed

Communication

Resource!and!Capability!Complementarity!vs.!Similarity v

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3. Methodology

3.1 Research Approach This thesis intends to increase the understanding of post-acquisition integration made by

Chinese firms acquiring German firms, as well as to establish a sound foundation for further

theory development within the field of post-acquisition integration. In order to contribute to

the mentioned topic, it is of high value for the authors to refer to the plenty existing theories

and studies of acquisition integration that are based on cases in industrialized countries.

However, we think that these theories are not sufficient to understand the integration

approach applied by Chinese MNCs, as these firms have different attributes and operate in

different business environments. Thus, abductive reasoning gets applied. This approach

allows us to go through an intertwined process that uses empirical data and existing theories.

Abductive reasoning has the advantages of understanding a new phenomenon, and of

improving the existing theories by adding new insights (Van Maanen, Sorensen and Mitchell,

2007).

3.2 Research Design The research design is the author's plan of how to answer the research questions (Saunders,

Lewis and Thornhill, 2012). We define the nature of our study as exploratory research. First,

as external researchers, we have no involvement and little understanding about the business

reality in the organizations, and we acknowledge that acquisitions from EMNCs are a new

phenomenon that has ample aspects to discover (Liu and Woywode, 2013; Kale et al., 2009).

This research design is more complex and probably different from previous studies, which

are mostly based on acquisitions done by firms from industrialized countries. Hence we were

ready and excited to gain new insights occurring during the data collection process as

exploratory research has the advantage of discovering and adding new perspectives on the

given topic. When choosing an exploratory methodology, a qualitative study is suitable (Yin,

2009).

3.3 Research Strategy A case study is relevant and suitable to gain an in-depth understanding of the context and the

processes of a phenomenon (Eisenhardt and Graebner 2007). It has the considerable ability to

answer the “how” questions (Yin, 2009). At the same time, the use of case studies is

20

worthwhile to explore or challenge the existing theories (Saunders et al., 2012). As little

attention has been drawn to the topic of balancing integration and autonomy granted to the

acquired German firms by Chinese acquirers, the evidence gained from a case study

including six acquisition examples can possibly build a foundation for further theory

development.

3.4 Case Selection In the beginning of acquisition example selection, we decided to contact acquirers of small

size, because we know that large size firms in China are highly hierarchical and hard to

contact. However, the small size firms, which did acquisitions of German firms, are not

present in the media. We tried to contact consulting firms that deal with acquisition issues for

Chinese companies. Yet, information on the acquisition deals is highly confidential.

Afterwards, we chose 25 companies from the acquisition report made by BGM Associates

Research (Bruche and Wallner, 2013). It lists the 25 largest corporate acquisitions from

China in Germany between 2002-2012. Because of expected access difficulties, we targeted a

large sample of firms in order to significantly increase the possibility to collect enough data.

Among these 25 companies, we have only had existing contacts to two firms. Strong

continuous efforts were made to gain access to all other 23 acquisitions. The initial contact by

email was unsuccessful as no feedback was received. Thus cold calls were made both to the

German and Chinese side.

After 2-4 weeks of contacting, access was gained to seven acquisitions. As one acquisition

(WISCO acquire Tailored Blanks) in the end did not provide new insights, it was deleted.

Among the six remaining acquisitions, only one required anonymity. Further more we also

chose to not present another example’s name as sensitive issues were raised during

integration process. We considered this a more ethical way of conduct. These two anonymous

acquisitions are from the new energy sector. The six acquisition examples therefore make up

one case, which is Chinese firm acquiring German firm.

Table 1 shows the fundamental information of the six acquisitions concerning industry,

transactions values, the number of employees in acquired firms, and the number of our

informants. Table 1. Description of Acquisitions

Acquisition

s Acquirer Acquired Industry

Acquired

Year

Approximate Transaction

Value/million Euro

Approximate Number of

Employees in Acquired Firm

Number and Level

of Informants

Affiliation of Informants

21

1 SMTCL Schiess AG Machine 2004 8 140 employees 1 Manager Acquirer 2 Beijing No.1 Waldrich Coburg Machine 2005 35 500 employees 1 Manager Acquired 3 Sany Putzmeister Machine 2012 360 3000 employees 1 Manager Acquirer

4 SZXN Degen Machine 2013 8 < 50 employees 2 CEO Acquirer and Acquired

5 Bestwind Solar Cell New Energy 2014 6.14 36 employees 1 Manager Acquired 6 Energy Inno New Energy 2012 25 400 employees 2 Managers Acquired

3.5 Data Collection

3.5.1 Primary Data collection and interview process

In line with our research methodology and research strategy a “non-standardized” semi-

structured interview is chosen. Cooper and Schindler (2008) also suggest that when a study

includes exploratory elements, semi-structured interviews are suitable to obtain data.

Interviews are a most advantageous approach to obtain data in the following circumstances:

First, there is a substantial amount of questions. Second, the questions are open-ended and of

high complexity. Third, the logic and order of questions can be adjusted to different

interviewees (Jankowicz, 2005; Saunders et al., 2012).

Our interview media is mostly digital via the Internet together with telephone calling.

Concerning digital interviews, both synchronous (Skype and Chinese online chat program

QQ) and asynchronous (email and internet forums) ways are used. There are two main

reasons why such approaches instead of face-to-face interviews were chosen. Firstly, the

potential interviewees are either from China or Germany, which are geographically remote

from the authors. Secondly, as most of the interviewees are top managers with high job

intensity and physical visits are more difficult to organize, the probability that a face-to-face

interview request will be refused is rather high. Luckily, we were able to conduct only one

face-to-face interview in Uppsala due to the fact that the German firm has a subsidiary here,

and we interviewed the CTO in the end of our data collection in Uppsala.

Saunders et al. (2012) emphasize the importance of preparation before interviews.

Preparation increases data quality and demonstrates the authors’ competence and credibility.

First, information on potential interviewees was gathered, such as their previous work

experience and their working years in the studied organizations. We have mainly used their

LinkedIn profile and their corporate webpages. Secondly, in order to enhance information

quality provided by interviewees, we collected data online (company webpage, news in

Chinese, English and occasionally in German) about the acquisitions. Third, the list of

questions was sent to the interviewees beforehand, so that they could prepare themselves,

22

which is a way to facilitate cognitive access (Saunders et al, 2012). The themes of the

questionnaire were: cultural distance between German and Chinese firms, top management

turnover in German firms, communication mechanisms, integration speed, and the two firms’

complementarity of resources and capabilities. We have designed two interview guides for

both Chinese side and German side. The interview Guide for Chinese side is written both in

Chinese and English. (See Appendix I and Appendix II)

Table 2 below presents our summarized information of our interviewee position, and the

years they spend in the studied organization and the interview time. Interviewed companies

are marked with a white background in the table. The grey ones in the same line are their

acquired/acquirer companies. Table 2. Overview of the Interviews

3.5.2 Choice of Interviewees

Since the topic of our thesis is balancing autonomy and integration in the post-acquisition

stage, it involves both acquirers and acquired firms. We therefore have chosen interviewees

from both sides. In the beginning we intended to interview managing directors,

communication department managers, as well as works council representatives on the

German side. Works councils in Germany play a vital role between employer and employee,

as they deal with employment issues especially during acquisitions. These representatives are

more open to interview requests according to suggestion from BRIC-INVEST in Germany.

Interview No.

Acquisition firm Interview type Date Length Interviewee Stay

period Chinese Firm German Firm

1 Sany Putzmeister Skype March 23 35-40 min Secretary General Director 8 years 2 SMTCL Schiess Skype March 25 20-25 min PR Representative 12 years 3 WISCO Tailored Blanks Skype March 30 10-15 min CEO of Tailored Blanks - 4 BYJC Waldrich Coburg Skype March 27 20-25 min PR Representative 15 years 5 as above E-mail March 28 - as above as above 6 as above Skype March 31 30-35 min as above as above 7 SZXN Degen Skype March 31 30-35 min CEO of Degen 30 years 8 SZXN Degen Skype April 14 35-40 min CEO of SZXN 14 years 9 Bestwind Solar Cell Skype March 31 25-30 min Works Council Representative 15 years

10 as above E-mail April 01 - as above as above 11 as above Skype April 06 20-25 min as above as above 12 Energy Inno Skype April 07 55-60 min Product Manager 5 years 13

as above E-mail April 23 - as above as above

14 as above Face-to-face May 02 50-60 min CTO 30 years

23

BRIC-INVEST has been conducting many researches concerning BRIC (Brazil, Russia, India,

China) countries’ investments in Germany. In the end, we had a wide range of interviewees

from both German and Chinese firms: three CEOs, two PR representatives, one general

manager assistant, one works council representative, one product manager and one CTO

respectively. In total, fourteen interviews were conducted with eight interviewees.

3.5.3 Gaining Access

Acquisitions by nature are of high sensitivity. Thus gaining access and building trust became

a difficult part of this research. In the following our data collection strategy is further

described. In order to gain comprehensive data, we had the strategy to gain hybrid access - a

combination of traditional and internet-mediated approaches.

Overcoming organizational concerns about granting access:

To overcome concerns about time and resources required for the research, the participants

were offered to only partly answer the questions in our interview guide (Easterby-Smith et al.

2008). Informed consent was reached by declaring the interviewees’ rights and by promising

confidentiality of data before interview questions were sent to the organizations. By doing so,

anxiety was decreased, honesty and respect was shown to the interviewees, which in return

enhanced the possibility to collect more qualified data (Bryman and Bell, 2005; Saunders et

al., 2012).

Utilizing existing contacts

It is easier to gain access if existing contacts are utilized wisely (Easterby-Smith et al. 2008).

It is also suggested that by creating a track record based on old contacts credibility with new

contacts increases (Saunders et al., 2012). We have searched our existing contacts in China

and Germany, and have made best use of social media such as LinkedIn, Wechat (social

media platform widely used in China) and Facebook to find contacts that may facilitate

access. After selecting the acquisitions, we searched contacts connecting us to corporate staff

and managers. By using existing contacts to institutions such as the German Chamber of

Commerce in Shanghai, the Acquisition “Energy acquired Inno” was acquired as one of our

examples.

24

Establishing credibility

Robson (2011) illustrate that gaining the participants’ willingness to cooperate is a matter of

credibility and trust. By sending out emails using Uppsala University’s email system, a high

level of credibility and trust was built compared with sending emails via personal email

addresses. To enhance this positive effect the research purpose was clearly stated in the

emails and emphasis was put on the high importance of the participant’s cooperation and

support for the research.

Using proper language

In initial calls and emails to Chinese interviewees the term “Chinese firms’ wisdom and

experience in managing foreign acquired companies” was used instead of “research” to make

the topic more interesting for the potential participants. As their working style is rather

straight German interviewees were directly informed of our request. We were aware that

Chinese firms have a much more hierarchical structure compared with German firms. Hence

gaining access to top managers is much more difficult. Either through existing connections or

by convincing gatekeepers such as receptionists of the research value for the firm, we also

achieved the goal of talking to Chinese top managers.

3.5.4 Secondary data collection

In order to complement the primary data collected through interviews, we also used

secondary data, which is argued to be of higher quality (Saunders et al., 2012). As main

source for secondary data in this study documentary data, including organizational

documents, emails, and news on webpages were used.

At the same time, we have contacted some government-supported organizations, such as

the German Association of M&A consultants (http://www.bm-a.de/), as well as the Bric-

Invest Association in Germany (www.bricinvest.de). Their information helped us to gain an

overall understanding of the topic, as these organizations provide support and consultancy on

acquisition deals. We also contacted M&A consulting agencies, however, due to strict

confidentiality agreements with customers, they were not able to provide any secondary data.

3.6 Data Analysis The conducted interviews were recorded and transcribed. They were reviewed in detail

before the following interview to improve results. In total there are fourteen transcriptions.

25

They were summarized and categorized in accordance to the defined themes. Coding and

cluster analysis method (Foss, 2004) was used to review the data. First, all interview were

written down. Secondly, transcriptions of each Acquisition were classified into the five

concepts of our theory framework. Thirdly, we created and highlighted existing keywords

(codes) in our transcriptions. Then, all codes were moved to a new document and connected

with each other. The result was a summary of all 14 transcriptions categorized in five

concepts that could be examined on the base of the study’s theory framework. We have

summarized and compared the key findings, and the results show what are confirmed and

what contradicts the theories we presented in theory section. Please see Appendix IV.

3.7 Reliability, Validity and Limitation Case study research always has the limitations in terms of generalization to a big population

(Yin, 2009). However, we carried out a case study with six acquisition examples as

triangulation to make our conclusions stronger (Saunders et al, 2012). The conclusions might

be applicable to acquisitions done by emerging countries in developed countries due the

similar nature of post acquisition styles (Kale et al., 2009).

We are also aware that some of our respondents are CEOs who are very busy. Hence the

interview time was limited to maximum 20-25 minutes. Within this short period of time the

ability to develop a deeper understanding of the studied case through interviewed CEOs was

limited. However, we have tried to compensate by searching secondary data and by emailing

assistants to CEO’s to obtain internal supporting documents on the topic.

In order to improve validity, interviews were mainly conducted with top managers from

the Chinese and German side.

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4. How Chinese Firms Integrate Acquired German Firms In this section, we present our empirical findings regarding the six acquisition examples. The

findings show the reality of how Chinese acquirers balance integration and autonomy by

considering the five main factors in focus (culture distance, communication, integration

speed, leadership & top management team turnover, and resources complementarity). There

is also a short description of two firms and fundamental background of each acquisition.

4.1 Schiess AG and Shenyang Machine Tool (SMTCL) Shenyang Machine Tool Co., Ltd (SMTCL) was founded in 1995. It is a state-owned

machine tool builder in China. Schiess AG is a world-famous machine producer with 150

years history, located in Aschersleben, Germany.

SMTCL participated in an exhibition in Chicago in 2002 to introduce itself as the largest

machine tool producer in China. However, its booth was located in the basement where fewer

visitors passed by. This made SMTCL to change its strategy to gain and improve its global

impact through international cooperation. SMTCL was dedicated to get rid of limitations

stemming from China’s old planned economy, and increase its product range as well as its

machine precision. In December 2003, SMTCL and Schiess started to talk about cooperation.

On June 25th 2004, Schiess had to file for bankruptcy and SMTCL took the opportunity and

acquired the firm with an approximate transaction value of 8 million Euros. In December

2004, the acquisition was completed.

4.1.1 Culture

Schiess AG was less hierarchical than SMTCL and much more decision-making friendly.

Tasks were executed by strictly following previously made plans (Interview 2, 2015). At

SMTCL, however, the labor force was more flexible as employees were used to work

overtime if the organization needs them to finish urgent projects (Interview 2, 2015).

In the beginning of the acquisition, the difference between the two firms caused many

difficulties for cooperation. SMTCL chose to respect and accept the difference. The objective

was to develop mutual understanding over a long period of time.

Both sides adopted a “compromise” attitude to combine the two sides’ advantages and

create culture diversity (Hou, 2013). SMTCL aimed to learn the German’s rigorous and

precise manner of making machines, and then combine it with Chinese workers’ hard

working spirit. SMTCL also had the plan to transfer the Chinese hard working spirit, passion

27

and flexibility to Schiess AG. In order to achieve the objectives, SMTCL adopted the 3C

Principle (Communication, Credit, Cooperation).

After 10 years, the “marriage couple knows how to handle things together now”, as stated

by SMTCL (Interview 2, 2015). The German side learned the Chinese way of conducting

business at a certain level as the Chinese side absorbed the German’s way of doing things.

4.1.2 Communication

SMTCL sent some of its Chinese staff to Germany not to supervise German employees but to

support them and help the two sides to better communicate (Interview 2, 2015). German

engineers were also sent to China to facilitate communication and transfer skills (Hou, 2013).


“Chinese were very efficient, it only took 3 months for them to complete the whole acquisition,

which actually was supposed to take 6 months” said by German side (Hou, 2013). However,

after the deal was closed, SMTCL was very careful to execute its integration strategy slowing

moving towards its goal. Mr. Chen, who was the CEO of SMTCL, had set a long-term plan

for Schiess AG before acquisition.

He proposed three fundamental principles: First, to support Schiess AG to develop further.

Secondly, to keep the tradition of Schiess AG and keep its base in Germany rather than

moving it to China. Thirdly, to keep its talents and management style (Hou, 2013).

The slow integration speed also showed in the work of totally independent department. The

purchasing department did not achieve any synergies due to different product offerings. Such

independencies satisfy both sides. They have different requirements, as suppliers provide

material of different quality.

4.1.4 Leadership and top management team turnover

As Mr. Chen stated, the original TMT was kept and Schiess AG was granted high autonomy

to operate and develop new technology. Managing directors from SMTCL only interfered in

the decision-making process at a corporate level to ensure that Schiess AG follows the

corporate strategy of SMTCL (Interview 2, 2015).

At the same time, SMTCL also controlled who stayed in the TMT. “We only controlled the

top management team, in all other HR related issues we did not interfere”, said by Mr. Chen

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4.1.5 Resource and capability

Trinity can be summarized as SMTCL’s plan to integrate resources and capabilities. It stands

for “Get orders in China; Made in Germany; Timely service in China”. “We have a foot in

Europe, Schiess AG has a foot in China” (Hou, 2013). Regarding sales and market, the

acquisition provided chances for both sides. The two sides worked together on sales and had

a high level of integration (Interview 2, 2015).

SMTCL specializes in manufacturing small to medium size machine tools, while Schiess

AG is better in producing large machinery (Interview 2, 2015). “The acquisition widens our

product rage to higher quality products, and enables us to target more market segments”.

Before the acquisition, SMTCL relied on imports when high end products were needed.

Thereafter its German subsidiary’s produce was used for their orders in China. Additionally,

SMTCL had a “PRD (Product Research & Development) Plan”, which intended to reduce the

tech gap with Germany. 36 master students were hired to get trainings in Germany (Hou,

2013).

4.2 Waldrich Coburg and Beijing No. 1 Machine Tool Plant Started in 1949, Beijing No.1 Machine Tool Plant started its business in the year the People’s

Republic of China was founded. It’s a state-owned large-scale machine tool manufacturer.

Waldrich Coburg is a medium size machine tool builder in Germany, founded in 1920.

In 2004, the American company Ingersoll, the parent company of Waldrich Coburg at that

time, filed for bankruptcy and decided to sell two subsidiaries (Waldrich Coburg and

Waldrich Siegen). As Beijing No.1 and Waldrich Coburg started to cooperate since 1984, the

two sides had built trust over their 20 years of cooperation. Hence, Beijing No.1 decided to

acquire Waldrich Coburg with 35 Mio. Euros and continually invested approximate 40 Mio.

Euros for building a new manufacturing workshop, an office building, repairing machines

and increasing employee benefits. After 10 years, sales of Waldrich Coburg doubled, and the

number of employees increased from 500 to more than 800, which made Beijing No.1 the

largest Chinese employer in Germany. Beijing No.1 increased orders by 10 times and gained

5 times higher profits after the ten years cooperation.

29

4.2.1 Culture

An American firm had acquired Waldrich Coburg, and heavily intervened. The result was

not satisfactory. In comparison, the Chinese owner Beijing No.1 was different. “We have all

the freedom we need and all decision are made here in Germany.” said Becker, CEO of

Waldrich Coburg (Interview 4, 2015).

Beijing No.1 had a mid to long-term plan, which ranged over 5 years. However, it did not

require such plan from the German side. Waldrich Coburg had its own rather showed term

plan, which was based on one-year objectives (Interview 6, 2015). Such a “One country, two

systems” policy intended to create trust and a good cooperation atmosphere (Interview 5,

2015). Chinese incrementally learned and understood the culture of Germany and Waldrich

Coburg. After ten years, “Beijing No.1 can handle things and work with us in a more

European way” (Interview 4, 2015). Waldrich Coburg’s branch in Beijing strengthened its

connections with Chinese culture and further enhanced the corporation.

4.2.2 Communication

Right after acquisition, there were rumors in German media, and employees had many doubts

about its Chinese owner (Interview 4, 2015). In order to resolve all rumors and doubts, Mr.

Cui, CEO of Beijing No.1, started to talk with every employee with sincerity and openness

(Interview 5, 2015).

The communication mechanism during the integration process worked like this: First, there

were two big meetings every year. Secondly, three Chinese staff members were sent to

Germanys to coordinate the work. Thirdly, Beijing No.1 set up a special business unit to

handle the cooperation with Waldrich Coburg. The unit acted as a communication bridge.

Fifthly, when conflicts occurred, the key to solve the conflict was to have open and direct

communication that made compromises possible (Interview 6, 2015). One example was the

negotiation with works council in terms of increasing working time due to the increased

orders. Germany is a country with very strict rules for working time. The negotiation was

tough and long. However, an agreement was achieved in the end (Interview 5, 2015). Works

council agreed to increase working time by 2 hours every week and to abolish two holidays.

Such a result was rarely seen before (Interview 4, 2015).

30


Integration speed was considered slow (Interview 4, 2015). Beijing No1 followed two

principles for the past ten years:

a. The “Big tree principle” was initiated by Mr. Cui. During the years, Beijing No.1

provided necessary support when its German subsidiary needed or suggested new

projects. At the same time, it tried to keep the tradition of Waldrich Coburg and let it

grow independently like a big tree that is well adjusted to and rooted in its

environment. Any big or quick changes would put it in danger (Interview 4, 2015).

b. “Do participate but not lead” In order to create synergies, the management method

“matrix management” was applied by Beijing No1 (Interview 5, 2015). Through

matrix management, both sides could clearly see responsibilities for decision-making.

There were 56 decision-making items defined at the operational level, in which

Beijing No.1 controlled only four financial items. The German side decided over the

other 52 items. This transparent system of decision-making, made the two

organizations cooperate very smoothly. And it also created trust and showed respect

to the TMT in the acquired firms.


Beijing No.1 kept the whole TMT of Waldrich Coburg since 2005. The German team was

perceived as critical intangible assets. “Chinese people rather look up to us than down on us”,

said Mr. Becker, CEO of Waldrich Coburg (Interview 6, 2015).

Two reasons why TMT was stable were: First, Mr. Cui played a very critical role during

and after the acquisition. His personal character and communication skills reduced anxiety

and created a pleasant atmosphere (Interview 4, 2015). Secondly, the TMT felt good towards

the new owner. In comparison to the prior American owner that intervened and forced many

changes., Beijing No.1 granted high autonomy to the TMT (Interview 4, 2015).

4.2.5 Resources and capability complementarity

“The machine industry in Germany well-known globally. Its workers are well trained.

Germany has a stable economic and political system. These macro factors attracted us to

invest ”(Interview 5, 2015). After acquisition, Beijing No.1 and Waldrich Coburg made big

efforts to combine each other’s resources and capability to gain a “win-win” situation


31

The two sides had different machine types. Beijing No.1 had small size types for the lower

level market. The Germans had bigger machine sizes and covered the upper market. They

had no synergies in production. But the product design departments worked together on a

certain level and tried to create synergies in the mid level market (Interview 5, 2015).

As “made in Germany” was an absolute advantage for selling in China, more Chinese

clients bought Coburg’s products. Therefore, Waldrich Coburg Machine Tool Maintenance

Service (Beijing) Ltd was set up to offer customers in China more timely service. Salesmen

and some engineers from two sides worked together (Interview 4, 2015). They constantly

cooperated and exchanged ideas for the Chinese market. The Chinese and German engineers

were working together in Beijing to install new machines and to provide maintenance

services to customers. As a result, Beijing No1 continuously improved its product quality by

learning from the Germans.

4.3 Putzmeister and Sany Founded by Wengen Liang in 1986, Sany is the sixth largest heavy machinery manufacturer

in the world. The acquisition of Putzmeister by Sany caused big public reactions, as

Putzmeister was considered a “German gem”.

4.3.1 Culture Distance

Culture distance was perceived very high. All procedures and responsibilities were clear at

Putzmeister. At Sany, tasks are done not only by following general rules and procedures but

also by heavy influence from personal relationships and suggestions made by the boss

(Interview 1, 2015). The difference made it hard to share views about an issue. And high

autonomy was necessary to avoid potential conflicts.

4.3.2 Communication

As their communication style is very indirect, Chinese tried to learn from the German

directness. We could say that Sany adapted more to the German way in terms of

communication (Interview 1, 2015).

There were regular meetings between the two TMT and German engineers were sent to

China. Norbert Scheuch, former CEO of Putzmeister, said that instead of dispatching some of

its 180 engineers to China, Putzmeister helped Sany to recruit German professionals. Then

32

they were sent to Sany to train Chinese. Third, Chinese engineers were sent to Germany.

Some engineers were sent to Putzmeister. However, Putzmeister had the right to decide how

many it could welcome, as too many apprentices could have interrupted its own workflow

and routine.


The employees were very insecure about the acquisition, firstly because they were not

informed; secondly because they were afraid Sany would destroy Putzmeister’s German soul.

However, Sany kept everything and Putzmeister operated very autonomously. This calmed

down the employees (Interview 1, 2015). After the acquisition, there was very little change

such as in manufacturing and purchasing (Interview 1, 2015). Both sides considered

integration speed very low. “There are huge differences in management, problem solving,

and social structures, which could not be transferred. We will never be able to turn a

German company into a Chinese company, and vice versa” (Interview 1, 2015).


The CEO of Sany promised Putzmeister to stay unchanged. He promised no layoffs until

2020. The German CEO played a very important role for the acquisition (Richter, 2013). He

was very positive about the Chinese owner and his own career in a long term, he helped to

comfort employees and reduce employees’ doubts (Interview 1, 2015).

4.3.5 Resource and capability complementarity

The main purpose of the acquisition was to “get some technology and get some brand” (Zhuo,

2012). Both sides claimed high similarity of their products. The interviewee from Sany told

us that Sany and Putzmeister were at the same technology level. Putzmeister also said

“concrete pumps were completely overlapping products” (Richter, 2013). Since both sides

were direct competitors, Sany decided to separate their markets regionally. Putzmeister

focused on the European and American market, while Sany mainly sold its products in Asia

and the Middle East (Richter, 2013). The acquisition was to reduce competition on the

international market and better allocate resources (Interview 1, 2015)

4.4 Degen and Suzhou Xinneng (SZXN)

33

SZXN is a burgeoning company founded in 2001. But due to its creative technology, it

developed very quickly in those 15 years. Founded in 1968, Degen Maschinenbau GmbH had

more than 40 years of history in the manufacturing industry.

SZXN and Degen signed the agreement of transfer 51% stock to SZXN in January 2013.

The approximate transaction value amounted to around 8 Mio. Euros. The cooperation

between them had the potential to accelerate the internationalization of both companies. They

hoped to learn from each other and to enter the European and Chinese market.

4.4.1 Culture

At Degen, employees strictly followed the plan, which was less likely to be changed during

its execution. In comparison, SZXN had a more flexible plan that could be adjusted

depending on various changes. SZXN could finish an urgent project in a very short time with

flexibility and efficiency. The Chinese firm took more risks to expand, while the German

firm was more conservative (Interview 8, 2015).

4.4.3 Communication

Degen hired a Chinese engineer in Germany. He used Skype and QQ (Chinese social media)

all the time to handle communication with SZXN (Interview 7, 2015). At SZXN, there was a

Chinese who spoke German to communicate with the German side. In terms of technology

transfer, SZXN sent employees to Germany already twice one year after acquisition


“The communication between two sides is still very challenging for me, the tremendous

difference creates barriers against fully understanding each other. It can lead to mistrust and

less transparency perceived”, said Mr. Degen. “We see that both of us are learning from each

other, and compromising on some issues.” (Interview 7, 2015). Mr. Degen also used China’s

most popular social media platform “Wechat”, and tried to personally connect through social

media with his Chinese partners. In addition, we were told that a clearly stated long-term plan

for the German firm increased transparency and trust (Interview 7, 2015).


The integration speed at the time of the interview was still perceived to be quite slow. SZXN

granted a high level of autonomy, which did not mean it did not care about synergies. Instead,

34

it expected to incrementally achieve synergies with great care for stability. SZXN expected

that in three to five years, it could achieve the expected synergies.


SZXN choose not to get involved in the management of the German subsidiary because we

thought their top managers were doing very well. Any intervention could put their business

stability at risk (Interview 7, 2015).

4.4.5 Resource and Capability Complementarity

SZXN set the goal to make Degen a high end product producer in the global market and at

the same time to strengthen its own position and brand awareness globally especially in its

home market (Interview 8, 2015). Concerning products and markets, Degen covered the high-

end market, while SZXN covered the low and middle-end market with less advanced

technology and cheaper product prices (Interview 7, 2015).

As SZXN said “the Chinese market is promising and we have already sold some Degen

machines here, Chinese clients love ‘Made in Germany’, we share our experience with each

other, and we have the plan to work together on new product developments” (Interview 8,

2015). Meanwhile, Degen also acted like a bridge for SZXN to enter the European and other

foreign markets.

4.5 Solar Cell and Bestwind (Anonymous) Bestwind is a Hong Kong based high-tech company focusing on researching, developing,

producing and selling silicon solar cells. Solar Cell is located in Germany, and focuses on

photovoltaic products.

In May 2014, Bestwind acquired two German solar companies. Solar cell was one of them.

In total, Bestwind acquired three German firms (Solar Cell, Bestwind and TBH) in the new

energy industry.

4.5.1 Culture

The perceived cultural distance was not very big, due to Bestwind’s international way of

doing business (Interview 9, 2015). Hong Kong’s long colonial history and business

traditions played a very important and supportive role. Top managers have solid international

35

management expertise. Their employees in the Hong Kong headquarters were very

international and spoke good English and Mandarin. Bestwind had a very dynamic culture

and used to make quick decisions. Solar Cell had been acquired twice. The first acquirer was

also a Chinese firm, which made quite slow decisions. No changes were implemented in the

German firm. However, after the acquisition, Bestwind’s style was very different and quick

decisions were made (Interview 9, 2015).

4.5.2 Communication

There were regular meetings and reports between the two sides. The R&D department

reported every week or every two weeks to Bestwind (Interview 11, 2015). The reports

should include the progress of product development.

Bestwind suddenly changed its integration strategy. As a result communication intensified

tremendously between the three acquired German units. Nevertheless the whole organization

including the only reserved R&D department continued to feel quite nervous about the shift

in Bestwind’s integration strategy. Solar Cell still had doubts about its future since the long-

term plan was unclear. Our interviewee did not feel good and was very emotional about the

changes (Interview 9, 2015)

4.5.3 Integration Speed

Integration strategy changed from “Preservation” to “Absorption”. Bestwind promised to

grant high autonomy in the beginning, but in the end Solar Cell enjoyed very little autonomy

and speed of change was perceived very high (Interview 9, 2015). Bestwind appointed a new

CEO in charge of the three acquired firms. He integrated them into one structure. TBH

became the headquarters of Bestwind Europe (Interview 11, 2015). Solar Cell only became a

research center for certain solar components. Except for its R&D department, all the other

departments were about to be dissolved. Other top managers had to leave the firm (Interview

9, 2015).


The old TMT was replaced by new TMT to consolidate the integration process. The new

CEO having 20 years of managing experience in the solar industry was appointed to integrate

36

the units (Interview 9, 2015). All three acquired units had shared the same TMT (Interview

10, 2015).

4.5.5 Resource and capability complementarity

“The solar power industry in Germany was going down” (Interview 10, 2015). However, the

“industry in China is growing quickly”. Potential synergies could be unlocked by combining

the technologies of all acquired German firms. They worked together to achieve the goal set

by Bestwind, which was to create advanced solar products that could be sold on global

markets especially in Asian (Interview 9, 2015).

Solar Cell was no longer considered a technology pioneer. However, its R&D department

still had very excellent employees who Bestwind wanted to retain and nurture (Interview 9,

2015). For a new project, TBH solar and Solar Cell were developing a special solar device.

Bestwind supported and used us to develop the new technology” (Interview 11, 2015).

4.6 Energy and Inno (Anonymous) Energy Group is a multinational clean-energy power generation company from China. Inno is

a R&D oriented manufacturer of thin-film solar modules, which was originally founded in

Uppsala and moved to Germany later. The original lab in Uppsala still remains as the

research center of Inno. It has the largest CIGS solar modules production and highest

conversion efficiency in the world.

Energy acquired Inno in 2012 with an approximate transaction value of 25 Mio Euros.

That year was the most difficult for the solar energy industry. Due to low efficiency and high

cost of silicon solar cells, people began to doubt the reliability of solar technology. The whole

solar industry cooled down. As Energy had abundant capital, it closed the deal at a decent

price and successfully entered the solar industry.

4.6.1 Culture

All interviewees thought that national culture difference was very high. They confused the

idea of both national culture and organizational culture during our interviews. Interviewees

thought that national culture difference simply caused the different way of doing things

(Interview 14, 2015). However, besides being a source of communication issues and an

obstacle for creating synergies it also built opportunities for co-learning.

37

“I believe that the Chinese company is very good at finishing urgent short-term tasks very

quickly as well as developing a strategy for the very long term” (Interview 12, 2015). The

German company in contrast is better at project management and mid-term planning.

Whereas German firms are more transparent in communicating long-term real goals,

Chinese companies are very indirect in this regard. “Maybe it would be better if the Chinese

firm clearly tells us what the top goals are and what it wants. Sometimes you do not know

why things are the way they are. I am not very clear of the overall picture” (Interview 14,

2015). A culture difference issue was apparent and the German side hoped for a more open

attitude at both sides to better learn from each other. It took a long time to really understand

each other. The CTO of the German side also thought that they learned a lot about the

Chinese culture. He even went to Beijing for Chinese New Year. The culture was undergoing

a diversification process.

“I do not feel that the Chinese side was forcing changes on us, we enjoy a lot of autonomy

in daily operation. They are afraid things will be falling apart if they manage by themselves”

(Interview 14, 2015). Culture difference made Chinese very cautious and respect local rules.

For instance, the HR department from the two sides worked rather independently (Interview

13, 2015). There were no salary changes in the German subsidiary due to the fact that in

Germany one has to strictly follow trade unions, labor unions etc. Energy also bought another

three American firms, and HR department from Energy also made efforts to integrate

different subsidiaries. It established common goals among different subsidiaries; so that

everything could be in align with the parent firm. Finance department also cooperated very

closely; a Chinese finance manager was working in Germany (integration).

4.6.2 Communication

Before and shortly after the acquisition, communication only took place between members of

top and middle management of the German subsidiary and selected Chinese managers and

experts. After the acquisition, more and more direct communication evolved between staff of

their different departments.

The organization of the Chinese parent company was very big, often changing and not very

transparent to the German subsidiary. Therefore, it was quite difficult for the German

employees to find the right contact person in the Chinese mother company. The situation

slowly improved with time, but the issue couldn’t fully be solved.

38

Important topics of the German side were usually addressed by the top management, which

had clear contact persons in the Chinese mother company. The Chinese side often had the top

management of the German subsidiary as main contact, even for smaller operative topics.

This clearly reflected in e-mail communication. The German side usually limited the

recipients in carbon copies, while the Chinese side often sent a copy to many people of the

higher management (Interview 13, 2015). For almost all activities the mother company

requested frequent reports from the German subsidiary. Sometimes, different departments of

the mother company required similar reports, which created unnecessary workload and

confusion for the German subsidiary. The Chinese side also collected ideas and suggestions

from its acquired subsidiaries when it had a new plan. For example, when the Chinese owner

wanted to expand to new markets. They asked the subsidiaries to report the advantages of the

new market (Interview 12, 2015). However, the German side thought that more information

and knowledge should be transferred back to the subsidiary.

Concerning communication on technology, the researchers of all parts of the corporate

group attended regular workshops to discuss and exchange ideas. The different subsidiaries,

however, mostly independently pursued concrete research projects. “I go to China for

management meetings, sometimes I go to the US for annual R&D meetings and I train

Chinese staff in China” (Interview 14, 2015).

After acquisition, the advisory board was added into the German organization. Its members

were Chinese with experiences in both cultures. They acted as important coordinators. Their

responsibility was to communicate corporate strategy, bonuses, targets, etc. “It helped a lot

that the Chinese owner had people that understood Western styles and culture.” (Interview

14, 2015).


“We have several areas with high synergy potentials such as purchasing and marketing. But

they are not unlocked yet.” (Interview 14, 2015). Transferring technology to China was an

ongoing process. But the CTO thought that the current process speed should be quicker. It

has already been three years since the acquisition, but our Chinese firm actually slowed down

the process of building the factory in China compared to the original plan. A new factory in

China will trigger technology transfer, train people, etc. There was a period when they were

not sure about the production and the future plan. So they were cautious and did not hire new

people during that period. But around this year, they plan to hire more people and make more

39

things happen (Interview 13, 2015). The integration process was speeding up. In addition,

many departments have built up a quite close cooperation. However, process development

and production (of the German product) are mostly managed by INNO independently. The

Chinese mother company is responsible for sales and marketing, while the German subsidiary

offers some support.

The subsidiary as a whole was incorporated into the new corporate structure and later

restructured to match the structure of the mother company and comply to the new company

goals. (Interview 13, 2015).

4.6.4 Leadership & TMT

All employees including the TMT kept their positions after the acquisition. A Chinese

finance manager has been added to the top management of the subsidiary. The Chinese firm

had more control on top management. The top managers were welcoming the Chinese owner.

During the integration process, the acquired leaders did not specifically need to comfort its

employees. The takeover had no influence on the employees in Uppsala. The Chinese TMT

made all the decisions, the German side had to follow them enjoying high autonomy to

execute them. “So top managers kept their former responsibilities to keep the company

running. And they also have the new responsibility to go with the long-term plan of the

Chinese acquirer. For example, expanding to new markets, building the new factory and

running long-term research projects” (Interview 13, 2015).

4.6.5 Resources complementary

INNO had a technology that Energy did not have. Technology was complementary between

the two sides. The R&D department operated independently but the German side had to

constantly report to Energy. The Chinese firm intended to maximize its market share in the

Chinese market. There, the Western technology could be used best in the long run. The

German firm also could benefit from it. “Without support from Energy, we will not be able to

enter the Chinese market” (Interview 14, 2015).

The best-integrated unit was the department for setting up plants and production lines. The

German side improved its capability to supply equipment for building factories in China.

There were synergies in the purchasing department as there were similarities in raw materials.

Although the acquisition did not have any impact on German customers, some insecurity for

suppliers occurred. “Before acquisition, the German owner bought from German suppliers,

40

and followed German legislation. Everyone was safe under the German system. Now you

change the owner to Chinese, especially when you go through economic difficulties, German

suppliers will feel less safe” (Interview 14, 2015).#

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5. Analysis In this section the analysis of empirical findings is made based on the theoretical framework.

Please see Appendix IV as our summarized analytical results.

In 5.1, we classify the six acquisition examples into the integration model of Haspeslagh and

Jemison (1991). From 5.2 to 5.6 empirical data is analyzed by following the five concepts of

our theory framework.

5.1 Integration types of the six acquisitions We categorized the six acquisitions based on the four integration approaches defined by

Haspeslagh and Jemison (1991). Interestingly, we found out that integration approach of

SMTCL and Beijing No.1 has slowly changed from “preservation” to “symbiosis” within the

last ten years after acquisition.

Need for strategic interdependence

Low High

Nee

d fo

r autonomy

High Preservation

Sany, SZXN, Energy Symbiosis

SMTCL, Beijing No.1

Low

Holding Absorption Bestwind

Figure 3. Integration Approach Model and Six Acquisitions (Adapted from Haspeslagh and Jemison, 1992 p.148)

5.2 Culture Distance In five acquisitions, except Bestwind, high culture distance is perceived. This aligns with

theories saying that culture distance derives from both the firms’ and the countries’ cultures.

Organizational cultures are strongly influenced by national cultures (Terpstra and David,

1991; Kogut and Singh, 1988). These five acquisitions recognize the obstacle of realizing

synergies great culture distance causes. In the “Energy” acquisition, the German side

considers organizational procedures and structures of its parent firm so different due to large

company size and unfamiliar hierarchies that finding the right contact person seems almost

impossible. At Sany the CEO in Germany showed little optimism that any real synergies

could be realized due to the two firms’ culture distance. Also the interviewee from Sany

China thought that there are no obvious benefits or learning gained from its acquired firm in

Germany. This is in line with the theory claiming that big culture distance leads to poor

acquisition performance (Chakrabarti et al., 2008; Olie, 1994; Vaara et al., 2012). Findings

from SMTCL and Beijing NO.1 actually reveal no culture conflicts as (quote) “after a long

42

marriage, we know how to live together”. SMTCL, Beijing No.1, Energy, SZHN, despite

culture-based obstacles, all consider culture difference a complementary resource. Attitudes

towards co-learning and mutual respect are adopted to solve conflicts when implementing

changes. No side dominates decision-making as Chinese acquirers and German subsidiaries

“compromise ” when meeting critical issues.

Germans felt that their higher need for order was satisfied after acquisition as they further

enjoyed independence and freedom to conduct business. For instance, Chinese are long term

driven (5 - 10 years plan) and also good at running short-term projects (e.g. 3 days to finish

one big project). However, Germans are more midterm oriented, normally using detailed one-

year plans. Decisions on these plans are made independently, which enables the German firm

to keep its traditions, working style and business rhythm. As a result they feel more

motivated and willing to learn and accept new cultures. This may explain why theories argue

that autonomy motivates acquired teams by satisfying higher human needs (Khandwalla,

1997; Stubbalt, 1983).

Chinese acquirers appreciate the German culture in terms of strictness and precision. This

may explain why in most acquisitions German firms are left independent. Chinese want to

learn and intend to be influenced by Germans. In the acquisitions of SMTCL and Beijing

NO.1, on the one hand, Germans have experienced the Chinese coworkers’ strong working

spirit and flexibility to handle problems. On the other hand, Chinese have partially absorbed

the European way of doing business. In the acquisition of Beijing NO.1, both Chinese and

Germans have cooperated in design jobs and market activities, which resulted in more

innovative thinking by adopting a collaborative mentality. In the acquisition of SMTCL, the

Chinese way of thinking caused the acquired German firm to finally realize the true reasons

of its bankruptcy which were formerly undetectable. We could see the difference between

German and Chinese cultures as they diversify each firm’s resources by mutual adaption and

co-learning (Reus and Lamont, 2009), which generate a higher innovative spirit (Cox, 1991).

In all acquisitions, except for Bestwind, the “preservation” integration strategy was

adopted in the beginning of the acquisition process. With SMTCL and Beijing NO.1 the

approach slowly shifted from “preservation” to “symbiosis”. In two acquisitions a high level

of integration was shown in many aspects. The interviewees showed undisguised happiness

about the cooperation results of the German subsidiary and the Chinese parent firm. The

reason why the acquisition achieved a high level of integration after ten years to some degree

can be explained by Slangen, (2006). He indicates that with acquisitions involving two firms

with big national culture distance, post-acquisition performance can be enhanced if the

43

“preservation” approach is adopted. In contrast, although Sany adopted a “preservation”

approach three years after acquisition, both sides state that no obvious values were achieved.

This clearly contradicts Slangen (2006).

Another argument from Slangen says that the “absorption” integration approach has a

negative impact on acquisition results when both national cultures are different. The

acquisition “Bestwind”, showed that total assimilation and absorption of the acquired

German firms lead to employee unhappiness and value disruption.

To sum up, the six acquisitions demonstrate that culture is a critical element to consider

when choosing and implementing the proper integration strategy (Björkman et al., 2007;

Teerikangas and Very, 2006; Vermeulen and Barkema, 2001). In our study, successful

acquisitions were those where culture difference was considered a complementary resource

instead of an obstacle. When German firms felt free, respected and supported by their

Chinese acquirers, they initiated necessary change themselves.

5.3 Communication Communication becomes a key success factor after acquisition. Most interviewees

emphasized the difficulty of communication that is normally caused by language difference,

culture and location distance, and as well firm size difference. In the Energy acquisition, the

German side was confused when different Chinese departments asked for similar reports,

which unnecessarily increased the workload for the German side.

Communication gets tough for Chinese acquirers if the German subsidiary does not

welcome them. If acquirers take over a firm in difficulty, its employees are more open and

willing to accept the acquisition. As a result communication becomes easier. However, if the

acquisition causes reaction such as “Chinese are buying German souls”, the acquirers are

faced with hardship to overcome them. It is coherent with Gomes et al., (2013), who argue

that communication in cross-border acquisitions is more challenging as acquirers have to deal

with high complexity in terms of finding and following the right communication strategy.

In this context SMTCL, Beijing NO.1 and Energy have done a great job after acquisition.

Beijing NO.1 employed the “big tree principle” which guaranteed the German firm to

operate and grow within its own system. The Chinese parent company would only provide

support when “the tree needs extra nutrition”. Sincere meetings were held in Germany in

order to answer all questions and remove all doubts of the German employees and works

council representatives. A harmonious atmosphere was established. Haspeslagh and Jemison

44

(1991) emphasize that an efficient communication strategy leads to a more cooperative and

collaborative atmosphere, which is essential for the integration implementation process.

Beijing NO.1 gained trust by keeping its promises and doing what has been said to the

German side. This is also in line with the theory indicating that face-to-face communication

may deliver information with more credibility (D'Aprix, 2009). And also in line with Ranft

and Lord (2002) who emphasize on the significance of communication in order to reduce

employee uncertainty. After removing uncertainty and gaining fundamental trust, the

integration process started. Beijing NO.1 set up some communication mechanisms to

facilitate knowledge transfer. According to Ranft and Lord (2002), trust building is an

essential condition for knowledge transfer.

Most acquisitions in this study have shown similar communication mechanisms during the

integration process. First, the German side had Chinese coordinators that are experienced in

both Western and Chinese culture. They act as a bridge between the two sides. Secondly,

German experts were sent to China, or Chinese technicians were sent to Germany in order to

train Chinese employees. Thirdly, Chinese and German top managers frequently held

meetings. Intense communication between them ensured alignment of the German side to

corporate directions set by the parent company in particular if a high level of autonomy was

granted. Fourthly, Chinese acquirers sometimes have a special business unit to handle critical

joint projects. The communication mechanisms applied facilitates cross border

communication also under the “Preservation” approach. This explains the theory from (Ranft

and Lord, 2002), which argues that rich communication can compensate the disadvantage of

the acquirers’ limited control over target firms.

In one acquisition communication could not solve the underlying conflicts. Bestwind has

shifted its strategy from little interventions to heavy involvement at the German side.

Although frequent communication took place as top managers travelled onsite to talk to every

employee, the big shift led to distrust and communication failed. This further illustrates that

communication has to be consistent with company behavior (Cording et al., 2014).

In the acquisitions of Beijing NO.1, Energy, and SZHX, all interviewees stated that

continuous communication between acquirers and acquired firm takes place. However, the

biggest obstacle of getting a clear picture and developing long-term goals in terms of

subsidiary development stays. German subsidiaries were highly concerned about the

transparency of top goals. This issue was considered a culture problem especially due to

national culture incompatibility. Chinese are indirect in terms of communicating and solving

problems. The concepts of communication and culture are in many ways connected and

45

interact. This aligns with theory saying that communication and culture are interconnected,

and the way that people communicate is largely influenced by national culture (Morosini et

al., 1998).

5.4 Integration Speed In five acquisitions (except Bestwind), interviewees said that integration speed was slow.

Changes in target firms were conducted cautiously. InKpen et al., (2000) present a 100 days

plan arguing a high integration speed is the common way to mitigate uncertainty of

employees and related stakeholders. None of the studied acquisitions were following such

integration strategy that firms from developed countries adopt when making acquisitions. The

Chinese approach of slowly integrating the German side into the acquirers’ system proves

rather successful than the previously mentioned approach.

In two acquisitions, SMTCL and Beijing NO.1, certain synergies were achieved in sales

and technology development after 10 years. Both sides acted like an “old married couple”.

This also is in line with theory (Homburg and Bucerius, 2006; Haspeslagh and Jemison,

1991) arguing that slow speed integration leaves more time for mutual learning and mutual

culture exchange and further allows the realization of synergies.

SZXN and Energy also have the intention to preserve the business routine and tradition of

the target firms. Although SZXN did not achieved any synergies by then, the Chinese

acquirers wanted to speed up the integration process in the years to follow. Competition in

China is fierce. By applying the German firm’s capabilities quicker, they were aiming at

gaining a competitive edge in their home market through higher competence. Sany stated that

the acquisition did not bring them any obvious value yet. Hence the findings of these 5

acquisitions show that slow speed brings both satisfactory and unsatisfactory acquisition

performance. This is in line with theory from Schweizer and Patzelt (2012), which states that

integration speed critically influences post-acquisition performance. However, both low and

high speed could lead to good or bad results. No matter how Chinese balance integration

speed, either slow or quick speed might cause similar reactions in acquired firms. The

attitude from the German side varies as shown in the Energy acquisition. The Chinese

acquirer proposed a new joint project requiring both sides to cooperate applying a slow speed

approach. The German side, however, expected quicker synergies and changes to better

exploit knowledge developed in Germany on the Chinese market. Different integration speed

was expected and no specific speed turned out to be either definitively good or bad. This is

46

in line with Homburg & Bucerius (2006), which indicate that there is no obvious relationship

between integration speed and post-acquisition performance when both internal and external

similarity are low

5.5 Leadership and TMT turnover After acquisition, the leaders from Chinese acquirers and German firms put high importance

on the facilitation of the integration process. Beijing NO.1 is a representative acquisition

illustrating how Chinese leaders may influence the attitude of target firms towards the new

owner. Right after acquisition, rumors spread in the German organization saying that Chinese

would take advantage of German technology by downsizing and moving the German unit to

China.

Then the CEO, Mr. Cui, showed up in Germany, and did one-to-one talks with all

employees. His “Big Tree Principle” was used when he visited the German office. Although

he only knew little German, he used the following German words to communicate his sincere

intentions “Waldrich Coburg bleibt Waldrich Coburg” (Waldrich Coburg will still stay as

Waldrich Coburg). People were mentioning this episode throughout the acquisition’s 10-year

history. His strong leadership skill had created a positive influence on all German employees,

and increased their willingness to cooperate and communicate. The leadership shown by Mr

Cui supports the arguments made by Pablo (1994) and Waldman (2004), which emphasize

leadership’s essential role in the creation of value in the acquisition process.

The Chinese acquirers did not only focus on delivering ideas from their leaders, but also

were fully aware of the critical role German leaders play to mitigate potential conflicts and

solve problems that they were not able to identify. On the one hand this goes in line with

Kiessling and Harvey (2006), who argue that leaders in target firms possess vital and tacit

knowledge about their firms and on the other hand aligns with (Brockmann and Authony,

2002; Michalisin et al., 2004; Kiessling and Harvey, 2006) saying that the TMT in acquired

firms has unique and vital knowledge. Chinese acquirers were strongly aware that big culture

distance between two countries leads to different approaches how people communicate and

work with each other. Thus, replacing the German TMT with Chinese leaders to change

business rhythm puts high pressure on social capital. It’s not simple for Chinese leaders to

manage Western employees, as the risk is high to rather lose control in the end. This is in

accordance with Randel and Ranft, (2007), who say that acquired leaders have solid social

47

connections amongst their employees. However it contradicts Lowenstein, (1983), who

claims that replacing the target TMT means gaining higher control over acquired firms.

Chinese acquirers had frequent informal and formal meetings with top managers in

Germany, or invited them to China to gain experience in Chinese culture and the country’s

new developments. During meetings, Chinese acquirers further expressed their good

intentions, communicated corporate goals and exchanged information with Germans. In the

five acquisitions (except for Bestwind), acquired leaders were motivated to work for the

Chinese owner. In the Sany acquisition, the German CEO tried to convince his employees as

well as the whole German public of the positive effects brought by the acquisition.

Although expected synergies were not achieved after 3 year, the importance of his roles as

a leader to comfort employees for the acquisition success cannot be denied. Graebner, (2004)

argues the acquired leaders can be of great support in relieving employees’ anxiety. In the

acquisition of SZXN and Energy, the interviewees who all were top managers, said that

originally they saw more potential synergies in the acquisition. From their perspective,

unexpected advantages occur through the support of acquired leaders. This is also aligned

with another argument from Graebner (2004), saying that acquired leaders can discover

unexpected synergies and achieve serendipitous values.

In five acquisitions (except Bestwind) Chinese acquirers granted high autonomy to the

local TMT. As Chinese parent firms were also seeking a certain level of integration in

accordance to their acquisition motivation, they came up with a management approach called

“matrix management” (decision making items). As adopted in the acquisition of Beijing

NO.1, the German TMT had the rights to decide on 52 items, whereas the Chinese side could

only decide on four. The parent company could successfully keep the whole TMT at a low

turnover rate. This confirmed the results of a study done by Angwin and Meadows, (2009)

which states that high autonomy is a crucial element to keep TMT turnover low.

“Bestwind” in contrast started to strongly intervene in the German business half a year

after acquisition. Consequently TMT turnover rose significantly. Bestwind replaced the TMT

with managers, it selected on its own. As the new CEO was responsible for integrating the

three acquired German firms, “Bestwind” gained better control. Three acquired German firms

shared many functional departments, so “Bestwind” could reduce cost by laying off

employees The three German acquired firms were integrated to become one functional whole.

This example justifies the replacement of the TMT as it enables acquirers to better control

acquired firms. We therefore conclude that the reasons why “Bestwind” took a different

approach by replacing the acquired TMT in comparison to the other five acquisitions are their

48

confidence derived from its international management experience as well as the similarity of

technologies and management in the three acquired German firms.

The leaders in different German sub-units of Bestwind had similar management experience

and functional background. This is in line with Krishnan et al., (1997) saying that high

similarity in the TMTs’ backgrounds indicates overlapping capabilities and lead to high TMT

turnover. This theory also demonstrates that the possibility to integrate TMT teams with

complementary skills into one system is quite high. In the other five acquisitions where

initially no replacements in the TMTs were made, TMT turnover is low in the years after

acquisition. Beijing NO.1 can be taken as a classical acquisition. Its Chinese TMT is more

specialized in marketing and sales. Furthermore, after-sales were more respondent that on the

German side. The German side, however, was more specialized in producing high quality

precision machines. The TMT of the two sides matched in a way that they could get well

along with each other for a long period of time. This fact justifies and strengthens the theories

of Krishnan et al., (1997)

Another empirical finding contradicts the theory that is proposed by Babić et al., (2014),

who states that employees need more support from leaders after acquisition. In the Energy

acquisition, however, employees on the German side neither needed additional psychological

support from their leaders nor had a negative attitude towards the acquisition. This could be

explained by harsh market conditions in the solar industry as the market was shrinking

sharply in Germany. It is much easier to follow the integration strategy under such

circumstances.

5.6 Resource and capability complementarity vs. similarity Five acquisitions of our study (except for Bestwind) proofed the fact that the main motive of

Chinese acquirers purchasing companies in industrialized countries is the gain access to

lacking resources and capabilities (See Appendix IV). In the due diligence phase companies

made sure that they could be acquired. SMTCL and Beijing NO.1 are from Mainland China

and turned to professional consulting agencies in Hong Kong to get a clear picture of the

target firms. This approach strengthens the argument of Kogut and Zander, (1992) which

highlights the importance of identifying resources and capabilities in the acquisition process.

All six Chinese acquirers took over firms in their own industry. They are all related

acquisitions.

Resource complementary and similarity in terms of technology, market segmentation and

49

managerial expertise of the six acquisitions is summarized below. Table 3. Resource Complementarity in Six Acquisitions

SMTCL, Beijing NO.1, SZXN possesses a high degree of complementarity with their target

firms.

As Chinese tend to adopt the “preservation” integration approach when the two sides

highly complement each other. The TMT of SMTCL, Beijing NO.1, SZXN, planned to

improve their product quality by learning from the German’s globally well-known machine

making skills. They highly supported R&D departments to develop and keep the target team

stable by granting a high level of autonomy. Harrison (2001) argues that autonomy can

enhance the stability of target firms. It explains why Chinese tend to “preserve” instead of

“absorb”. The respect and support from Chinese owners, as well as the fast growing massive

Chinese market grant high potential benefits for German side. These two factors motivate the

German side to be more willing to “teach” Chinese employees and transfer know-how to

China. Obviously, the 1+1>2 joint values were achieved in the acquisitions of Beijing NO.1

and SMTCL, as both sides combined their complementary resources and capabilities. This

lies in line with Milgrom and Roberts (1995), who argue that greater joint values can be

created by such combinations.

Chinese acquirers normally suffer a lack of international expertise and have the intention to

learn from the German side. One German interviewee said “the Chinese are afraid that things

fall apart if they manage the German side by themselves”. It is substantially difficult for

Chinese sides to manage a Western business unit, as they do not know the rules and

procedures in Germany. They rather focus on their own domestic high potential markets, as

they understand them better. Capron, (1999) states that it is more challenging for acquirers to

rationalize the acquired firm’s resources and capability than their own.

Despite the lack of technology and management, the Chinese provided strong sales support.

As a result the German side was able to significantly increase its brand awareness and sales

Technology Market Managerial Expertise

SMTCL and Schiess AG Complementarity Complementarity Complementarity Beijing No.1 and Waldrich Coburg Complementarity Complementarity Complementarity SZXN and Degen Complementarity Complementarity Complementarity Sany and Putzmeister Similarity Similarity Similarity Bestwind and Solar Cell Similarity Similarity Similarity Energy and Inno Complementarity Complementarity Similarity

50

volume on the Chinese market. Few conflicts occurred as the Chinese side rarely intervened

and synergies were created as departments closely cooperated. Beijing NO.1 and SMTCL

achieved both high integration and high autonomy. This result strengthens the theory by

Zaheer et al., (2013) which argues that high level integration and autonomy can both exist

when the acquired firms’ resources and capabilities complements those of acquiring firms.

The Energy acquisition shows a medium level of complementarity.

“Energy” followed the strategy to acquire high-tech firms in developed countries with

different products, in order to widen its patent portfolio and strengthen its leadership role in

the new energy industry. It had solid experience in international business operations and was

extremely good at winning project bids in the Chinese market. Yet, the acquired firm, Inno,

had a technological product that Energy did not have.

Although “Energy” had rich international business experience, it decided to not get involve

in its German subsidiary. Autonomy is encouraged when acquirers are unfamiliar with the

technology in acquired firms (Zaheer et al., 2013). Meanwhile, in order to combine “Inno’s”

technology in its own wide product portfolio, “Energy” tried to integrate Inno into its new

corporate structure following the overall goal to align all acquired firms. The new factory in

China that was built by “Energy” and “Inno” should act as a technology transfer center,

triggering synergies in engineering, marketing and technology. This confirms the theory by

Harrison (2001) saying that a certain level of integration is needed when acquirers aim to

gain benefits from complementary resources and capabilities of acquired firms.

The Sany and Bestwind acquisitions show high similarity

Due to high similarity with its German subsidiary, Sany expected to realize many

synergies. It demonstrated publicly to the Chinese media that they would closely cooperate

with Putzmeister. Kogut and Zander (1992) argue that a high integration level can be

expected when two firms are similar.

However, reality showed that few synergies could be unlocked due to the slow integration

process. Both sides are large enterprises in the machinery industry. After the acquisition,

Sany deliberately ensured market protection for the German firm and promised a high level

of independence, as reaction to strong resistance from the entire organization and even the

German public.

To conclude, most Chinese acquirers purchased firms with resources and capabilities that

complement their own to diversify and complement each other (Morosini et al., 1998; Kogut

51

and Singh, 1988). Complementary resources make acquirers grant high autonomy to the

German side.

52

6. Conclusion Previous studies mainly focused on acquisitions done by companies from developed

countries. Some studies made certain contributions in the area of acquisitions done by

EMNCs. However, the post-acquisition stage still stayed almost unexplored. Although

assumptions were made that EMNCs grant high autonomy to target firms during the

integration process, only few studies actually tried to answer the questions how the

integration process works in detail and how Chinese acquirers balance integration and

autonomy given to German target firms. Therefore, the purpose of this paper is to gain deeper

understanding of post-acquisition integration made by Chinese firms acquiring German firms,

as well as to establish a sound foundation for further theory development within the field of

post-acquisition integration. In order to achieve this goal, the research questions were defined

as “How do Chinese firms balance integration and autonomy with acquired German firms?”

Based on previous studies, a theory model was developed that included five key factors

which have a substantial impact on the dilemma of balancing integration and autonomy.

These factors are culture distance, communication, integration speed, leadership & TMT

turnover and resource complementarity. A case study with six acquisition examples was

implemented, during which we have conducted fourteen interviews mainly with top

managers both from the German and Chinese side. The following five key findings could be

identified:

First, although previous scholars argued that high autonomy leads to loss of control and

limited integration, our results showed that granting high autonomy to acquired firms doesn’t

necessarily lead to such consequences. It could even be said that in one acquisition both high

autonomy and high integration can coexist. We discovered that German and Chinese firms

mainly possessed complementary resources and capabilities. German firms had more

advanced technology whereas Chinese had a strong foothold in the growing Chinese market

showing high demand for German products. This complementarity made each party

cooperate closely in marketing and sales as well as in R&D, so that both acquired more

customers and provided services to them especially in the Chinese market. In these

departments with high complementarity, both high integration and high autonomy were

simultaneously possible. This was one foundation piece for further theory development.

Secondly, the results also showed that the Chinese side rather considered large cultural

distance between the two countries a complementary factor as they benefited from learning

53

the German way of conducting business. The German side also tended to learn from its

Chinese acquirers. A “co-learning” process regarding culture, leadership and communication

between the two sides took place.

Thirdly, despite the fact that, in general, speed of integration was slow, all examined

acquisitions achieved a high integration level after a certain period of time.

Fourthly, all acquisitions shared similar communication strategies: coordinators proved

useful to act as bridge between the two sides. These coordinators had a deep understanding of

both Western and Eastern culture. Also meetings were held among TMTs to ensure the

achievement of corporate goals set by Chinese acquirers.

Fifthly, the studied acquisitions showed that the five key factors were interconnected.

Culture distance hampered the management of the acquired firm by the Chinese acquirer on a

daily base. As a result acquirers kept the acquired TMT stable and TMT turnover low. Big

culture distance caused acquirers to integrate at slow speed whose disadvantages could be

well compensated by intense communication. In addition, culture distance acted as

complementary resource and created more innovative thinking.

Besides the mentioned key findings, we could also conclude that the sizes of the acquirer, its

ownership such as state owned or privately owned, as well as its industry were closely related

with the integration approach chosen. For instance, big firms in the traditional machine

industry with state owned background (Sany, SMTCL, Beijing No.1) were more conservative

when making changes in the German target firms. They were more likely to apply the

“Preservation” approach with slow integration speed. Ten years after acquisition, Beijing

No.1 and SMTCL incrementally transformed to the “Symbiosis” integration approach. While

privately owned companies from new industries (Energy, Bestwind) were more experienced

in international business management and more progressive concerning the integration

process.

In addition, six acquirers promised to grant high autonomy to the acquired firms before

acquisition. Five of them kept their promise and slowly integrated the acquired firm without

big interventions. Only one acquirer (Bestwind) started to heavily intervene in the acquired

firm and absorbed it six months after acquisition. The reason why Bestwind suddenly

changed its approach was the target firm’s tremendously shrinking market share in Germany.

Furthermore Bestwind acquired three highly similar German firms in the same industry

regarding technology know-how, market segmentation, and managerial expertise. In order to

save cost all three units were merged into one structure, which showed more efficient results.

54

Energy was on the way to change its approach from “Preservation” to “Symbiosis” achieving

high integration and high autonomy. On the one hand, Inno intended to market the acquired

technology in China while the European market was going down. On the other hand, the

German subsidiary felt positive towards Energy, which proposed a new attractive business

model to gain a competitive edge in the long run. These two aspects made integration more

attractive to many departments of the German side.

6.1 Limitation

In our study, one limitation is that we did not make a standardized measurement for post-

acquisition performance. Some acquisitions firms think the acquisition have not yet generate

direct economic benefits, but they are happy about the situation as they for example

successfully entered the Chinese markets. Some other firms say that they have strong roots in

another continent after acquisition. Such non-standardized measurement probably could not

comprehensively represent the reality.

6.2 Implication for further research

We acknowledged that our research have limited acquisitions and not sufficient to generalize.

We suggest that future researchers should examine how other country EMNC integrates and

create synergies with their acquired targets in developed countries. The conceptual

framework in this study should be also further examined and further reveals how the

relationship among five concepts interacted. Chinese integration strategy and how it relates

with post-acquisition performance will be of high value to explore in future studies.

As Bestwind Acquisition is quite a mystery for us, due to the limited time and access, we

were not able to find the real motivation behind its acquisition. Further research could

explore the acquisitions that have done acquisition without a clear motivation, as well as how

their integration process works.

6.3 Managerial implications

This study provides a better understanding of integration approach that Chinese MNCs adopt

when making acquisition with German firms. It sheds lights on how Chinese MNC balances

integration and autonomy by referring to five defined concepts.

From a managerial perspective, the key findings of the study firstly show that a sincere and

open communication with works council and employees can reduce the uncertainty and

55

create trust, and it is quite critical for Chinese acquirers to clearly demonstrate to the acquired

firms about the long-term plan and stick to it, since most CEO of acquired firms express to us

the biggest obstacles for them is the exact and clear plan for the future, even they have high

autonomy currently.

Second, it suggests that acquirers should differently balance integration and autonomy in

different business units. And high integration and high autonomy in certain department is

possible and acquirers should implement efficient mechanisms so that expected synergies

could be achieved instead of totally intact the acquired firms. Third, acquirers should make

efforts to propose attractive business model for target firms to gain confidence and sincerity

towards the target firms, it could gain TMT and employees commitment if they perceive the

bright future to work for a new owner.

56

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Strategic Management Journal. 18(8),pp.593–614.

Waldman, D.A. et al. 2004. Charismatic leadership at the strategic level: A new application of

upper echelons theory. The Leadership Quarterly. 15(3),pp.355–380.

Weber, Y. et al. 1996. National and Corporate Cultural Fit in Mergers/Acquisitions: An

Exploratory Study. Management Science. 42(8),pp.1215–1227.

63

Williamson, P.J. and Raman, A.P. 2011. How China reset its global acquisition agenda. Harvard

Business Review. 89(4),pp.109–114.

Yin, R.K. 2009. Case study research: design and methods 4th ed. Los Angeles, Calif: Sage

Publications.

Zaheer, A. et al. 2013. Synergy Sources, Target Autonomy, and Integration in Acquisitions.

Journal of Management. 39(3),pp.604–632.

Zhuo, Z. 2012. Sany acquire Intermix Gmbh. Available from:

http://finance.people.com.cn/n/2012/0923/c349598-19082136.html.

64

Appendix I Interview Guide to Chinese Firm

Acquisition Purpose : 1. What were the reasons your company chooses to acquire the German firm?

2. What are your expectations after the acquisition?

Cultural and leadership difference

3. What were the main differences of the two firms’ organizational culture?

4. What did you learn from German firm’s management style?

5. What is your long-term plan for German subsidiary?

How two firms work together to achieve synergy potential (Balance between autonomy

and integration)?

Communication

6. What difficulties do you think are the main obstacles for achieving potential synergy?

7. What mechanism exists to facilitate communication and trust building between two

sides?

!!

8. What do you think should be improved between two firms’ communication?

9. Which departments in Germany works very independently? Which departments

cooperate more and Chinese involve more?

65

10. After acquisition, for R&D and marketing or manufacturing, do you perceive two

sides are quickly or slowly integrated with each other?

11. Do you think Chinese firm adapts to German side more or another way around?

,

12. Do you think Chinese firm improve international management skill since acquisition

took place?

R&D and Manufacturing :

13. Do two firms’ R&D departments complement with each other?

14. How does R&D cooperate between two firms? Why do you choose such approach?

15. How do you cooperate with each other in Manufacturing and purchasing?

Marketing and Sales

16. Do you work together on market and sales strategies? How does it work?

17. What are the changes of both firms’ market share and brand awareness?

18. What are your plans for global market expansion? What is the role of your German

subsidiary?

HR

19. Which side decides on hiring and promotion in German side?

66

20. What are the changes of top management responsibility in German sides? Is there any

mechanism to facilitate the communication between top managers between two firms?

21. Is there a growing number of expatriate from German side to Chinese firm?(Or

Chinese move to German firm to work)

Final question :

22. What aspects do you satisfied about the cooperation Which aspects should be

further improved?

67

Appendix II Interview Guide to German Side

Acquisition Purpose: 1. Why do you think Chinese firm choose to acquire this company? 2. What are your concerns and expectations after the acquisition?

Cultural difference

3. What were the main differences of the two firms’ organizational culture? 4. What do you think of Chinese management and leadership style?

How two firms work together to achieve Synergy potential (Balance between autonomy

and integration)?

General questions:

5. What difficulties do you think are the main obstacles for achieving potential synergy? 6. What mechanism exists to facilitate communication between the two sides? What aspects

of the business performance on the German side are monitored by the Chinese side? 7. Which departments in Germany work independently? Which departments cooperate more

and involve the Chinese part more? Are you satisfied with how the cooperation works? 8. Do you think the speed of integration is slow or quick? 9. Do you feel secure and get support from Chinese side if in difficulty? 10. Do you think German firms adapt to the Chinese way more, or the other way around? 11. Do you think the Chinese have improved their international management skills since the

acquisition took place?

R&D and Manufacturing:

12. Does the two firms’ R&D complement each other? 13. How do the R&D-departments cooperate between the two firms? 14. How do you cooperate with each other in Manufacturing?

Marketing and sales

15. Do you work together on market strategies? 16. Did both sides improve market share and sales after acquisition?

HR

17. Which side decides on hiring and promotion in the German company? 18. What are the changes of top management responsibility in the German company? Are there a growing number of expatriates from the German company to the Chinese

company? (Or do Chinese employees move to the German company to work)

68

Appendix III. Summary of Theoretical Background Concept Researchers Theoretical Propositions

Pre-acquisition Acquisition motivation

Dunning (2000) OLI eclectic model: Firms internationalize due to three advantages: ownership, Location, and Internalization

Amsden & Chu (2003) EMNCs do not have competitive advantages when

they invest in developed countries. Goldstein (2007) Mathews (2006) Luo & Tung (2007) EMNCs intend to compensate for their ownership

disadantages by acquiring firms from developed coutries.

EMNCs take acquisitions as "springboard" to obtain strategic assets and strengthen their positions in home markets

Deng (2007) Chinese MNCs prefer acquisition as a quicker way to access to strategic capabilities and resources in industrial countries. Include following:

-Advanced technology -Managerial expertise

-Market resources Post-acquisition

Integration Capron, 1999 Integration can positively affect post-acquisition performance by realizing synergies. Larsson and Finkelstein

(1999)

Birkinshaw et al. (2000) Autonomy Khandwalla (1997) Autonomy could meet higher needs of human being

such as freedom and power , thus it could motivate acquried team.

Stubbalt (1983)

Integration approach model

Haspeslagh and Jemison (1991)

Four types of integration approaches: - Preservation: High autonomy and low integration - Symbiosis: High autonomy and high integration - Absorption: Low autonomy and high integration - Holding: Low autonomy and low integration

5 concepts Culture Distance Terpstra & David (1991) Culture distance derives from both organization

culture and national culture. Organizational cultures are closely associated with national cultures.

Kogut & Singh (1988)

Björkman et al. (2007) Cultual distance is a key determinant in post-acquisition integration. Teerikangas & Very (2006)

Vermeulen & Barkema (2001)

Olie (1994) a. A big cultual distance could lead to poor post-acquisition performance. Chatterjee et al. (2008)

Chakrabarti et al. (2008) Olie (1994) Vaara et al. (2012)

- Cultual distance is an obstacle for integration. - Culture distance as an obstacle is more obvious in

Cross-border Acquisitions Krishnan et al. (1997) b. Cultural distance can be seen as resource

complementarity and lead to value creation. Morosini et al., 1998 Vermeulen & Barkema

(2001)

69

Reus & Lamont (2009) - aquirers and acquired firms could learn from each other's culture, which create culture diversification

Cox (1991) - Culuture diversification could result in more innovative spirit.

Barkema &Vermeulen (1998)

- Firms with diversified culture are more adaptive to changes

Slangen (2006) When there is a big national culture distance, adoption of "preservation"integration could positively impact on post acquisition performance. In contrast, "absorption" integration negatively influences the result.

Communication Mishra et al. (2014) An efficient and open internal communication enables employees and managers share insights and increase committment to achieve the common goals.

Gertsen et al. (1998) Cross border acquisition has to deal with more challenging communication difficulties, and communication are critically impact on post acquisition performance.

Ranft & Lord (2002) Gomes et al. (2013)

Miris and Marks (1986) Top managers tend to avoid disscussing with employees about changes after the acquisition.

Napier et al. (1989) Employee from acquired side seeks information from other sources such as rumors due to the lack of information and uncertainty towards their future.

D' Aprix (2009) Face to face communication could create more credible information for employees.

Schweiger & DeNisi (1991) Open and transparent communications clearly inform employees about the corporate changes and their work responsibility differences after acquisition, which enhances integration process.

Mishra et al. (2014) Eisenberg & Witten (1987)

Ranft and Lord (2002) Communication richness compensates for acquirers limited control when acquirers have granted a high autonomy.

Ranft and Lord (2002) Communication reduces employee uncertainty and nerves, build trust Communicaition facilitate knowlege transfer.

Haspeslagh & Jemison (1991)

An Efficient communication strategy helps to establish a cooperative and collaborative atmosphere. Atmosphere is important for integration implementation process.

Haspeslagh & Jemison (1991)

The integration process of Absorption integration type is to assimilate target firms into the acquirers system, which needs much work of communication.

Integration Speed

InKpen et al. (2000) High speed integration could increase employee commitment.

Homburg & Bucerius (2006)

Internal similarity and external similarity jointly affect the relation between post acquisition perfomance and integration speed.

- High speed could lead to better performance when a high internal similarity combines with low external similarity

- High speed could strongly lower the performance when a lower internal similarity combines with high external similarity

70

- Integration speed does not have an obvious influence on post-acquisiton performance when internal and external similarity are both low

Homburg & Bucerius (2006)

Slow integration can leave period for mutual learning and trust buiding,which enable firms to obtain resource and knowledge transfer. Haspeslagh & Jemison

(1991)

Ranft & Lord (2002) Slow integration could positively impact on culture adaptation

Reichheld & Henske (1991) High integration speed can reduce customer uncertainty. Clemente & Greenspan

(1997)

InKpen et al. (2000) High speed integration could mitigate employee uncertainty, such as typical 100days plan

Capron (1999) High speed enables firms quickly benefit from economies of scale and save cost. Homburg & Bucerius

(2005)

Ranft & Lord (2002) Fast integration might result in value destruction Key employees and top managers leave the organization Lin (2012)

Leadership and TMT turnover

Pablo (1994) Leadership plays vital role in creating acquisition values Strauss & Corbin (1990)

Waldman et al. (2004) Graebner (2004) Acquired Leaders can achieve two types of values:

expected and serendipitous -Leaders can mitigate potential conflicts and relieve

emloyee anxiety that typically happen after acquisition. (Expected values)

- Leaders have the visibility and motivation to discover unexpected synergies.(Serendipitous value)

Babić et al. (2014) Employees need support from leaders after acquisition Angwin & Meadows (2009) A high level integration relates to high TMT turnover;

a high level autonomy relates to low TMT turnover. High TMT turnover might caused by Krug & Hegarty (2001) - intensive interventions from acquired firms Hambrick and Cannella

(1993) - less autonomy and lower formal status

Low TMT turnover might caused by Hambrick and Cannella

(1993) - The executives in acquired firms have positive

perceptions of the long-berm benefits on acquisition Krishnan et al. (1997) - TMT in acquirer and acquired firms have

complementary functional backgrounds. Lowenstein (1983) Acquirers replace acquired TMT to better control the

target firms Butler et al. (2012) TMT turnover has negative impact on post-acquisition

performance since Brockmann &Authony

(2002) - TMT in acquired firms has uniqure and vital

knowledge about target firm. Michalisin et al. (2004) Kiessling & Harvey (2006) Randel and Ranft (2007) - TMT turnover has negative effects on information

exchange and social capital in acquired firm Kogut & Zander (1992) Integrate and reconfigure resources and capabilities is

important for post acquisition performance. Morosini et al. (1998)

Kogut and Singh (1988) The new market and capability from acquired firms or

acquirers diversifies each other’s corporate resource

71

Resource and capability complementarity VS similarity

Milgrom & Roberts (1995) Bring two firms together with complementary resources could potentially create greater joint values.

Kim & Finkelstein (2009) Two firms need to be integrated to achieve the expected joint values. Cassiman et al. (2005)

Conner (1991) Harrison (2001) Certain level of integration is necessary to achieve

potential synergies whentwo sides' resources and capabilities are complementary.

Certain level of autonomy should be granted so that acquired firms' resources and capability could be maintained and stay stable

Capron (1999) Acquirers have more challenges to rationalize target’s resources and capability than their own

Zaheer et al. (2013) Autonomy is especially vital for acquirers to deploy R&D resources and capability

Lubatkin (1983) High resources and capability similarity by integration could lead to economic of scale and incresae earnings for acquirers

Singh & Montgomery (1987)

Kogut & Zander (1992) Integration level is expected high when two firms have

a high simiarity Makri et al. (2000) It is easier for two firms with high similarity in market

and technology to implement integration strategy. Puranam et al. (2009) Low level autonomy results in knowledge disruption. Ranft & Lord (2002

Zaheer et al. (2013) High Level of integration and high autonomy can coexist, expecially when two firms have complementary resources and capabilities

Con

cept

Res

earc

hers

The

oret

ical

Pro

posi

tions

Con

firm

ed fi

ndin

gsC

ontr

adic

tiona

ry fi

ndin

gs

Dun

ning

(200

0)O

LI e

clec

tic m

odel

: Firm

s in

tern

atio

naliz

edu

e to

thre

e ad

vant

ages

: ow

ners

hip,

Loca

tion,

and

Inte

rnal

izat

ion

Six

acqu

isiti

on fi

rms h

ave

not s

trict

lyfo

llow

ed O

LI m

odel

to in

tern

atio

naliz

e.

Am

sden

& C

hu(2

003)

Gol

dste

in (2

007)

Mat

hew

s (20

06)

EMN

Cs i

nten

d to

com

pens

ate

for t

heir

owne

rshi

p di

sada

ntag

es b

y ac

quiri

ng fi

rms

from

dev

elop

ed c

outri

es.

conf

irmed

by

five

acqu

isiti

ons(

exce

ptB

estw

ind)

Bes

twin

d

EMN

Cs t

ake

acqu

isiti

ons a

s "sp

ringb

oard

"to

obt

ain

stra

tegi

c as

sets

and

stre

ngth

enth

eir p

ositi

ons i

n ho

me

mar

kets

conf

irmed

by

five

acqu

isiti

ons(

exce

ptB

estw

ind)

. The

ir m

arke

t pos

ition

and

bra

ndaw

aren

ess e

spec

ially

in C

hine

se m

arke

t is

stre

nght

en a

fter a

cqui

sitio

n.C

hine

se M

NC

s pre

fer a

cqui

sitio

n as

aqu

icke

r way

to a

cces

s to

stra

tegi

cca

pabi

litie

s and

reso

urce

s in

indu

stria

lco

untri

es. I

nclu

de fo

llow

ing:

-Adv

ance

d te

chno

logy

conf

irmed

by

five

acqu

isiti

ons(

Exce

ptB

estw

ind)

-Man

ager

ial e

xper

tise

conf

irmed

by

four

acq

uisi

tions

(Exc

ept o

rEn

ergy

and

Bes

twin

d)

-Mar

ket r

esou

rces

conf

irmed

by

Sany

, SZX

N, t

hey

all i

nten

d to

expa

nd to

Eur

opea

n m

arke

t.

Cap

ron,

199

9Th

ree

acqu

isiti

on c

onfir

med

that

cer

tain

inte

grat

ion

lead

to v

alue

cre

atio

n.In

acq

uisi

tion

SZX

N, a

lthou

gh th

eac

quis

iton

enab

le G

erm

an si

de su

cces

sful

lyen

tere

d ch

ines

e m

arke

t, ho

wev

er, t

he c

ost o

fco

mm

unic

atio

n in

crea

sed.

The

acq

uire

dfir

ms n

ot su

re th

e re

al d

ilem

ma

resu

lt.

Den

g (2

007)

Our

stud

y di

d no

t fin

d ou

t why

Bes

twin

dac

quire

the

targ

et fi

rms

Post

-acq

uisi

tion

Inte

grat

ion

Inte

grat

ion

can

posi

tivel

y af

fect

pos

t-ac

quis

ition

per

form

ance

by

real

izin

gsy

nerg

ies.

App

endi

x IV

. Sum

mar

y of

Ana

lysi

s Fin

ding

s

Pre-

acqu

isiti

on

Acq

uisi

tion

mot

ivat

ion

EMN

Cs d

o no

t hav

e co

mpe

titiv

e ad

vant

ages

whe

n th

ey in

vest

in d

evel

oped

cou

ntrie

s.co

nfirm

ed b

y fo

ur a

cqui

sitio

ns e

xcep

t for

Bes

twin

d an

d En

ergy

.B

estw

ind

and

Ener

gy h

ave

stro

ngco

mpe

titiv

e ad

vant

age

in te

chno

logy

and

man

ange

men

t exp

ertis

e.

Luo

& T

ung

(200

7)

Lars

son

and

Fink

elst

ein

(199

9)B

irkin

shaw

et a

l.(2

000)

Kha

ndw

alla

(199

7)St

ubba

lt (1

983)

Four

type

s of i

nteg

ratio

n ap

proa

ches

:- P

rese

rvat

ion:

Hig

h au

tono

my

and

low

inte

grat

ion

Sany

, SZX

N, E

nerg

y

- Sym

bios

is: H

igh

auto

nom

y an

d hi

ghin

tegr

atio

nSM

TCL,

Bei

jing

No.

1En

ergy

is o

n th

e w

ay to

be

"Sym

bios

is"

- Abs

orpt

ion:

Low

aut

onom

y an

d hi

ghin

tegr

atio

nB

estw

ind

- Hol

ding

: Low

aut

onom

y an

d lo

win

tegr

atio

nN

one

Terp

stra

& D

avid

(199

1)K

ogut

& S

ingh

(198

8)

Bjö

rkm

an e

t al.

(200

7)Si

x ac

quis

ition

s all

conf

irmed

.

Teer

ikan

gas &

Ver

y(2

006)

Verm

eule

n an

dB

arke

ma

(200

1)O

lie (1

994)

Con

firm

ed b

y Sa

ny.

Cha

tterje

e et

al.

(200

8)- C

ultu

al d

ista

nce

is a

n ob

stac

le fo

rin

tegr

atio

n.C

onfir

med

by

all a

cqui

sitio

ns. A

llac

quis

ition

firm

thin

k its

diff

icul

t to

inte

grat

edu

e to

cul

ture

diff

eren

ce

How

ever

, the

cul

ture

obs

tacl

e di

d no

t cre

ate

pred

icte

d co

nflic

ts in

SM

TCL,

Bei

jing

No.

1,En

ergy

.

Inte

grat

ion

Inte

grat

ion

can

posi

tivel

y af

fect

pos

t-ac

quis

ition

per

form

ance

by

real

izin

gsy

nerg

ies.

Tech

nono

logy

impr

ovem

ent:

Sany

hav

enot

impr

oved

per

form

ance

on

tech

nolo

gy/p

rodu

ct o

fferin

g ha

s bee

nw

iden

ed in

Bei

jing

No.

1,SM

TCL

Aut

onom

y

Inte

grat

ion

appr

oach

mod

el

Has

pesl

agh

and

Jem

ison

(199

1)

5 C

once

pts

Cul

ture

Dis

tanc

eC

ultu

re d

ista

nce

deriv

es fr

om b

oth

orga

niza

tion

cultu

re a

nd n

atio

nal c

ultu

re.

Org

aniz

atio

nal c

ultu

res a

re c

lose

lyas

soci

ated

with

nat

iona

l cul

ture

s.

Con

firm

ed b

y fiv

e ac

quis

ition

s,exc

ept

Bes

twin

d G

roup

. Int

ervi

ewee

s alw

ays m

ixth

e do

min

e of

nat

iona

l cul

ture

and

firm

cultu

re. w

hen

we

ask

them

abo

ut th

eor

angi

zatio

n cu

lutre

, the

y al

way

s lin

k th

eid

ea to

nat

iona

l cul

utre

diff

fere

nce.

Cul

tual

dis

tanc

e is

a k

ey d

eter

min

ant i

n po

st-

acqu

isiti

on in

tegr

atio

n.

a. A

big

cul

tual

dis

tanc

e co

uld

lead

to p

oor

post

-acq

uisi

tion

perf

orm

ance

.In

terv

iew

ees i

n fo

ur a

cqui

sitio

n(ex

cept

San

yan

d B

estw

ind)

are

all

happ

y ab

out t

heac

quis

iton

perf

orm

ance

.C

hakr

abar

ti et

al.

(200

8)O

lie (1

994)

Vaar

a et

al.

(201

2)

Aut

onom

y co

uld

mee

t hig

her n

eeds

of

hum

an b

eing

such

as f

reed

om a

nd p

ower

,th

us it

cou

ld m

otiv

ate

acqu

ried

team

.

conf

irmed

by

all a

cqui

sitio

ns.

- Cul

ture

dis

tanc

e as

an

obst

acle

is m

ore

obvi

ous i

n C

ross

-bor

der A

cqui

sitio

nsK

rishn

an e

t al.

(199

7)M

oros

ini e

t al.,

199

8Ve

rmeu

len

&B

arke

ma

(200

1)R

eus &

Lam

ont

(200

9)- a

quire

rs a

nd a

cqui

red

firm

s cou

ld le

arn

from

eac

h ot

her's

cul

ture

, whi

ch c

reat

ecu

lture

div

ersi

ficat

ion

Con

firm

ed b

y fo

ur a

cqui

sitio

ns(e

xcep

t for

Sany

and

Bes

twin

d) fo

ur a

cqui

sitio

ns a

llth

ink

it's a

mut

ual a

dapa

tion

and

cultu

re c

o-le

arni

ng p

roce

ss.

Cox

(199

1)- C

ulut

ure

dive

rsifi

catio

n co

uld

resu

lt in

mor

e in

nova

tive

spiri

t.B

arke

ma

&Ve

rmeu

len

(199

8)- F

irms w

ith d

iver

sifie

d cu

lture

are

mor

ead

aptiv

e to

cha

nges

Slan

gen

(200

6)W

hen

ther

e is

a b

ig n

atio

nal c

ultu

re d

ista

nce,

adop

tion

of "

pres

erva

tion"

inte

grat

ion

coul

dpo

sitiv

ely

impa

ct o

n po

st a

cqui

sitio

npe

rfor

man

ce. I

n co

ntra

st, "

abso

rptio

n"in

tegr

atio

n ne

gativ

ely

influ

ence

s the

resu

lt.

Con

firm

ed b

y fiv

e ac

quis

ition

s(ex

cept

for

Sany

). A

mon

g th

ese

five

acqu

isiti

ons,

SMTC

L an

d B

eijin

g N

O.

Sany

and

its G

erm

an h

ave

very

littl

ein

tera

ctio

n, a

nd th

e in

tegr

atio

n st

rate

gy o

fpr

eser

vatio

n do

es n

ot sa

tisify

bot

h si

des.N

oex

pect

ed sy

nerg

ies a

re re

aliz

ed.

Mis

hra

et a

l. (2

014)

An

effic

ient

and

ope

n in

tern

alco

mm

unic

atio

n en

able

s em

ploy

ees a

ndm

anag

ers s

hare

insi

ghts

and

incr

ease

com

mitt

men

t to

achi

eve

the

com

mon

goa

ls.

Con

firm

ed b

y SM

TCL,

Bei

jing

NO

.1,E

nerg

yB

estw

ind

tried

the

best

to c

omm

unca

te w

ithits

acq

uire

d ta

rget

, how

ever

, th

e m

assi

vela

yoffs

alre

ady

crea

te to

o m

uch

anxi

ety

tow

ards

em

ploy

ees.

Even

the

rich

com

mun

icai

ton

coul

d no

t com

pesa

te o

n it.

Ger

tsen

et a

l. (1

998)

Ran

ft &

Lor

d (2

002)

Con

firm

ed b

y al

l acq

uisi

tions

. All

acqu

isiti

on fi

rm th

ink

its d

iffic

ult t

o in

tegr

ate

due

to c

ultu

re d

iffer

ence

How

ever

, the

cul

ture

obs

tacl

e di

d no

t cre

ate

pred

icte

d co

nflic

ts in

SM

TCL,

Bei

jing

No.

1,En

ergy

.

b. C

ultu

ral d

ista

nce

can

be se

en a

s res

ourc

eco

mpl

emen

tarit

y an

d le

ad to

val

ue c

reat

ion.

Bei

jing

No1

and

its G

erm

an si

de w

ork

onso

me

Des

ign

and

Mar

ket a

ctiv

ity, w

hich

nurtu

re m

ore

inno

vativ

e th

inki

ng in

thes

eac

tiviti

es b

y ad

optin

g di

ffere

nt m

enta

lity.

Com

mun

icat

ion

Cro

ss b

orde

r acq

uisi

tion

has t

o de

al w

ithm

ore

chal

leng

ing

com

mun

icat

ion

diffi

culti

es, a

nd c

omm

unic

atio

n ar

e cr

itica

llyim

pact

on

post

acq

uisi

tion

perf

orm

ance

.

Con

firm

ed b

y fiv

e ac

quis

ition

s(Ex

cept

for

Bes

twin

d). T

he re

ason

s: 1

, big

cul

ture

dist

ance

2, l

ocat

ion

dist

ance

3, l

angu

age

prob

lem

s 4,o

rgan

izat

iona

l stru

ctur

edi

ffere

nce.

5, f

irm si

ze d

iffer

ence

. O

neex

trem

e ex

ampl

e is

Ene

rgy'

s diff

eren

tde

partm

ents

ask

ing

Ger

man

firm

doi

ngre

peat

ed re

ports

and

fix

sim

ilar i

ssue

s tha

tco

me

from

Chi

nese

side

.

Cul

ture

Dis

tanc

e

Cha

krab

arti

et a

l.(2

008)

Olie

(199

4)Va

ara

et a

l. (2

012)

Gom

es e

t al.

(201

3)

Miri

s and

Mar

ks(1

986)

Top

man

ager

s ten

d to

avo

id d

issc

ussi

ng w

ithem

ploy

ees a

bout

cha

nges

afte

r the

acqu

isiti

on.

Con

firm

ed b

y Sa

ny. S

any'

s Ger

man

subs

idia

ry d

id te

nd to

avo

id to

talk

to w

hole

empl

oyee

in th

e be

ginn

ing

.

Bei

jing

NO

.1, S

MTC

L, E

nerg

y al

l ope

ned

talk

ed a

bout

the

acqu

isiti

ons.

Nap

ier e

t al.

(198

9)Em

ploy

ee fr

om a

cqui

red

side

seek

sin

form

atio

n fr

om o

ther

sour

ces s

uch

asru

mor

s due

to th

e la

ck o

f inf

orm

atio

n an

dun

certa

inty

tow

ards

thei

r fut

ure.

Con

firm

ed b

y Sa

ny, B

eijin

g N

O.1

, Ene

rgy.

Empl

oyee

s in

Putz

mei

ster

(San

y ac

quis

ition

),W

aldr

ich

Cob

urg(

Bei

jing

NO

.1)h

ave

been

seek

ing

for i

nfor

mat

ion

from

Ger

man

soci

ety

whi

ch h

ad c

erta

in n

egat

ive

impr

essi

on to

war

ds C

hine

se a

cqui

rers

. Bot

hPu

tzm

eist

er a

nd W

aldr

ich

Cob

urg

wer

e"G

erm

an S

oul"

.Ger

man

soci

ety

thus

wer

ecr

itici

zing

Chi

nese

buy

ing

its so

ul.

Empl

oyee

s in

Inno

(Ene

rgy

acqu

isiti

on) w

ere

posi

tive

and

look

ing

forw

ard

to th

eac

quis

ition

.

D' A

prix

(200

9)Fa

ce to

face

com

mun

icat

ion

coul

d cr

eate

mor

e cr

edib

le in

form

atio

n fo

r em

ploy

ees.

Con

firm

ed b

y B

eijin

g N

o1 a

nd S

MTC

L.C

EO fr

om C

hina

cam

e to

Ger

man

y to

hav

em

eetin

gs w

ith a

ll th

e em

ploy

ees.

Schw

eige

r & D

eNis

i(1

991)

Mis

hra

et a

l. (2

014)

Eise

nber

g &

Witt

en(1

987)

Ran

ft an

d Lo

rd (2

002)

Com

mun

icat

ion

richn

ess c

ompe

nsat

es fo

rac

quire

rs li

mite

d co

ntro

l whe

n ac

quire

rsha

ve g

rant

ed a

hig

h au

tono

my.

Bei

jing

NO

.1, S

MTC

L, E

nerg

y, D

egen

all

adim

itted

that

as G

erm

an si

de o

pera

tes

inde

pend

ently

, the

y co

mm

unci

ate

very

ofte

nso

that

kno

w h

ow c

an b

e tra

nsfe

rred

.R

anft

and

Lord

(200

2)C

omm

unic

atio

n re

duce

s em

ploy

eeun

certa

inty

and

ner

ves,

build

trus

tC

omm

unic

aitio

n fa

cilit

ate

know

lege

tran

sfer

.Con

firm

ed b

y B

eijin

gNo1

Com

mun

icat

ion

Cro

ss b

orde

r acq

uisi

tion

has t

o de

al w

ithm

ore

chal

leng

ing

com

mun

icat

ion

diffi

culti

es, a

nd c

omm

unic

atio

n ar

e cr

itica

llyim

pact

on

post

acq

uisi

tion

perf

orm

ance

.

Con

firm

ed b

y fiv

e ac

quis

ition

s(Ex

cept

for

Bes

twin

d). T

he re

ason

s: 1

, big

cul

ture

dist

ance

2, l

ocat

ion

dist

ance

3, l

angu

age

prob

lem

s 4,o

rgan

izat

iona

l stru

ctur

edi

ffere

nce.

5, f

irm si

ze d

iffer

ence

. O

neex

trem

e ex

ampl

e is

Ene

rgy'

s diff

eren

tde

partm

ents

ask

ing

Ger

man

firm

doi

ngre

peat

ed re

ports

and

fix

sim

ilar i

ssue

s tha

tco

me

from

Chi

nese

side

.

Ope

n an

d tra

nspa

rent

com

mun

icat

ions

clea

rly in

form

em

ploy

ees a

bout

the

corp

orat

e ch

ange

s and

thei

r wor

kre

spon

sibi

lity

diffe

renc

es a

fter a

cqui

sitio

n,w

hich

enh

ance

s int

egra

tion

proc

ess.

Con

firm

ed b

y SM

TCL

and

Bei

jing

NO

.1

Has

pesl

agh

& Je

mis

on(1

991)

An

Effic

ient

com

mun

icat

ion

stra

tegy

hel

psto

est

ablis

h a

coop

erat

ive

and

colla

bora

tive

atm

osph

ere.

Atm

osph

ere

is im

porta

nt fo

rin

tegr

atio

n im

plem

enta

tion

proc

ess.

Six

acqu

isiti

ons a

ll co

nfirm

ed.

Has

pesl

agh

& Je

mis

on(1

991)

The

inte

grat

ion

proc

ess o

f Abs

orpt

ion

inte

grat

ion

type

is to

ass

imila

te ta

rget

firm

sin

to th

e ac

quire

rs sy

stem

, whi

ch n

eeds

muc

hw

ork

of c

omm

unic

atio

n.

Bes

twin

d co

nfirm

ed

InK

pen

et a

l. (2

000)

Hig

h sp

eed

inte

grat

ion

coul

d in

crea

seem

ploy

ee c

omm

itmen

t.H

ombu

rg &

Buc

eriu

s(2

006)

Inte

rnal

sim

ilarit

y an

d ex

tern

al si

mila

rity

join

tly a

ffect

the

rela

tion

betw

een

post

acqu

isiti

on p

erfo

man

ce a

nd in

tegr

atio

nsp

eed.

Our

six

acqu

isiti

ons a

ll th

e lo

w in

tern

al a

ndex

tern

al si

mila

rity.

- Hig

h sp

eed

coul

d le

ad to

bet

ter

perf

orm

ance

whe

n a

high

inte

rnal

sim

ilarit

y co

mbi

nes w

ith lo

w e

xter

nal

sim

ilarit

y

Not

in th

e ac

quis

ition

- Hig

h sp

eed

coul

d st

rong

ly lo

wer

the

perf

orm

ance

whe

n a

low

er in

tern

alsi

mila

rity

com

bine

s with

hig

h ex

tern

alsi

mila

rity

Not

in th

e ac

quis

ition

Inte

grat

ion

Spee

dN

ot c

onfir

med

. We

do n

ot h

ave

a in

dep

th a

cqui

sitio

n w

ith h

igh

spee

d in

tegr

atio

n(Fi

veac

quis

ition

s are

all

slow

spee

d in

tegr

atio

, onl

y on

e ac

quis

ition

firm

Bes

twin

d ju

st st

arte

dto

spee

d up

inte

grat

ion)

Com

mun

icat

ion

- Int

egra

tion

spee

d do

es n

ot h

ave

anob

viou

s inf

luen

ce o

n po

st-a

cqui

sito

npe

rfor

man

ce w

hen

inte

rnal

and

ext

erna

lsi

mila

rity

are

both

low

Con

firm

ed b

y al

l acq

uisi

tions

. In

SMTC

Lan

d B

eijin

g N

O.1

, the

slow

spee

d in

tegr

atio

npr

oved

to p

ositi

vely

influ

ence

on

acqu

isiti

onpe

rfor

man

ce.

In S

any

acqu

isiti

on, t

hein

tegr

atio

n sp

eed

is to

o sl

ow, a

nd o

urin

terv

iew

ee fr

om S

any

said

the

acqu

isiti

ondo

esno

t brin

g ex

tra v

alue

s for

them

. In

both

Ener

gy a

nd S

ZX, i

nteg

ratio

n pr

oces

s is

expe

cted

to sp

eed

up to

real

ize

mor

epo

tent

ial s

yerg

ies.I

nter

estin

gly,

Inno

(Ene

rgy

acqu

isiti

on) s

ide

expe

ct h

ighe

r spe

ed to

inte

grat

e an

d de

ploy

its t

echn

olog

y in

Chi

nese

mar

ket.

Yet,

Bes

twin

d qu

icke

n its

chan

ges o

n th

e ge

rman

side

, and

it m

ade

Ger

man

side

ups

et. N

o m

atte

r int

egra

tion

issl

ow o

r qui

ck, t

he re

sult

and

influ

ence

are

unce

rtain

in e

ach

acqu

isiti

on.

Hom

burg

& B

ucer

ius

(200

6)H

aspe

slag

h &

Jem

ison

(199

1)R

anft

& L

ord

(200

2)Sl

ow in

tegr

atio

n co

uld

posi

tivel

y im

pact

on

cultu

re a

dapt

atio

n

Rei

chhe

ld &

Hen

ske

(199

1)

Sany

hav

e a

very

slow

inte

grat

ion

spee

d, a

ndth

e tw

o si

des h

ardl

y ga

ined

mut

ulal

unde

rsta

indi

ng a

nd tr

ust .

(1 tw

o si

des h

ave

been

dire

ct c

ompe

titor

for a

long

tim

e 2

high

prod

uct s

imila

rity

and

over

lap

3 so

, tw

osi

des d

onot

a m

utua

l goa

ls o

f int

egra

tion.

Inte

grat

ion

Spee

d

Slow

inte

grat

ion

can

leav

e pe

riod

for m

utua

lle

arni

ng a

nd tr

ust b

uidi

ng,w

hich

ena

ble

firm

s to

obta

in re

sour

ce a

nd k

now

ledg

etra

nsfe

r.

Five

acq

uisi

tions

exc

ept B

estw

ind

ado

pted

slow

inte

grat

ion

spee

d. A

mon

g th

e fiv

e, fo

urac

quis

ition

s exc

ept S

any

have

gai

ned

or st

illtry

ing

to g

ain

trust

and

bui

ld m

utua

lle

arni

ng.

SMTC

L an

d B

eijin

g N

o1 h

ave

done

acq

uisi

tion

for t

en y

ears

, tw

oac

quis

ition

s st

rong

ly re

pres

ent a

long

tim

eco

urte

rshi

p re

latio

nshi

p w

ith m

utua

lun

ders

tand

ing

and

smoo

th c

oope

ratio

n.C

hine

se le

arne

d Eu

rope

an w

ay ,

Ger

man

lear

ned

Chi

nese

way

.H

igh

inte

grat

ion

spee

d ca

n re

duce

cus

tom

erun

certa

inty

.N

ot c

onfir

med

In o

ur a

cqui

sitio

ns, h

igh

inte

grat

ion

spee

dac

tual

ly in

crea

se c

usto

mer

unc

erta

inty

.SM

TCL

once

trie

d to

spee

d up

the

proc

ess

of in

tegr

atio

n by

mak

ing

som

e qu

ick

chan

ges,

for e

xam

ple,

mov

ing

prod

uctio

n to

Chi

na a

nd it

act

ually

mad

e its

cus

tom

ers g

etw

orse

pro

duct

s due

to th

at G

erm

an m

ade

prod

ucts

are

mor

e ap

prei

cate

d /E

nerg

yac

quis

ition

s rev

eals

that

low

inte

grat

ion

spee

d di

dnot

hav

e an

y in

fluen

ce o

n ac

quire

dfir

ms'

cust

omer

.

Cle

men

te &

Gre

ensp

an (1

997)

InK

pen

et a

l. (2

000)

Hig

h sp

eed

inte

grat

ion

coul

d m

itiga

teem

ploy

ee u

ncer

tain

ty, s

uch

as ty

pica

l10

0day

s pla

n

Not

con

firm

edA

ll si

x fir

ms d

id n

ot h

ave

100d

ays p

lan

for

inte

grat

ion.

/Fiv

e ac

quis

ition

(ex

cept

for

Bes

twin

d) c

onfir

med

that

a lo

w sp

eed

inte

grat

ion

coul

d re

duce

em

ploy

eeun

certa

inty

.San

y ac

quis

ition

con

firm

ed a

sta

rget

firm

s' em

ploy

ees w

ere

miti

gate

d af

ter

Sany

dem

onst

ated

hig

h at

uono

my

and

very

little

cha

nges

wou

ld b

e m

ade.

C

apro

n (1

999)

Hom

burg

& B

ucer

ius

(200

5)

Ran

ft &

Lor

d (2

002)

Fast

inte

grat

ion

mig

ht re

sult

in v

alue

dest

ruct

ion�

Key

em

ploy

ees a

nd to

pm

anag

ers l

eave

the

orga

niza

tion

Con

firm

ed b

y So

lar C

ell.

Lin

(201

2)Sl

ow in

tegr

atio

n co

ule

be ri

sky

for h

igh-

tech

firm

s sin

ce th

ey n

eed

to g

et te

chno

logy

sour

ce q

uick

ly.

Pabl

o (1

994)

Stra

uss &

Cor

bin

(199

0)W

aldm

an e

t al.

(200

4)

Acq

uire

d Le

ader

s can

ach

ieve

two

type

s of

valu

es: e

xpec

ted

and

sere

ndip

itous

SMTC

L o

nce

mov

ed p

rodu

ctio

n to

Chi

na,

whi

ch su

ppos

e to

redu

ct c

ost ,

how

ever

,G

erm

an fi

rms h

as to

repr

oces

s the

pro

duct

,an

d it

in th

e en

d ac

tual

ly in

crea

se th

e co

st.

Lead

ersh

ipan

d TM

Ttu

rnov

er

Lead

ersh

ip p

lays

vita

l rol

e in

cre

atin

gac

quis

ition

val

ues

Con

firm

ed b

y si

x a

cqui

sitio

ns. A

ver

yre

pres

entiv

e ac

quis

ition

is B

eijin

g N

o1,

Chi

nese

CEO

Mr C

ui h

as sh

owed

a v

ery

trans

form

atio

nal l

eade

rshi

p st

yle,

he

was

the

one

who

cle

ar d

oubt

s for

em

ploy

ees .

His

"big

tree

prin

cipl

e" w

as v

ery

influ

entia

lG

raeb

ner (

2004

)

Inte

grat

ion

Spee

d

Hig

h in

tegr

atio

n sp

eed

can

redu

ce c

usto

mer

unce

rtain

ty.

Not

con

firm

edIn

our

acq

uisi

tions

, hig

h in

tegr

atio

n sp

eed

actu

ally

incr

ease

cus

tom

er u

ncer

tain

ty.

SMTC

L on

ce tr

ied

to sp

eed

up th

e pr

oces

sof

inte

grat

ion

by m

akin

g so

me

quic

kch

ange

s, fo

r exa

mpl

e, m

ovin

g pr

oduc

tion

toC

hina

and

it a

ctua

lly m

ade

its c

usto

mer

s get

wor

se p

rodu

cts d

ue to

that

Ger

man

mad

epr

oduc

ts a

re m

ore

appr

eica

ted

/Ene

rgy

acqu

isiti

ons r

evea

ls th

at lo

w in

tegr

atio

nsp

eed

didn

ot h

ave

any

influ

ence

on

acqu

ired

firm

s' cu

stom

er.

Hig

h sp

eed

enab

les f

irms q

uick

ly b

enef

itfr

om e

cono

mie

s of s

cale

and

save

cos

t. A

hig

her s

peed

inte

grat

ion

in E

nerg

y an

dSa

ny w

ere

perc

eive

d to

be

mor

e be

neni

tial

to sa

ve c

ost

-Lea

ders

can

miti

gate

pot

entia

l con

flict

s and

relie

ve e

mlo

yee

anxi

ety

that

typi

cally

happ

en a

fter a

cqui

sitio

n. (E

xpec

ted

valu

es)

Con

firm

ed b

y Sa

ny a

cqui

sitio

n. A

cqui

red

CEO

Mr S

cheu

ch d

id c

omfo

rting

the

empl

oyee

s.-

Lead

ers h

ave

the

visi

bilit

y an

d m

otiv

atio

nto

dis

cove

r une

xpec

ted

syne

rgie

s.(Se

rend

ipito

us v

alue

)

Con

firm

ed b

y Su

zhou

xinn

eng

acqu

isiti

on.

Acq

uire

d C

EO M

r Deg

en st

rong

ly d

edic

ated

to th

e or

ganz

atio

n. D

ue to

the

busi

ness

secr

etcy

he

just

told

us h

e se

es in

tere

sts t

hat

no o

ne e

lse

coul

d se

e.B

abić

et a

l. (2

014)

Empl

oyee

s nee

d su

ppor

t fro

m le

ader

s afte

rac

quis

ition

Con

firm

ed b

y fiv

e ac

quis

ition

s. Es

peci

ally

whe

n th

e ac

quire

d fir

ms a

re g

oing

thro

ugh

quic

k ch

ange

s. Fo

r ins

tanc

e, e

mpl

oyee

sca

me

to o

ur in

terv

iew

ee �

who

is w

orks

couc

il re

pres

enta

tive

to ta

lk a

bout

thei

rne

eds a

nd fe

ars.

In E

nerg

y ac

quis

ition

, afte

r acq

uisi

tion,

empl

oyee

s in

R&

D c

ente

r did

not

hav

e an

yin

fluen

ce a

nd d

o no

t hav

e em

otio

nal

reac

tions

tow

ards

the

acqu

isiti

on. I

t is

beca

use

the

R&

D c

ente

r has

bee

n ac

quire

dtw

ice.

It a

lread

y ge

t use

d to

fore

gin

owne

r.

Ang

win

& M

eado

ws

(200

9)A

hig

h le

vel i

nteg

ratio

n re

late

s to

high

TM

Ttu

rnov

er; a

hig

h le

vel a

uton

omy

rela

tes t

olo

w T

MT

turn

over

.

Con

firm

ed b

y si

x ac

quis

ition

s

Hig

h TM

T tu

rnov

er m

ight

cau

sed

byK

rug

& H

egar

ty(2

001)

- int

ensi

ve in

terv

entio

ns fr

om a

cqui

red

firm

sH

ambr

ick

and

Can

nella

(199

3)- l

ess a

uton

omy

and

low

er fo

rmal

stat

us

Low

TM

T tu

rnov

er m

ight

cau

sed

by- T

he e

xecu

tives

in a

cqui

red

firm

s hav

epo

sitiv

e pe

rcep

tions

of t

he lo

ng-b

erm

bene

fits o

n ac

quis

ition

Con

firm

ed b

y fiv

e ac

quis

ition

s exc

ept

Bes

twin

d( B

estw

ind

acqu

isiti

on h

as a

com

plex

situ

atio

n, a

nd so

me

the

TMT

leav

eth

e fir

m d

ue to

lay

off.

And

we

are

not s

ure

if th

ey h

ave

posi

tive

or n

egat

ive

attit

udes

tow

ards

the

new

acq

uire

rs. )

Kris

hnan

et a

l. (1

997)

- TM

T in

acq

uire

r and

acq

uire

d fir

ms

have

com

plem

enta

ry fu

nctio

nal

back

grou

nds.

Not

sure

Not

sure

Low

enst

ein

(198

3)A

cqui

rers

repl

ace

acqu

ired

TMT

to b

ette

rco

ntro

l the

targ

et fi

rms

Con

firm

ed b

y B

estw

ind

Lead

ersh

ipan

d TM

Ttu

rnov

er

Gra

ebne

r (20

04)

Con

firm

ed b

y B

estw

ind

But

ler e

t al.

(201

2)TM

T tu

rnov

er h

as n

egat

ive

impa

ct o

n po

st-

acqu

isiti

on p

erfo

rman

ce si

nce

Bro

ckm

ann

&A

utho

ny (2

002)

Mic

halis

in e

t al.

(200

4)K

iess

ling

& H

arve

y(2

006)

Ran

del a

nd R

anft

(200

7)- T

MT

turn

over

has

neg

ativ

e ef

fect

s on

info

rmat

ion

exch

ange

and

soci

al c

apita

l in

acqu

ired

firm

Kog

ut &

Zan

der

(199

2)In

tegr

ate

and

reco

nfig

ure

reso

urce

s and

capa

bilit

ies i

s im

porta

nt fo

r pos

t acq

uisi

tion

perf

oman

ce.

Con

firm

ed b

y si

x ac

quis

ition

s

(Mor

osin

i et a

l., 1

998;

Kog

ut a

nd S

ingh

,19

88).

The

new

mar

ket a

nd c

apab

ility

from

acqu

ired

firm

s or a

cqui

rers

div

ersi

fies e

ach

othe

r’s c

orpo

rate

reso

urce

.

Con

firm

ed b

y si

x ac

quis

ition

s. O

neac

quis

ition

s is

Sany

and

Put

zmei

ster

hav

eno

w m

ore

focu

s on

the

diffe

rent

mar

ket

sege

men

tatio

n, w

hich

shift

the

rela

tions

hip

as c

ompe

titor

s to

coop

erat

ive

rela

tions

hip.

Milg

rom

& R

ober

ts(1

995)

Brin

g tw

o fir

ms t

oget

her w

ithco

mpl

emen

tary

reso

urce

s cou

ld p

oten

tially

crea

te g

reat

er jo

int v

alue

s.

Con

firm

ed b

y si

x ac

quis

ition

s. G

erm

anfir

ms a

nd C

hine

se fi

rms a

ll ha

veco

mpl

emen

tary

reso

urce

s in

mar

ket

segm

enta

tion.

Fou

r acq

uisi

tions

( exc

ept

Bes

twin

d an

d Sa

ny) c

ompl

emen

t eac

h ot

her

in R

&D

, and

it b

rings

1+1

>2 jo

int v

alue

s.K

im &

Fin

kels

tein

(200

9)C

assi

man

et a

l. (2

005)

Con

ner (

1991

)C

erta

in le

vel o

f int

egra

tion

is n

eces

sary

toac

hiev

e po

tent

ial s

yner

gies

whe

ntw

o si

des'

reso

urce

s and

cap

abili

ties a

reco

mpl

emen

tary

.

Res

ourc

ean

dca

pabi

lity

com

plem

ent

arity

VS

sim

ilarit

y

Two

firm

s nee

d to

be

inte

grat

ed to

ach

ieve

the

expe

cted

join

t val

ues.

Fou

r acq

uisi

tions

con

firm

ed e

xcep

t San

yan

d B

estw

ind.

1:

Ene

rgy

mak

e ef

forts

inre

stru

ctur

ing

the

acqu

ired

firm

into

one

big

stru

ctur

e, so

that

the

subs

idia

ry c

an fi

t int

oth

e co

mm

on g

oal t

hat E

nerg

y se

t up.

2: F

our

acqu

isiti

ons a

ll ha

ve c

onst

ant c

omm

unca

tion

in R

&D

and

R&

D d

epar

tmen

ts h

ave

certa

inle

vel o

f int

egra

tion

to d

rive

new

tech

onlo

gyan

d kn

owle

dge

trans

fer.

Har

rison

(200

1)

Lead

ersh

ipan

d TM

Ttu

rnov

er

- TM

T in

acq

uire

d fir

ms h

as u

niqu

re a

ndvi

tal k

now

ledg

e ab

out t

arge

t firm

.C

onfir

med

by

six

acqu

isiti

ons

Cer

tain

leve

l of a

uton

omy

shou

ld b

e gr

ante

dso

that

acq

uire

d fir

ms'

reso

urce

s and

capa

bilit

y co

uld

be m

aint

aine

d an

d st

ayst

able

Cap

ron

(199

9)A

cqui

rers

hav

e m

ore

chal

leng

es to

ratio

naliz

e ta

rget

’s re

sour

ces a

nd c

apab

ility

than

thei

r ow

n.Za

heer

et a

l. (2

013)

Aut

onom

y is

esp

ecia

lly v

ital f

or a

cqui

rers

tode

ploy

R&

D re

sour

ces a

nd c

apab

ility

.co

nfirm

ed b

y si

x fir

ms.

Six

firm

s all

have

high

aut

onom

y in

R&

D d

epar

tmen

t.N

orm

ally

Chi

nese

acq

uire

rs m

ore

finan

cial

ly su

pppo

rt R

&D

dev

elop

men

tsu

ch a

s Bei

jing

No1

and

Ene

rgy.

The

targ

etfir

ms i

ndep

ende

ntly

dev

elop

new

pro

duct

s,an

d th

e C

hine

se a

cqui

rers

will

ado

pt c

erta

inpr

oduc

ts a

nd se

ll th

em in

Chi

na.

Luba

tkin

(198

3)Si

ngh

& M

ontg

omer

y(1

987)

Kog

ut &

Zan

der

(199

2)In

tegr

atio

n le

vel i

s exp

ecte

d hi

gh w

hen

two

firm

s hav

e a

high

sim

iarit

y.C

onfir

med

by

Sany

Ene

rgy

and

Bes

twin

d.O

ne g

ood

exam

ple

is S

any.

InC

hine

se m

edia

, San

y de

mon

stra

ted

to th

epu

bilic

that

ther

e ex

ists

a g

reat

pot

entia

lsy

nerg

ies b

etw

een

Sany

and

Put

zmei

ster

.M

akri

et a

l. (2

000)

It is

eas

ier f

or tw

o fir

ms w

ith h

igh

sim

ilarit

yin

mar

ket a

nd te

chno

logy

to im

plem

ent

inte

grat

ion

stra

tegy

.

Bes

twin

d ha

s alre

ady

star

ted

to "

abso

rb"

itsac

quire

d fir

ms b

y do

wns

izin

g an

d cr

eate

econ

omic

of s

cale

by

shar

ing

the

sam

e TM

T,as

it sa

w th

e ov

erla

ppin

g fu

nctio

nal u

nits

with

in th

e w

hole

org

aniz

atio

n.

Sany

per

ciev

ed h

igh

diffi

culty

to o

btai

nsy

nerg

ies,

and

it di

d no

t ach

ieve

obv

ious

syne

riges

afte

r thr

ees y

ears

.

Pura

nam

et a

l. (2

009)

Ran

ft &

Lor

d (2

002

Ener

gy a

nd S

any

acqu

isiti

on ,

the

prod

uct

mat

eria

ls h

ave

muc

h si

mila

rity.

The

acqu

isiti

ons h

ave

not s

een

obvi

ous e

arni

ngs

for a

cqui

rers

due

to e

cono

mic

of s

cale

Low

leve

l aut

onom

y re

sults

in k

now

ledg

edi

srup

tion.

Con

firm

ed b

y B

estw

ind.

Bes

twin

d st

arte

d to

heav

ily in

terv

ene

into

the

busi

ness

of t

arge

tfir

ms,

and

even

it in

tend

s to

keep

R&

Dde

velo

pmen

t, an

d la

yoff

othe

rs, t

his a

ctio

nac

tual

ly m

ake

the

R&

D a

lso

lose

secu

rity

and

feel

bad

abo

ut it

, ou

r int

ervi

ewee

as a

tech

inic

al le

ader

con

side

r lea

ve th

eor

gain

zatio

n.

Res

ourc

ean

dca

pabi

lity

com

plem

ent

arity

VS

sim

ilarit

y

Har

rison

(200

1)

Con

firm

ed b

y si

x ac

quis

ition

s. C

hine

sefir

ms h

ave

less

inte

rnat

iona

l exp

eriti

se a

ndth

ey a

re la

ck o

f kno

wle

dge

in E

urop

ean

mar

kets

that

is w

hy th

ey h

ave

mor

ech

allle

nges

to ra

tiona

lize

its a

cqui

red

firm

sre

sour

ces,

only

can

rely

on

Euro

pean

s to

deal

with

the

busi

ness

Hig

h re

sour

ces a

nd c

apab

ility

sim

ilarit

y by

inte

grat

ion

coul

d le

ad to

eco

nom

ic o

f sca

lean

d in

cres

ae e

arni

ngs f

or a

cqui

rers

Not

con

firm

ed

Zahe

er e

t al.

(201

3)H

igh

Leve

l of i

nteg

ratio

n an

d hi

ghau

tono

my

can

coex

ist,

expe

cial

ly w

hen

two

firm

s hav

e co

mpl

emen

tary

reso

urce

s and

capa

bilit

ies

SMTC

L an

d B

eijin

g N

o.1

alre

ady

achi

eve

the

resu

lt. T

hrou

gh o

ur in

terv

ew, w

e co

uld

see

that

Ene

rgy

acqu

isiti

on p

roba

bly

will

be

achi

evin

g th

e re

sult

as w

ell .

Ene

rgy

high

lyre

spec

t the

loca

l rul

es o

f Ger

man

y, a

nd le

tth

e su

bsid

iary

wor

k w

ith h

igh

auto

nom

y. a

ndth

ey a

re a

lso

alre

ady

mak

ing

man

y pr

ojec

tsto

geth

er. A

fact

ory

is ju

st b

uilt

up to

act

as

know

ledg

e tra

nsfe

r cen

ter a

nd m

any

func

tiona

l uni

ts fr

om b

oth

side

s are

inte

grat

ed in

the

fact

ory.

Res

ourc

ean

dca

pabi

lity

com

plem

ent

arity

VS

sim

ilarit

y

Balancing Integration and Autonomy in the Post …823895/FULLTEXT01.pdf · Balancing Integration...

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Transcript of Balancing Integration and Autonomy in the Post …823895/FULLTEXT01.pdf · Balancing Integration...