Executive Turnover in Acquired Firms: An Analysis of Resource-Based Theory and the Upper Echelons Perspective

Using a repeated measureslongitudinal design, I analyzed rates,patterns, and the timing of top managementturnover among more than 12,000 executives in473 target and non-acquired firms over afifteen-year period. Acquisitions led to muchgreater long-term instability in acquired topmanagement teams than was found in studies thatonly examined the short-term effects ofacquisitions on target company executives. Topmanagers quit at significantly higher ratesthan normal up to nine years following theircompany's acquisition. Research suggests thattarget company executives are at greaterturnover risk when their firm is acquired by aforeign multinational. The results indicatethat these short-term effects do not extend tothe long term: turnover rates were notsignificantly different between the foreign anddomestic acquisitions over the long term,though there were differences in timing. Thefindings suggest that foreign ownership hasdifferent implications for target companyexecutives depending on whether they aremembers of the original management team or jointhe target company after the acquisition. Thedebate between resource-based theory and theupper echelons perspective in providingprescriptions to acquiring firms aboutintegrating target companies over the short-and long-term is discussed. Copyright Kluwer Academic Publishers 2003