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Mergers of Equals and Unequals

Author

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  • Smeets, Valerie

    () (Universidad Carlos III de Madrid)

  • Ierulli, Kathryn

    () (University of Chicago)

  • Gibbs, Michael

    () (University of Chicago)

Abstract

We examine the dynamics of post-merger organizational integration. Our basic question is whether there is evidence of conflict between employees from the two merging firms. Such conflict can arise for several reasons, including firm-specific human capital, corporate culture, power, or favoritism. We examine this issue using a sample of Danish mergers. Controlling for other effects, employees from the acquirer fare better than employees from the acquired firm, suggesting that they have greater power in the newly merged hierarchy. As a separate effect, the more that either firm dominates the other in terms of number of employees, the better do its employees fare compared to employees from the other firm. This suggests that majority / minority status is also important to assimilation of workers, much as in ethnic conflicts. Finally, greater overlap of pre-merger operations decreases turnover. This finding is inconsistent with the view that workers of the two firms substitute for each other, creating efficiencies from merger. However, that result and our other findings are consistent with the view that more similar workers (in terms of either firm- or industry-specific human capital) are easier to integrate post merger.

Suggested Citation

  • Smeets, Valerie & Ierulli, Kathryn & Gibbs, Michael, 2006. "Mergers of Equals and Unequals," IZA Discussion Papers 2426, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2426
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    References listed on IDEAS

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    1. José G. Montalvo & Marta Reynal-Querol, 2005. "Ethnic Polarization, Potential Conflict, and Civil Wars," American Economic Review, American Economic Association, vol. 95(3), pages 796-816, June.
    2. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
    3. Charles Brown & James L. Medoff, 1988. "The Impact of Firm Acquisitions on Labor," NBER Chapters,in: Corporate Takeovers: Causes and Consequences, pages 9-32 National Bureau of Economic Research, Inc.
    4. Edward P. Lazear, 1999. "Culture and Language," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 95-126, December.
    5. José Garcia Montalvo & Marta Reynal-Querol, 2004. "Ethnic polarization, potential conflict and civil wars," Economics Working Papers 770, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2005.
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    Cited by:

    1. Coralie Perez, 2011. "Organisational change and job separation in France: endure or escape?," Documents de travail du Centre d'Economie de la Sorbonne 11073, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. repec:ebl:ecbull:v:30:y:2010:i:1:p:614-623 is not listed on IDEAS
    3. Mathieu Bunel & Richard Duhautois & Lucie Gonzalez, 2010. "Are Mergers and Acquisitions Accompanied by Increasing Recourse to THS employment? A French perspective," Economics Bulletin, AccessEcon, vol. 30(1), pages 614-623.

    More about this item

    Keywords

    conflicts; internal organization; mergers;

    JEL classification:

    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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