Abstract
Our study builds on extant theory on embeddedness by concentrating on the process of preservation and dissolution of the target firm's embedded ties in acquisitions. We identify four critical areas (communication, idiosyncratic investments, interpersonal relations and personnel turnover) where managerial decisions taken during the acquisition process affect the components of the target firm's embedded ties — trust, joint problem-solving, conflict resolution and exchange of fine-grained information. The preservation or dissolution of an embedded tie depends ultimately on two specific tie contingencies, the balance of power between the target firm and the embedded relation and interpretive processes at the interface between the two. Our findings have implications for the study of the dissolution of market ties by pointing to different roles played by social and institutional forces, power asymmetries and competition in the dynamics of embedded ties. Finally, we encourage theory development in acquisition studies by positing the importance of interpretive processes and, more broadly, relational elements that span the boundaries of the parent—target dyad.
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