Social constraints to integrating information systems, knowledge, and firm capabilities following a corporate merger

Abstract

PurposeThe purpose of this paper is to contribute to a better understanding of how socially‐embedded information systems (IS), knowledge, and firm capabilities can impact the post‐merger integration efforts of a firm. In particular, this research seeks to identify, describe, and analyze how socially‐embedded resources hindered the integration of the procurement function following the merger of two telecommunications firms.Design/methodology/approachThis research was designed as a longitudinal exploratory study of a single case. The design involved multiple interviews, participant observation, and an evaluation of multiple data sources. Data were collected to develop a comprehensive and reliable understanding of events and outcomes related to the systems integration effort. Process models are used to show the development of phenomena over time.FindingsThe findings of the research are twofold. First, in line with previous findings on socially‐embedded resources, the research shows that socially‐embedded resources hindered the ability of a merged firm to integrate some resources. Previous research argued that social constraints can prevent a firm from changing the way it uses resources to establish a competitive advantage, and this research confirms those findings. Second, this research is an important contribution because it identifies two social constraints in particular – cognitive sunk costs and the reluctance to defy social traditions – that contributed to the inability of the merged firm to successfully integrate the procurement function following a merger.Research limitations/implicationsThe findings of this study provide empirical evidence to support the theoretical argument that the socially embedded resources involved in the IS, knowledge, and firm capabilities of each of the firms prior to the merger enabled them to establish a competitive advantage in their respective market environments. Further, the data provide validation for the idea that the social context in which firms compete does, in fact, contribute to the development of competitive advantages. The RBV is also extended by showing that the same social contexts can also prevent firms from integrating important resources following a corporate merger.Originality/valueOne of the main objectives of executive management following a corporate merger is to lead the organization in skillfully integrating key resources of the merged organization. However, most firms cannot successfully engage in post‐merger integration efforts unless they fully understand how resources such as IS, knowledge, and firm capabilities can help or hinder their integration efforts. By highlighting one firm's efforts to integrate resources following a merger, the paper provides concrete examples of potential problems that can arise. Potential problems and hindrances are presented in a strategic checklist for managerial consideration.