The Dark Side of Inventor Retention: How Too Much Integration Deters Knowledge Integration after M&A

Abstract

Does more post-M&A inventor retention always lead to more M&A knowledge integration and synergies? Extant emphasis on the acquired firms role as a knowledge provider in an M&A has thus far validated positive aspects of acquired firm inventor retention. Our research sheds light on a complementary yet overlooked perspective of acquired firms as knowledge recipients, and examines how the comprehensive analysis of the knowledge flow mechanism of an M&A may challenge the long-held belief on the benefits of acquired firm inventor retention and reveal its potential dark side. To investigate the negative impact of too much retention in knowledge-intensive M&As, we study the impact of inventor retention on post-M&A knowledge integration between the acquiring and acquired firm. We predict that the retention of inventors from the acquired firm will have a positive effect on knowledge integration only up to a point, beyond which increased retention will trigger organizational inertia of the acquired firm that negatively affects the integration of knowledge. We further delve into how this inverted U-shaped relationship is moderated by two relative knowledge aspects of the acquired firm ? relative size of the acquired knowledge base and relative relatedness of the acquired knowledge base. By examining mergers and acquisitions within the pharmaceutical and semiconductor industry, we obtain empirical findings that significantly support our hypotheses. This research offers both theoretical and managerial implications by introducing a complementary perspective on the knowledge flows of M&As, and thus broadens our understanding of inventor retention.