Parker, Pauline Olivia (2015) The effect of product integration on performance post acquisition: factors influencing the capture of value in the case of highly acquisitive firms in the business software industry. (DBA thesis), Kingston University, .
Abstract
Building on behavioural theory with dynamic capabilities, I have studied how firms create competitive advantage through innovation over time after multiple mergers and acquisitions. This research is focused on the acquirer’s ability towards obtaining performance from product integration and set within the context of highly acquisitive software-houses, those organisations involved in the sales and manufacture of business software products. Within high technology industries, resources are at the heart of the firm and constitute the largest cost. Dynamic capabilities are a more recently extended RBV of the firm to incorporate dynamic markets, I,e, firms in situations of rapid change. In these markets, where the competitive landscape is shifting, the dynamic capabilities by which firm managers integrate, build, and reconfigure internal and external competencies to address rapidly changing environments. To this end, I test the dynamic capabilities theory in the high tech software industry in times of change. In 2012, software firms completed over $66 billion of mergers and acquisitions (Berkery Noyes, 2013). However research suggests that synergies are often left unrealised (Barkema and Schijven, 2008; Léger and Quach, 2009). In addition, the software industry is maturing and the mergers and acquisition activity in the industry has intensified (Léger and Quach, 2009). The highly acquisitive company - seeking rapid growth and using acquisitions as the means to achieve this, is using a recognised route to growth (Damodaran, 2004). In a report from PwC (2014) Rob Fisher, the PwC US technology industry leader notes that With software embedded in virtually everything, software and Internet sector [mergers and acquisitions] deal activity continues to flourish, offsetting declines in other subsectors.” (PWC, 2013): In this longitudinal research I describe, explain and account for the impacts of mergers and acquisitions on innovation, expressed through product integration; - the reconfiguring and combination of the product portfolios within software firms. Concerning the acquiring firm's endogenous growth (the creation of value through internal resource capability), I explain the relationship between organisation capabilities and the innovation outcome as well as the innovation effect on revenue. I find that the dynamic capabilities framework is a suitable for complex empirical study. In addition I find that while the measures including the measured capabilities directly effect product integration and revenues. By using mediation techniques, I also find that revenues are indirectly affected by product integration. Interestingly product integration, negatively impacts the financial performance of the firm. These findings are important for managerial decision making and imply a high level of orchestration requirement. According to the Business Software Alliance, BSA (2008), the software sector has enjoyed meteoric growth. In 2007, the software and related services sector experienced a real annual growth rate of 14%, while the business sector was considerably less. This is reflected by the business, SunGard (2009) who grew endogenously by only 1%. In light of the business problem, I concentrate on highly acquisitive software firms, i.e. those firms seeking growth through acquisition. I conceptualise product integration innovation as a second stage process of organisation integration. I have tested my theory using panel data of highly acquisitive firms, which have undertaken in excess of 900 events over a ten-year period.
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