The role of outgroups in constructing a shared identity: a longitudinal study of a subsidiary merger in Mexico.
| Verfasser | Lupina-Wegener, Anna |
| Posten | RESEARCH ARTICLE |
Abstract Both scholars and practitioners agree that constructing a shared organizational identity is necessary for successful outcomes in mergers and acquisitions. Yet the process of constructing shared identity is not an easy path. We report findings of a longitudinal in-depth case study of merging Mexican subsidiaries--part of two European Multinational Corporations. The study took advantage of a rare opportunity that includes prior knowledge of the merger and permission to follow-up until post-merger integration concluded. Particularly, in the studied case, status differences between premerger organizations were removed, external boundaries were reinforced and new outgroups emerged, namely the Head Offices and Latin American divisions. Our study contributes to the M&A literature, to the stakeholder approach to organizational identity and to identity construction in nested organizations. We shed light on how intergroup dynamics change over time during interactions between internal and external stakeholders, and whose status changes in the post-merger organization. Based on these findings, we argue that considering both intragroup and intergroup dynamics can refine the concept of shared organizational identity. Intragroup dynamics refers to employees of the post-merger organization, and intergroup dynamics refers to outgroup--outside the post-merger organization. We coin a concept of an optimal shared identity, defined as the members' shared belonging to the post-merger organization and to the Multinational Corporation (on the global or regional level) in the face of salient outgroups.
Keywords Identity conflict * Identity construction process * Mergers * Nested organizations * Longitudinal study
1 Introduction
The creation of a new organizational identity is crucial to the success of major strategic change initiatives. Prior research has demonstrated that organizational identity is related to positive outcomes such as the intention to remain in the organization, job satisfaction, work motivation, and cooperative behavior (Riketta 2005; Rousseau 1998). Much of the prior research is based on social identity theory (Tajfel and Turner 1986), which posits a duality between an individual's personal and social identities. Membership in groups, i.e. social identity, can contribute to an individual's self-esteem and wellbeing. However, it can also be a source of conflict when group members aim to positively differentiate their ingroup from relevant outgroups. This is particularly apparent in mergers and acquisitions (M&As) wherein employees often face difficulties moving away from pre-merger identity and embracing a new, shared post-merger identity. We define organizational identity as what is considered by organizational members to be the "central, distinctive and enduring characteristic of an organization" (Albert and Whetten 1985). Organizational identification refers to as the individual's perception of the sharedness of this organizational identity as put forth by Ashforth and Mael (1989). Organizational identification helps an individual to define him- or herself by sharing aspects of the organization's identity with others. However, the organization, as a whole or in parts (such as subsidiaries that are studied here), does not necessarily have a monolithic identity (Scott and Lane 2000).
Some M&A scholars argue that identity conflict impedes the construction of a shared identity and thus should be avoided (Buono, Bowditch and Lewis 1985; Marks and Mirvis 2001; Meyer and Altenborg 2007; Nahavandi and Malekzadeh 1988). More recent research reveals that conflict between identities of pre-merger groups might be a natural stage in developing a shared, post-merger identity (Fiol, Pratt and O'Connor 2009). Specifically, employees' attachment to their pre-merger identity may dissipate over time (Gleibs et al. 2008). Thus, it is important for leaders to lay a roadmap of the organization's future identity, to direct and facilitate employees' attachment to the post-merger identity (Chreim 2007; Clark et al. 2010; Ullrich et al. 2005). Despite these important insights, the majority of M&A research is chiefly static with only few exceptions (Raukko 2009).
In this study, we will focus on the following research questions:
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How do subsidiary intergroup dynamics shape the construction of a shared organizational identity?
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Which issues contribute to these intergroup dynamics in subsidiary M&As?
The longitudinal study presented in this paper will address these questions. To this end, we have conducted a qualitative in-depth case study on a merger of Mexican subsidiaries of two European Multinational Corporations (MNCs). Alpha-Corp, (1) a large European multidivisional Multinational Corporation (MNC) merged with Beta-Pharma, a specialized, research oriented company in the same European country. We began the investigation with pilot interviews 1 month before post-merger integration began (time 0), after 7 months (time 1; T1) and 3 years later (time 2; T2). Consequently, we used the grounded theory approach to process theory building (Corbin and Strauss 2008) in longitudinal research (Pettigrew 1990; Vincze 2013) to identify issues in intergroup dynamics and the consequent implications for constructing a shared organizational identity. We address the process of shared identity construction (theoretical domain) in M&As (problem domain).
The findings provide insights into how intergroup dynamics in the post-merger subsidiary were influenced by the Head Office. In the early phase of the merger, the Global Head Office removed status asymmetries of the merging subsidiaries. Later on, it reinforced external boundaries of the post-merger subsidiary to which we will refer to as a "post-merger organization" in the rest of the text. As a result, the Head Office become a new outgroup and two pre-merger groups in Mexico were integrated. However, optimal shared post-merger identity has not yet developed. Specifically, we theorize on the concept of shared identity in M&As. We argue it should account for both intragroup dynamics ("us", the post-merger organization) and intergroup dynamics (relation to "them", outgroup(s) outside the post-merger organization). We introduce the concept of optimal shared identity, defined as the employees' shared belonging to the post-merger organization and to the MNC (on the global or regional level) in the face of salient outgroups.
Our paper is structured as follows. We will begin by reviewing the social identity approach to M&As. Next, we present the results of the longitudinal in-depth case study on a merger within the Mexican subsidiaries of two European MNCs. We conducted this research in a rare situation: we had prior knowledge of the merger, and senior management allowed us to study the integration both early on and after a substantial period of time. Longitudinal case studies typically start well after the merger and/or with much shorter time intervals between measurements. Finally we extend previous conceptualizations of shared identity and then develop implications for research and practice.
2 The Social Identity Approach to M&A
Organizational identity has been conceptualized in different ways and from different theoretical perspectives (Haslam et al. 2003). It can be defined as members' collective and shared sense of who they are as an organization in terms of the characteristics collectively understood by the members to be central, distinctive and enduring (Albert and Whetten 1985). In other words, organizational identity is a 'relatively enduring state that reflects an individual's willingness to define him- or herself as a member of a particular organization' p. 382 (Haslam 2001). We refer to organizational identification as the individual's perception of the sharedness of this organizational identity (Ashforth and Mael 1989). Both concepts are grounded in social identity theory and self-categorization theory, which together help explain social behavior when individuals are not acting on the basis of their personal identities but as members of their group(s) in relation to members of other groups (Tajfel and Turner 1986; Turner et al. 1987). Personal identity, or "how am I different from him/her?", might become less salient in contacts with other groups. In such circumstances, individuals tend to define themselves in terms of their social identity shared with ingroup members.
Self-categorization theory provides a complementary perspective (Turner 1985; Turner et al. 1987). It describes the emergence of group-oriented behavior as a process of depersonalization. When a particular social identity is salient, an individual's self-perception tends to be based on attributes shared with other group members rather than individual characteristics. Various social identities for self-categorization are available at a particular time (Brewer 1991), and individuals may choose to identify with groups that provide a distinctive and self-esteem enhancing identity. As a result, identity conflict might emerge when two clearly defined identities, in terms of "who are we?" co-exist, and compete to seek privilege (Corley and Gioia 2004). Identity conflict is likely to be exacerbated in situations marked by an unequal distribution of scarce resources such as power, prestige or wealth (Brewer and Kramer 1985; Tajfel and Turner 1986). On the other hand, organizational identification can positively contribute to the success of a company. Previous research demonstrates that highly identified employees show more positive work-related outcomes, such as the intention to remain in the organization, job satisfaction, work motivation, cooperative behavior (for a meta-analytic overview see: Riketta 2005), and readiness for change (Rousseau 1998).
2.1 Constructing a Shared Post-Merger Identity
Similar outcomes have been found in recent M&A research (Bartels et al. 2009; van Dick et al. 2006). Shared identity has...
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