Resource and Skill Transfers in Subcontractor SME Acquisitions: Influence on the Long‐Term Performance of Acquired Firms

Author:Catherine Thévenard‐Puthod, Véronique Favre‐Bonté
DOI:http://doi.org/10.1111/emre.12014
Publication Date:01 Sep 2013
Resource and Skill Transfers in
Subcontractor SME Acquisitions:
Influence on the Long-Term Performance
of Acquired Firms
Véronique Favre-Bonté and Catherine Thévenard-Puthod
IREGE, Université de Savoie, Annecy-le-Vieux, France
This paper investigates the link between resource and skill transfers and the long-term performance of acqui-
sitions. Rather than taking the more common acquirer’s perspective, this research emphasizes the point of view of
the acquired firm and focuses on a little-studied type of business, namely, small and medium-sized subcontractor
firms. Through 14 case studies of subcontractor acquisitions, we show that those acquired firms can improve their
long-term performance in terms of turnover, profitability, number of employees and reduced dependency, if they
receive certain types of new resources and skills from acquirers. Particularly, post-acquisition performance is
more closely related to the transfer of managerial and functional skills than to operational resources. Three factors
(e.g., geographical, business and cultural proximity) also help facilitate some types of transfers. However, the
degree of post-acquisition integration does not play a key role in those transfers.
Keywords: acquisition; resource transfer; skill transfer; small and medium-sized enterprises; subcontractors;
performance
Introduction
Acquisition performance is a recurrent theme in stra-
tegic management research (Zollo and Meier, 2008;
Haleblian et al., 2009). Yet most studies examine the
acquirer’s point of view or combine both firms’ perspec-
tives (Capron and Hulland, 1999; Ahuja and Katila,
2001; Capron and Pistre, 2002; Cloodt et al., 2006); the
acquirer’s perspective may seem more important, in the
sense that being acquired is a signal of weakness or
failure (Graebner and Eisenhardt, 2004). Although
research has considered a firm’s capacity to choose
whether and by whom it will be acquired (Graebner,
2004; Graebner and Eisenhardt, 2004; Dalziel, 2008),
few studies have explored the acquired firm’s side of the
story (Bandick and Görg, 2010). However, acquirer and
acquired firms may differ in their assessments of acqui-
sition performance, such that ‘one party could consider
an acquisition successful while the other views it as
disappointing’ (Graebner et al., 2010: 77). For example,
owners who sell their companies are often concerned
about their longevity, especially when the companies are
family-owned, small and medium-sized enterprises
(SMEs). To preserve their employees’jobs, maintain the
know-how and culture of their firm, and nurture good
relationships with customers and suppliers (Uzzi, 1997;
Dalziel, 2008), they tend to choose an acquirer carefully
(Kets de Vries, 1988) and attend to the performance of
the firm even after its acquisition (Graebner et al., 2010).
The long-term performance of acquired firms has also
become a major concern of public institutions in many
Western countries, because the demographics of owner-
managers1and the relatively high failure rate of acqui-
sitions raise both economic and social issues (Calogirou
et al., 2011). Even when a selling firm no longer exists as
an independent legal entity, it can still be analysed as an
acquired unit, especially if its post-acquisition integra-
tion into the acquirer is low and it retains a high level
of autonomy. In such a scenario, we could appraise
acquisition performance in terms of the long-term
Correspondence: Catherine Thévenard-Puthod, IREGE, Université de
Savoie, chemin de Bellevue, BP 80439, 74944Annecy-le-Vieux Cedex,
France. E-mail: catherine.puthod@univ-savoie.fr
1Each year, business transfers in the EU 27 due to the age of firm
owners affect 450,000 firms and 2,000,000 employees
(Calogirou et al., 2011).
European Management Review, Vol. 10, 117–135 (2013)
DOI: 10.1111/emre.12014
© 2013 European Academy of Management
performance of the previously separate entity (Dalziel,
2008).2
Prior research has emphasized the role of resource
and skill transfers in the performance of acquisitions
(Haspeslagh and Jemison, 1991; Bresman et al., 1999;
Larsson and Finkelstein, 1999; Ranft and Lord, 2002;
Stahl and Voigt, 2008), yet sufficient knowledge
about such transfers is lacking (Haleblian et al., 2009).
Empirical work is essential to address the link between
transfers and post-acquisition performance using non-
financial measures and to examine long-term evaluations
and strategic measures (King et al., 2004; Laamanen and
Keil, 2008; Haleblian et al., 2009) to reveal firms’ future
potential (Cording et al., 2010). Consequently, we
explore the impact of resource and skill transfers on the
acquired unit’s long-term post-acquisition performance,
using a resource-based view of the internal sources of a
firm’s sustained competitive advantage (Barney, 1991;
Kraaijenbrink et al., 2010). An acquirer can obtain valu-
able, rare, inimitable and non-substitutable resources
from an acquired unit (Wernerfelt, 1984; Haspeslagh
and Jemison, 1991; De Man and Duysters, 2005); in
turn, the resources and skills an acquired firm possesses
might be enhanced during the integration process if it
receives resources and competences from the acquirer
(Morosini et al., 1998; Stahl and Voigt, 2008). This
prediction seems particularly apt for SMEs, especially
subcontractors,3which often suffer from a structural
deficit of resources and skills (Alvarez and Barney,
2002). Therefore, we investigate the link between
resource and skill transfers and the long-term perfor-
mance of an acquisition, from the acquired subcontrac-
tor firm’s point of view. In particular, we address the
following research questions: What resources and/or
skills are most important to ensure the long-term perfor-
mance of an acquired subcontractor SME, and which
types of factors facilitate those transfers?
We focus on small subcontractor firms for four main
reasons. First, it is easier to determine the effects of
resource and skill transfers for smaller firms. Second,
these subcontractors often need additional resources and
expertise to improve their competitiveness and manage
their situation of dependence in relation to their princi-
pal (Wilson and Gorb, 1983; Radway et al., 2011).
Third, subcontractors represent a critical part of the
economies of many industrialized countries (12% of
value added in Portugal, 9% in France, 8% in Germany
and 6% in the United Kingdom; Eurostat, 2009). Fourth,
to our knowledge, few studies have examined these
firms, even though they are prime targets for acquisitions
(Quah and Young, 2005). To explore which types of
resource and skill transfers play a key role in the long-
term performance of an acquired subcontractor firm,
given the lack of prior theory and empirical work on
these topics, we adopt an exploratory, partially inductive
research design, based on a multiple case study
approach. We analysed 14 acquisition cases of subcon-
tractor SMEs in the automotive industry. Unlike most
studies of skill transfers in acquisitions (Capron et al.,
1998; Capron and Hulland, 1999), we focus on not only
horizontal acquisitions but all types of buyers. That is, a
subcontractor can be bought by a competitor, but it also
might be acquired by a customer, supplier, or company
from another industry.
We begin by presenting our analysis framework,
developed from a resource-based view of acquisitions,
together with our case study methodology. We then
describe the types of resources and skills transferred to
the subcontractor SMEs in our sample after acquisition
and their effects on the firms’ long-term post-acquisition
performance. Despite their loss of autonomy, acquired
firms can benefit from acquisition, provided they receive
new resources and skills from their acquirers. Although
post-acquisition performance may be linked to the
amount of resources and skills transferred, it also may
relate to the types of transfer, such as functional and
managerial skills rather than operational resources.
Finally, we discuss key facilitators of resource or skill
transfers.
Literature review: analysis framework
Performance of acquisitions, from the acquired firm’s
point of view
Unlike large companies, in which management and
ownership are separated, many SMEs belong to single
owner-managers or families with a controlling stake in
the company that may have founded or inherited the
firm.4This connection influences their corporate objec-
tives, which are often confused with the personal goals
of the firms’ leaders or families. Acquisition in this
setting is nearly always a process of mutual agreement
between a potential acquirer and a seller,5rather than a
2Indirectly, the performance of the acquired entity also affects
that of the acquirer.
3Subcontractors differ from first-tier supplier or equipment
manufacturer. An equipment manufacturer is commercially and
technically responsible for its products. The subcontractor is
itself a contractor; its activity is subordinate to that of the prin-
cipal, and it must meet the technical specifications required by
the principal.
4Family businesses are the dominant form of organizations
worldwide (Churchill and Hatten, 1987; Shanker and Astrachan,
1996). In 2003, they represented 93% of companies in Italy,
80% in Greece, 70% in Belgium and 60% each in France and
Germany (IFERA, 2003). In the United States, they represented
90% of companies (Ibrahim and Ellis, 1994).
5We use the term ‘seller’ to refer to the owner-manager of the
SME; it becomes an ‘acquired firm’ or ‘acquired unit’ after the
deal is concluded.
118 V. Favre-Bonté and C. Thévenard-Puthod
© 2013 European Academy of Management

To continue reading

Request your trial