Organizational integrity and acquisition performance: The role of values in value creation

Acquisitions are a popular vehicle used to implement firms' diversification and growth strategies. Empirical evidence, however, indicates that the majority of these transactions fail to create value for the acquiring firm's shareholders. Scholars have investigated a number of factors to inform management practice on how to improve the odds of success, but one area of inquiry is notable in its absence: the impact of ethical behavior on post-acquisition integration success.; This thesis begins an exploration into this dynamic by exploring the role of organizational integrity—defined as consistency between espoused and enacted organizational values—as a predictor of acquisition success. Computer-aided content analysis of annual reports is used to quantify the espoused values, and a mail-questionnaire survey instrument is used to measure the enacted values. Two value structures were investigated: values relating to the firm's customer and product orientation, and values involving the relationship of the firm and its employees.; Results indicate a strong correlation between integrity vis-à-vis an organization's customer and product values and acquisition success. This relationship is moderated by the degree of congruence in the value structures of the acquiring and target firms. In addition, customer integrity is significantly correlated with lower drops in employee productivity and commitment, two variables that have previously been shown to predict acquisition success. Moderate support is provided showing that top management turnover is lower when firms act with integrity vis-à-vis their employee values. Component effects were found for the depth of the required integration, but not for the strategic importance of human assets.; These empirical results provide strong support for the claim that consistency in word and deed is important to the achievement of acquisition objectives. The weak results for the employee integrity measure may provide an indication that employee values expressed in annual reports are not operative inside the organization, and reliance on private information is necessary to adequately measure this construct.; My thesis makes several contributions: the operationalization of organizational integrity; the exploration of correlations between ethical and behavioral variables to acquisition success; and the integration of the strategy and business ethics disciplines. Implications for future research are discussed.