Preservation and Dissolution of the Target Firm's Embedded Ties in Acquisitions

Our study builds on extant theory on embeddness to concentrate on the process of preservation and dissolution of the target firm’s embedded ties in acquisitions. We identify four critical areas - communication, idiosyncratic investments, inter-personal relations and, personnel turnover – where managerial decisions taken during the acquisition process affect the components of the target firm’s embedded ties – trust, joint problem-solving and exchange of fine-grained information. The preservation or dissolution of an embedded tie depends ultimately on two specific tie-contingencies, the balance of power between the target firm and the embedded relation and interpretive processes at the inter-face between the two. Our findings have implications for the study of the dissolution of market ties as they point to different roles played by social and institutional forces, power asymmetries and competition in the dynamics of embedded ones. Finally, we encourage theory development in acquisition studies by positing the importance of interpretive processes and, more broadly, relational elements that span the boundaries of the parent-target dyad.