The Moderating Role of Transformational Leadership on HR Practices in M&A Integration

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Version: Accepted Version
Article:
Vasilaki, A, Tarba, S, Ahammad, MF orcid.org/0000-0003-0271-2223 et al. (1 more author)
(2016) The moderating role of transformational leadership on HR practices in M&A
integration. The International Journal of Human Resource Management, 27 (20). pp.
2488-2504. ISSN 0958-5192
https://doi.org/10.1080/09585192.2016.1204556
© 2016, Taylor & Francis. This is an Accepted Manuscript of an article published by Taylor
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The Moderating Role of Transformational Leadership on HR Practices in M&A
Integration
Dr Athina Vasilaki
IESEG School of Management,
3 rue de la Digue, 59800 Lille, France
Email: [e-mail]
Dr Shlomo Tarba
Birmingham Business School,
University of Birmingham,
Edgbaston, Birmingham, B15 2TT, UK
Email: [e-mail]
Dr Mohammad Faisal Ahammad
Sheffield Business School,
Sheffield Hallam University,
Email: [e-mail]
Dr Alison J. Glaister
York Management School,
University of York, UK
Email: [e-mail]
Note: This is the final version of the paper accepted in International Journal of HRM on
9th June 2016.

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The Moderating Role of Transformational Leadership on HR Practices in M&A
Integration
Abstract
Scant research exists examining the effect of HRM practices on employee behavior in M&A
integration and the role that leaders play within this. This paper develops a conceptual
framework that focuses on the moderating role of transformational leadership on the
achievement of human integration and organizational identification in M&A integration. We
argue that communication, employee involvement, teamwork, and training and developme nt
have a positive effect on employee behavior and their identification with the newly formed
organization. Moreover, we argue that transformational leadership behaviors will moderate the
implementation of HRM practices in M&As, leading to positive employee behavior and
employee identification in the new organization. We suggest that further research is necessary
to test propositions of the present study in order to achieve finer-grained understanding of the
role of transformational leadership on the achievement of human integration and organizatio na l
identification in M&A integration.
Keywords: Mergers and acquisitions, HRM, leadership, and organizational identification.

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The Moderating Role of Transformational Leadership on HR Practices in
M&A Integration
INTRODUCTION
Mergers and acquisitions (M&As) have been studied from a variety of perspectives and
disciplines, and while it is suggested by Bower (2004) that there is nothing more to learn from
the study of M&As, an area that received scant research attention in the literature is the
importance of human resource practices and the leadership required to design and imple me nt
these practices during the integration of two organizations. The management of the transitio n
from two separate organizations to one integrated organization remains a key challenge for
senior executives as it requires the blending of organizational cultures, structures, manageme nt
systems and processes (Gomes, Weber, Brown, and Tarba, 2011). Therefore, in order to
achieve expected synergies, an emphasis is placed upon planning processes that facilitate a
reconciliation of these different organizational ‘systems’ (Schweiger and Weber 1989; Stahl
and Voigt 2008).
In general, the impact of M&A on individuals and groups may differ widely between various
human resource management practices (Budhwar, Varma, Katou, and Narayan, 2009; Sarala,
Junni, Cooper, and Tarba, 2014; Weber and Tarba, 2010), and can be influenced by nationa l
cultural distance and corporate culture differences (Weber, Tarba, and Reichel, 2009; 2011),
strategic agility (Junni, Sarala, Tarba, and Weber, 2015), knowledge sharing during post-
merger integration (Aklamanu, Degbey, and Tarba, 2015), and talent retention (Stokes, Liu,
Smith, Leidner, Moore, and Rowland, 2015; Zhang, Ahammad, Tarba, Cooper, Glaister, and
Wang, 2015).
M&A integration requires employees to increase their productivity, manage job routines and
adopt new practices while transitioning from one organization to another (Nemanich and Keller
2007). Leaders seek to balance similarity and difference in order to retain talent and prevent

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the withdrawal of employees (Langley et al. 2012). However, during the post-acquisitio n
integration process employees often respond negatively with culture clashes being associated
with more dysfunctional behaviors amongst employees (Marmenout 2011:793). Changes in
organizational routines cause shock, anger, disbelief, depression, and helplessness before,
during, and after the acquisition (Coff 2002; Schweiger et al. 1987) and each of these
contributes to a loss of attachment and identification with the new organization (Birkinshaw et
al 2000). A reduction in post-M&A identification can bring about inferior job satisfactio n,
lower team performance, decreasing organizational citizenship behavior, and augmented
turnover intentions (Ullrich and van Dick 2007; van Dick et al. 2006). These negative behaviors
limit the extent to which employees are able to fully adapt to the post-merger organization and
may jeopardize the strategic goals of the merging firms (Giessner 2011). It is suggested that in
order to maintain positive employee behavior in the new organization, human resource
management practices must be implemented (Bartels et al. 2006; De Wever et al. 2005;
Maguire and Phillips 2008). Prior research indicated that leadership style has a signific a nt
effect on talent retention during post-M&A integration (Zhang et al. 2015). Therefore, it is also
important to consider the role that leaders play in moderating the impact of these HR practices.
The aim of the paper is to develop a conceptual framework that focuses on the moderating role
of transformational leadership on the achievement of human integration and organizatio na l
identification in M&A Integration. The literature on the effect of HRM practices on employee
behavior is limited (Lakshman 2011; Weber and Tarba 2011b) and the role that leaders play
within this has received limited attention (Shi et al. 2012). Consequently, this article analyses
the effects of post-merger HRM practices and makes a key contribution through the recognitio n
that the impact of HRM practices on the achievement of human integration and organizatio na l
identification is moderated by the leadership style of the acquiring organization.

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ORGANIZATIONAL IDENTIFICATION AND M&A
The identity of an organization - its central, enduring, and distinctive characteristics - may be
called into question once an organization is involved in M&A activity (Albert and Whetten
1995), and employees who once identified with the organization, feel uncertain and threatened.
This is problematic as high organizational identification enhances member integration and
performance, whereas low identification is associated with conflicts and negative emotions
(Salk and Shenkar 2001:162; Terry 2001; Terry 2003; Van Dick et al. 2004). Consequently,
real or perceived identity threats can lead to conflicts amongst employees. Moreover, low
identification with the post-M&A organization may lead to M&A failure (Ullrich and van Dick
2007; Giessner et al. 2006; van Dick et al. 2006).
Social identity theory suggests that individual self-concept consists of two types of identity:
personal - consisting of individual characteristics, and social - deriving from group
membership and its emotional attachments (Boen et al. 2006). Through the latter, individ ua l
characteristics are subsumed within the group. M&As alter the identity of an organization and
in so doing also shifts the employees’ social identification with the organization – impacting
“collective identity and self-esteem” (van Dick et al. 2006:S69). M&As represent a form of re-
categorization from one group to another, requiring employees to reclassify themselves as
members of a newly merged organization. According to Colman and Lunnan (2011) the
valence of this reclassification will depend upon the extent to which the newly merged
organization is considered high status (leading to positive social identity) or low status (leading
to poor self-concept and negative social identity) by its employees. Low and high status groups
differ in their post-merger expectations and the extent to which they experience continuity
(Giessner 2011). Amiot et al. (2007:571) suggest that high status groups adjust to new
organizational routines progressively over time, whereas low status groups decrease their

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commitment over time and become increasingly susceptible to a sense of “injustice and
illegitimacy.” However, the former also remains problematic as high-status groups exhibit
resistance towards subsequent post-merger change if they perceive a threat to their identity
(Ullrich et al. 2005; Van Knippenberg et al. 2002). As such, Van Leeuwen et al. (2003) and
Chreim (2007) highlight the need to balance the preservation of old identities while
incorporating a new social identity. This should help to improve employee commitment and
cooperation, reduce negative emotions amongst employees, and lower in-group bias and
turnover intentions while ensuring employee loyalty (Amiot et al. 2007; van Dick et al. 2006;
Birkinshaw et al. 2000; Bachman 1993; Hogg 2000; Hogg and Terry 2001).
Yet, M&As increase the preoccupation with status between groups located within the merging
organizations and threatens the abandonment of “valued social identity” (Boen et al. 2010:462).
Research by Langley et al. (2012) shows that employees involved in M&As experience some
form of struggle but respond in different ways, some through innovation, others through
passive behaviors. Chreim (2007:475) states that “it is possible for all merged groups to view
themselves as losers,” yet a failure of employees to identify with the merged organization can
lead to value creation through “local action” (Chreim 2007:475) and the expression by
employees of “conflict and noise” as a means of self-preservation (Colman and Lunnan
2011:857).
Other studies suggest that positive employee behavior correlates with the degree of continuity
in the practices of the organization (Ullrich et al. 2005). Ullrich et al. (2005) argue that if neither
projected nor observable continuity is granted, positive employee behavior appears very
difficult to maintain or achieve. The loss of identity in the combined organization leads to a
loss of trust in the organization and given that job satisfaction and identification are highly
dependent upon feelings of self-efficacy – those considering the post-acquisition process as
unfair will also experience negative perceptions of self-efficacy (De Wever et al. 2005; Amiot

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et al. 2006). This, in turn, limits social integration processes and disrupts the creation and
maintenance of relationships within the organization (Meyer and Altenborg 2007). In this
context, Lupina-Wegener et al. (2014: 767) suggested that in order to enhance employees’
identification with the post-merger organization, change agents should attempt to boost a sense
of projected continuity. These efforts should in particular target employees in the subordinate
group who identified greatly with their pre-merger organization.
It is the disruption in creating a relationship within the merged organization that has profound
psychological effects on employees involved in M&As, threatening both the psychologic a l
attachment to the organization and organizational performance. Through feelings of
uncertainty and threats to self-identity, employees may seek to leave the organization resulting
in a loss of corporate memory and negative effects on productivity (Mottola et al. 1997;
Cartwright and Cooper 1993). Emphasis is therefore placed on the development of human
resource management systems and the ability of these systems to retain key talent and develop
career structures that deliver a sense of equity and organizational ‘justice’ (Amiot et al. 2007;
Schweiger and Weber 1989).
HRM PRACTICES
There is consensus in the literature that implementation of HRM practices leads to positive
employee behavior and attitudes (Guest and Conway 2002). HRM systems are considered both
as key control mechanisms and important determinants of the levels of trust during M&As
(Lakshman 2011; Faulkner et al. 2002). These systems are important in managing the sense of
procedural justice which in turn builds greater organizational identification amongst employees
(Edwards and Edwards 2012). Guest (2002) found that HRM practices emphasizing
communication, employee involvement, teamwork and training and development and correlate
significantly with positive employee behaviors and employee wellbeing. Each of these