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

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. The paper argues that communication, employee involvement, teamwork, and training and development have a positive effect on employee behavior and their identification with the newly formed organization. Moreover, the paper argues 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.

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Vasilaki, A, Tarba, S, Ahammad, MF orcid.org/0000-0003-0271-2223 et al. (1 more author)
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integration. The International Journal of Human Resource Management, 27 (20). pp.
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1
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.

2
The Moderating Role of Transformational Leadership on HR Practices in M&A
Integration
Abstract
Scant research exists examiningthe effect of HRM practices on employee behaviorin 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 development
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 organizational
identification in M&A integration.
Keywords: Mergers and acquisitions, HRM, leadership, and organizational identification.

3
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 leadershiprequired to design and implement
these practices during the integrationof two organizations. The management of the transition
from two separate organizations to one integrated organization remains a key challenge for
senior executives as it requires the blending of organizational cultures, structures, management
systems and processes (Gomes, Weber, Brown, and Tarba, 2011). Therefore, in order to
achieve expected synergies, an emphasis is placed upon planningprocesses 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 national
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

4
the withdrawal of employees (Langley et al. 2012). However, during the post-acquisition
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 satisfaction,
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 significant
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 organizational
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 limitedattention (Shi et al. 2012). Consequently, this article analyses
the effects of post-merger HRM practices and makes a key contribution through the recognition
that the impact of HRM practices on the achievement of human integration and organizational
identification is moderated by the leadership style of the acquiringorganization.

5
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 conflictsand 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, individual
characteristics are subsumed within the group. M&As alter the identity of an organization and
in so doing also shiftsthe employees’ social identificationwith 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

6
commitment over time and become increasingly susceptible to a sense of “injusticeand
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 improveemployee 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 a2010:462).
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 t
themselves as losers,” yet afailure of employees to identify with the merged organization can
lead to value creation through“localaction”(Chreim2007:475) and the expression by
employeesof “conflictand noise”as a meansof 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 identityin the combined organizationleads to a
loss of trust in the organizationand 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

7
et al. 2006). This, in turn, limits social integration processes and disrupts the creationand
maintenance of relationships within the organization (Meyer and Altenborg 2007). In this
context, Lupina-Wegener et al. (2014: 767) suggestedthat 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 organizationthat has profound
psychological effects on employees involved in M&As, threatening both the psychological
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 developmentof 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 etal. 2007;
Schweiger and Weber 1989).
HRM PRACTICES
There is consensus in the literaturethat implementation of HRM practices leads to positive
employee behavior and attitudes (Guest and Conway 2002). HRM systems are considered both
as key control mechanismsand 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

8
practices is discussed in the following subsections.
Communication
The stress caused by M&As derive from a variety of sources including job insecurity, a lack of
autonomy, the impact of change and an uncertainfuture (Bikenshaw et al. 2000; Cartwright
and Cooper 1993). Bastien (1987) stresses that the more communication occurs and the more
it aligns with employee perceptions of reality, the more stability it provides in turbulent
situations. Communication is therefore vital in reducingstress, smoothing change, creatinga
shared vision and providing a sense of meaning (Marmenout 2011; Jimmieson and White 2010;
Marks and Mirvis 2001; Schweiger and DeNisi 1991) but it also reduces a damagingpower
and dependency on gossip and rumor (Wickramasinghe and Karunaratne 2009). Indeed,
employeesexpectleadersto “createtime” and effectivecommunicationchannels and
emphasize the need for regular and individualised contact (Bligh 2006). Giessner (2011:1091)
suggests that if employees understand the reason for a merger they areable to “reconstructa
strong sense of organizational identity.” Therefore, communication provides much needed
clarity in the transition phase of M&As as it is often a lack of information that causes confusion
and disaffection amongst employees (Kavoor-Misra and Smith2008; Chreim 2007). Agle et
al. (2006) noted that CEOs must remain engaged in the process of maintaining good
relationships, delegating responsibilities, and communicating decisions reached during the
process.
Guest (2002) confirms that communication has positive consequences for self-esteem,
organizational commitment, and cooperative behavior. Employees receiving information are
more likely to engage in “change-supportive behaviors” and improve their identification with
the new organization(Jimmieson and White 2010: 338). Gomes et al. (2012) find a positive
association between the extent of communication and the links between the organizations,
emphasizing the ability of communication to mitigate cultural disruption in newly acquired

9
firms. Similarly, Herriot and Pemberton (1997) found that ongoing interactions between
employer and employee through various communication channels can help establish and
clarify employee expectations. Thus, the systematic use of communication channels throughout
the M&A process should help employeesto identify with the organizationand build higher
commitment levels and create a safe space for substantive differences and conflicts to surface
and to be addressed (Turnley and Feldman 1999; Dooley and Zimmerman 2003).
There is, however, some contentionover the complexity of these communication channels.
Some (see for example: Smidts et al. 2001; Bordia et al. 2004; Gagne et al. 2000) suggest that
the use of multiple forms of communication help to increase identification within the
organization, which in turn, reduce uncertainty, anxiety and increase openness and
empowerment. In contrast, Ullrich et al. (2005) found that higher complexity in communication
channels only intensified the perceived stress and pace of change. Indeed, certain
communicationmechanismssuch as Q&A sessions,presentationsand official“grapevine”
sources can have deleterious effects resulting in conflict intensification (Marks and Mirvis
2011). Therefore, communication efforts should be tailored and targeted towards different
employees depending on their perceived levelsof uncertainty (Giessner 2011).Despite this,
communication throughout M&A activity is central in assistingorganizational identification
and enabling employees to understand the nature of change and future expectations.The main
challenge of M&A integration is to encourage employees to cooperate effectivelyacross the
boundaries of management levels (Ullrich and van Dick 2007). It is thus imperative to promote
identification with the new organization and commitment to it through effective
communication that leads to a common goal orientation(van Knippenberg 2003), helping to
minimize employee resistance and encourage positive employee behaviors. Based on the above
arguments, we conjecture the following proposition:
Proposition 1: In the M&A context, communication has a positive effect on employees’

10
behavior and their identification with the new organization.
Employee Involvement
Employee involvement refers to the creation of an environment in which employees can
influence decisions and actions that affect their jobs and it is considered centralto identity
building (Fenton-O’Creevy2001; Jimmieson and White 2011). It is a reflection of management
and leadership philosophy on how employees can be made to contribute most to the continuous
improvement and ongoing success of their organization (Edwards 2005). Participation in
decision making encourages employee support and provides the space requiredto “ignite”
employee creativity encouraging groups to work together for high-quality solutions (Marks and
Mirvis 2011; Densten 2008:105).
Van Dick et al (2006) suggest that employees who feel valued and supported are less likelyto
leave the organizationand employee involvementpractices have a significant positive effect
on identification and organizational performance, creating enthusiasm, job satisfaction and
improved support of change (Jimmiesonand White 2011; Brown and Cregan 2008; Korunka
et al. 1995; Petrescu and Simmons 2008). Waldman and Javidan (2009) advocate employee
involvement in vision statements and decision making in order to achieve integration and
greater organizational alignment. Moreover, such involvement improves motivation (Guest et
al. 1993), productivity (Edwards 2005), and increases overall trust in the organization (Petrescu
and Simmons 2008).
Employee involvement and participation in M&As is a key characteristic of successful
acquisition implementation (Amiot et al. 2006), as it empowers employees and provides them
with a sense of agency and control (Gagne et al. 2000). As employee commitmentis closely
linked with identity in the organizations (Edwards 2005), it is possible to argue that employee
involvement should be encouraged in M&As. Bartel et al. (2006) and Van Dick (2001) support

11
this argument, explaining that employee involvementfosters greater identificationwith both
the job and the organization.As such employee involvement is an important means through
which greater post-acquisition responsiveness can be achieved (Amiot et al. 2006). The above
arguments lead to the following proposition:
Proposition 2: In an M&Acontext, employee involvement has a positive effect on employe
behavior and their identification with the new organization
Team Work Practices
As noted by Khan et al. (2015), in the context of the Pakistani emerging economy, international
joint ventures IJVs can play a critical role as the boundary spanners of knowledge transfer since
local suppliers are linked with their global suppliers' networks throughassociational learning.
Furthermore, social capital between the IJVs and the local component suppliers and the IJVs'
willingness to initiate a knowledge transfer dialogueamong local and global Tier 1 suppliers
are of critical importance to facilitate the afore-mentioned transfer of knowledge (Khan et al.,
2015). Furthermore, based on data collected via a cross-sectional survey using a questionnaire
on a sample of UK firms that had acquired North American and European firms, the research
of Ahammad, Tarba, Liu, and Glaister (2016) indicated that knowledge transfer and employee
retention have positive influence on CBA performance. Moreover, organizational culture
differences have a negative influence on CBA performance, but also mediate the relationship
between knowledge transfer and CBA performance.
Since teamwork as a sophisticated attempt to integrate the individual into the organization
(Morley and Heraty 1995), it can play an important role in facilitating knowledge transfer in
collaborative partnerships in general and in M&A in particular. In organizations experiencing
a major change the emphasis is placed upon the need for the sharingof tacit knowledge, as
such according to Lakshman (2011) socio-cognitive mechanisms such as teamwork and

12
communities of practice and learning become more important than more technologically
focused systems of knowledge codification.Thus, teamwork mightbe linked to enhancement
in a variety of outcomes such as communication, coordination, integration of information,
increased productivity, and job satisfaction (Rodwellet al. 1998). In the case of organizational
change, teamwork has been linked with knowledge production,identity evolution, enriching
communication networks while minimizing employee resistance and negative behaviors
(Alvesson and Willmott 2002). Together with the implementation of other HRM practices such
as communication, employee involvement, and training, teamwork can reinforce identity
reconstruction and evolution in the context of organizational change.
In M&As new relationships and patterns are established as the two organizations come together
(Birkinshaw et al; 2000). Departments, teams, and staff must be integratedand new working
processes and procedures emerge. Buono (2003) argues that the group and intergroup dynamics
that follow the merger of the two firms are significant determinants of M&A success or failure.
Burke and Jackson (1991) suggest that the new entity should focus on team building activities
by creating new relationships and establishing bonds between teams. Thus, team building and
teamwork practices duringthe M&A process can help reduce the extent to which employees
experience low commitment and high stress levels (Marks and Mirvis, 2001). Child et al.
(2001) found that successfulM&As are associated with the increased use of teamwork and that
the use of autonomous teams fostered positive behaviors toward the M&A process. The above
arguments lead to following proposition:
Proposition 3: In an M&A context, teamwork will have a positive effect on employees
behavior and their identification with the new organization.
Training and Development
Employee training and development has become an important HRM practice for promoting

13
continuous employee improvement and long-term investmentin employees’skills and
capabilities (Useem, 1993). Nikandrou and Papelaxandris (2007) confirm that training and
formalised HR policies are significant differentiators of firm performance during M&As.
Training and development enables the development of new routines, improving existing
systems while helping employees to cope with change in their environment, but it is also central
in blending organizational cultures, improving decision making, retaining talent and
redeploying resources, all of which are high priorities during M&As (Weber and Tarba, 2010b;
Cummings and Worley, 2008; Stahl et al; 2011). The use of training and development programs
and coaching increase productivitybut also has positive effects on organizationalcitizenship
behaviors (Hackman and Wageman, 2005). Continuous investment in training and
development opportunities is positively associated with high levels of job satisfaction,
organizational commitment, and employee retention after organizational change events
(Shields and Ward, 2001).
In the case of M&As, the new entitymust address several issues to ensure its viabilityand
success (Schuler and Jackson, 2001) and firms should engage in activities that encourage
introspection and extensive dialogue, encouraging reflexivity on a cognitive, emotional and
political level (Schweiger anad Goulet, 2005). Training interventions targeted in this way lead
to greater communication, cooperation and increased cultural awareness with commitment
amongst employees (Schweigerand Goulet, 2005). Buono (2003) advocates post-acquisition
training workshops focusing on the lessons learned during the acquisition to ensure the
continuity of daily practices and aim to build employee identityin the organiza tion.Training
and development in M&As enhances employee competencies, facilitates adjustment to the new
organizational environment, and improves performance (Schuler et al; 2004). Marks and
Mirvis (2011) suggest that in order to ease cultural integrationa seriesof “deep learning
interventions”should be provided and that these assist cross-organizationdialogue and ease

14
the integration of two previously independent organizations. Based on the above arguments,
we suggest the following proposition:
Proposition 4: In an M&A context, training and development activities will have a positive
effect on employees’behavior and their identification with the new organization
The role of transformational leadership as a moderator between HR practices and
employee behavior
Implementation of the practices listed by Buono (2003) such as teamwork, involvement,and
empowerment leads to employee integration in the new organization and results in higher levels
of commitment and identification. Yet it could be argued that much will depend on the nature
of leadership within the organization and the extent to which these leaders are able to influence
their followers.
Transformational leadership theory rests on the tenet that certain leaders enhance commitment
to a well-articulated vision and inspire followers to develop new ways of thinking about
problems (Piccolo and Colquitt 2006; Densten 2008), motivating followers to work for
transcendental goals and for higher-level self-actualization needs, rather than engaging in
simple exchange relationshipswith followers (Nemanich and Keller 2007; Covin et al. 1997;
Densten 2008). Avolio and Bass (2004) argue that managerswho exhibit transformational
leadership raise awareness amongst subordinates of the importance and value of designated
outcomes, enabling employees to transcend their self-interest.
Poor performance in M&As is often associated with an absence of leadership (Haspeslagh and
Jemison 1991) evidenced by a lack of vision and impersonal reference to the new organization,
increasing levels of mistrust amongst employees (Ullrich et al. 2005). During M&As senior
executives are often considered as outsiders,reducing the extent to which employees are able
to identify with a new vision (Giessner and Schubert 2007). This is compounded with

15
employees often constructing their own view of what constitutes good leadership. Bligh (2006)
cites a variety of different leadership expectations amongst employees including, inter alia, the
utilization of cultural differences, the provision of a forum for expression, managing
expectations of change, clearly articulating the need for change and mindfulness amongst
leaders of their own actions.
Transformational leadership is more likely to arise in situations that are turbulent and
unstructured and where emphasis is placed upon shared values (Nemanich and Vera, 2009:28;
Waldman and Javidan, 2009). In these situations, transformational leadership can overcome
the conflicts associated with highlevels of cultural distance (Vasilaki, 2011) and ease post-
acquisition integration through positive associations with employee performance, creative
thinking and acquisition acceptance (Nemanich and Keller, 2007:60-61). Such leadership is
central to the creation of trust and influencesemployees to achieve the intended objectives
through openness, participation, and the blending of old routines with new systems (Nemanich
and Vera, 2009; Vera and Crossan, 2004; Morosini et al; 1998).
Empirical studies and meta-analyses have found positive relationships between
transformational leadership and a range of outcome measures. Vasilaki (2011a, 2011b)
confirms a positive significant effect of transformational leadership on organizational
performance in cross-border acquisitions consistent with Lowe et al. (1996), DeGroot et al.
(2000), and Jacobsen and House (2001). Good leadership reduces causal ambiguity and
influences followers to achieve goals and exhibitbehaviors such as inspirational motivation
and intellectual stimulation (Lakshman, 2011; Elenkov et al; 2005). Leaders provide vision and
inspiration through the use of stories and shared vision statements, creating supportive
structures and cultures needed to integrate the two organizations (Waldman and Javidan, 2009;
Nemanich and Keller, 2007). These structures include a system of human resource
management practices. If these practices are not properlyimplemented they cannot have a

16
positive impact on acquisitionacceptance, satisfaction, and productivity amongst employees
(Nemanich and Keller, 2009; Fey et al; 2009; Guest, 2002). Rao-Nicholson, Khan, and Stokes
(2016) on their part explored the impact of leadership on employee psychological safety (EPS),
characterizedby employees’expectationof job and remunerationstabilityduringthe cross-
border mergers and acquisitions (M&As) pursued by the emerging market multinational
companies (EMNEs) from India and China. Utilizingthe case survey method to examine the
effectof leadershipon earningper share (EPS), theyfoundthat the EMNEs’ leadership
visibility during the M&A process has no impact onthe EPS, however the trust in the EMNEs’
leadership has a positive influence on the EPS.
We argue that these practices cannot be fully implemented if they are not monitored and
controlled, and if employees are not coached to adapt to the new entity and not able to express
their opinions, suggestions, and feelings about the challengesthat may arise through the post-
acquisition integration. Therefore, the role of the leader becomes central in creating order and
continuity (Densten, 2008). Based on the above arguments, we suggest the following
proposition.
Proposition 5: 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.
Based on the above arguments, the following conceptual framework (Diagram 1) is presented
that focuses on HRM practices, leadership styles, employee behaviour and employee
identification.

17
Diagram 1: Conceptual framework
Communication (P1)
Employee
Involvement (P2)
Teamwork (P3)
Training and
Development (P4)
Transformational
Leadership (P5)
Employee Behaviour
Employee Identification

18
DISCUSSION
A number of prior studies has examinedfinancial and strategic factors as predictors of M&A
performance without finding clear relationships (King, Dalton, Daily, & Covin, 2004).
Although human resources (HR) have been frequently mentioned as a potential factor in M&A
failures (e.g., Stahl, Mendenhall, & Weber, 2005), there is a dearth of theoretical and empirical
studies of the relationships between M&A performance and acquirer's HR practices during the
integration period following a merger. Moreover, prior literature has paid limitedattention to
the effect of HRM practice on employee behavior (Lakshman, 2011; Weber and Tarba, 2011a)
and the role leaders play within this (Shi, Sun and Prescott, 2012). The present paper
contributes in M&A literaturethrough the appreciation that the impact of HRM practices on
the achievement of human integration and organizational identification is reliant on the
leadership style selected by the acquiring firm.
The idea of employees identifying with their organization has been of academic interest
(Ashforth & Mael, 1989). Identity issues become criticalin today’s hecticorganizational life
of change (Cartwright & Cooper, 1993; Van Knippenberg, Van Knippenberg, Monden, & De
Lima, 2002). Several studies have shown that organizational restructuring may fail because of
employees’feelings of threat to their individual self-esteem and well-being (Cartwright &
Cooper, 1993), uncertainty about how the changes will affect their work (Ashford, 1988), and
employees holding on to old identities (Buono & Bowditch, 1989). In contrast, positive
identification with the newly merged organization has proven to be a crucial factor in
explaining successfulrestructuring processes (Van Knippenberg et al., 2002).
Research suggests that loss of identity can be a major concern that employees experience
during M&As (Schweiger, Ivancevich,& Power, 1987), acknowledging the important role of
organizational identity in the M&A context (Amiot, Terry, & Callan, 2007; Terry et al., 2001).
Shock, anger, disbelief, depression, and helplessness before, during, and after the acquisition

19
are caused by alterations in organizational routines (Coff, 2002; Schweiger et al., 1987).
Consequently, such emotional reaction leads to a loss of attachment and identification with the
newly formed organization (Birkinshaw et al; 2000). These negative behaviors limit the extent
to which employees are able to fullyadapt to the post-merger organization. The present study
argues that communication,employee involvement, teamwork, and training and development
have a positive effect on employee behavior and their identification with the newly formed
organization. Communication enables employees to appreciate the nature of change and future
expectation. Such appreciation has a positive effect on employee behavior. Moreover,
communication assist in achieving common goal orientation which, in turn, reduces employee
resistance to change. Thus, effective communication helps in promoting identification with the
newly merged organization.Employee involvement enhances motivation and productivity of
employees. Employee involvement in vision statements and decision making are critical in
achieving post-M&A integration and organizational alignment. Moreover, Employees feel
valued and supported in the merged organization. Consequently, employee involvement creates
a positive impact on identification and organizational performance. Team building and
teamwork practices help in minimizingthe high stress levels and low commitment among
employees. Moreover, teamwork and autonomous teams develop positive behavior towards the
M&A process. Thus, team work has a positive impact on employee behavior and identification.
Finally, training and development activities are expected to increase communication,
cooperation and higher culturalawareness with commitmentamongst employees. Moreover,
training and development in M&A increase employee competencies and facilitates amendment
to the new organizational environment. Therefore, training and development are essential to
ensure positive employee behavior and build employee identity.
Transformational leaders generate a different way of thinking, seeking new solutions to
problems and adopting generative exploratory thought processes (Sosik et al, 1998).

20
Transformational leaders confront current reality by drawing on intellectual capital, mind
power, know-how, imagination and learning. Transformational leadership encourages good
communication networks and a spirit of trust that enables the transmissionand sharing of
knowledge and motivates employees to work towards a specified goal and vision. These
leadership attributes are of vital importance in the post-acquisition integration process when
the integration of departments, employees, processes and practices is taking place. In this
context, Vasilaki (2011a, 2011b) confirms a positive significant effect of transformational
leadership on organizational performance in cross-border acquisitions.
Leaders provide vision and inspiration through the use of stories and shared vision statements,
creating supportive structures and cultures needed to integrate the two organizations (Waldman
and Javidan, 2009; Nemanich and Keller, 2007). These structures includea system of human
resource management practices. If these practices are not properly implementedthey cannot
have a positive impact on acquisition acceptance, satisfaction, and productivity amongst
employees (Nemanich and Keller, 2009; Fey et al; 2009; Guest, 2002). We argue that HR
practices cannot be fully implemented if they are not monitored and controlled, and if
employees are not coached to adapt to the new entity and not able to express their opinions,
suggestions, and feelings about the challenges that may arise through the post-acquisition
integration. By considering each subordinate as an individual, transformational leader can
provide support through the change process by facilitating social reconstruction to bring more
uniform interpretations to people with separate experience bases (Bass, 1998). Moreover,
Transformational leaders help subordinates to unlearn past routines, and respond appropriately
to new environments (Bass et al., 2003; Vera & Crossan, 2004). Therefore, we suggest that
transformational leadership behaviors willmoderate the implementation of HRM practices in
M&As, leading to positive employee behavior and employee identification in the new
organization.

21
CONCLUSION
Despite the importance of HRM issues, limited researchers examined the role of transformation
leadership on the realization of human integration and organizational identification. This paper
contributes by developing 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. Specifically, this paper analyses the effects of post-merger
HRM practices and makes a key contribution through the recognition that the impact of HRM
practices on the achievement of human integration and organizational identification is
contingent upon the leadership style (i.e. transformational leadership style) chosen by the
acquiring organization. Our conceptual model suggests that communication, employee
involvement, teamwork, and training and development have a positive effect on employee
behavior and their identification with the newly formed organization. Our model also suggest
that transformational leadership moderates the implementation of HRM practices in M&As,
leading to positive employee behavior and employee identification in the new organization.
We have attempted to contributed by developing a conceptual model of leadership, HR
practices and organizational identification. Further research is necessary to test propositions in
order to achieve finer-grained understanding of the role of transformational leadership on the
achievement of human integration and organizational identification in M&A Integration. In
addition, the propositions presented in this paper involve four HR practices. Additional
theoretical exploration is therefore required, and the investigation of other HR practices,
organizational elements, and systems may improve M&A integration and performance.
Moreover, as acquisitions are dynamic processes a more in-depth investigationof the role of
leadership in enhancing post-acquisition organizational performance is needed. This study did
not, however, considered the impact of demographic characteristics of the leader, for instance

22
age, tenure, education, rewards and premiums,cross-cultural competence and intelligence and
how they manage the change process of the integration.Future studies could examine this
issues in the context of domestic and cross border M&A.

23
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