Social integration in subsidiary-building acquisitions

Abstract

We identify and conceptualize the phenomenon of subsidiary-building acquisitions. International acquisitions provide a powerful means for multinational corporations (MNCs) to grow their existing subsidiaries. The integration of subsidiary-building acquisitions involves a triad of actors: the MNC, the existing subsidiary, and the target. However, extant research emphasizes international acquisitions as a cross-border phenomenon, focusing in a limited way on the foreign acquirer–local target dyad, thus ignoring the complexities of subsidiary-building acquisitions. Through a qualitative study of a Norwegian target acquired by a French MNC with an existing Norwegian subsidiary, we find that subsidiary-building acquisitions involve tensions between autonomy and integration in two distinct and interrelated integration processes: local integration and cross-border integration. We uncover how pressures for autonomy in one process counter-intuitively trigger pressures for integration in the other. These dynamics fuel headquarters–subsidiary relationships and subsidiary cohesion, the two components of social integration in subsidiary-building acquisitions. By unearthing the underexplored phenomenon of subsidiary-building acquisitions, we provide novel insights into the complexities of international acquisitions. We bridge the merger and acquisition (M&A) and MNC literatures, thus paving the way for research on international acquisitions to move beyond the acquirer–target dyad to understand their implications for MNCs.