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Trust following acquisitions: a three-country comparative study of employee reactions to takeovers

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This study examined how characteristics of the takeover situation and the acquiring firm's integration decisions and actions influence target firm members' trust in the acquiring firm management. A policy-capturing approach was used to model individuals' trust decisions following takeovers in a cross-national sample of German, Canadian and Singaporean employees. The findings revealed that the five factors hypothesized to influence trust, namely mode of takeover, cultural distance, extent of imposed control, perceived attractiveness of acquiring firm's HR and reward system, and interaction history, were significant influences on respondents' trust decisions, and the direction of effects was as hypothesized. However, respondents did not give equal weight to the five factors in their decisions to trust the acquiring firm management. Attractiveness of acquiring firm's HR and reward system was found to be the most important determinant of trust, followed by mode of takeover, interaction history, imposed control, and cultural distance. A significant interaction effect between mode of takeover and cultural distance was found, suggesting that the negative effects of a hostile mode of takeover on target firm members' trust are stronger in cross-border acquisitions compared to domestic ones. National cultural orientations and, to a lesser extent, demographic variables moderated the relationship between the characteristics of the takeover situation and the post-acquisition integration process, and respondents' trust decisions. The implications for merger and acquisition research and practice are discussed.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2003/2003-06.pdf

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Copyright INSEAD. All rights reserved