Curing the firm's indigestion: Organizational restructuring and the dynamics of acquisition performance

In the present paper, we argue that the more intensive the firm's acquisition activity, the more frequently the firm should undertake large-scale organizational restructuring. Drawing on the insight that the integration of acquisitions is inevitably imperfect in the short term, thus giving rise to lingering integration problems that tie up management time and attention in highly acquisitive firms, we first hypothesize that acquisitions are an important driver of restructuring. Subsequently, we juxtapose two counteracting forces: one that pushes toward more frequent restructuring - the positive content effect of restructuring - and one that induces less frequent restructuring - the negative process effect. Unlike most extant research, which studies the performance effects of isolated acquisitions, we argue, building on a small yet growing research stream, that the position of an acquisition within the sequence of acquisitions undertaken since the firm's last restructuring greatly influences its performance contribution. Furthermore, we examine the role of time in this relationship and how the dynamics of this relationship evolve as the firm becomes more experienced with acquisition and restructuring. Using panel data on large, highly acquisitive corporations covering over thirty years, we find support for our predictions.