Managing knowledge transfer in a multinational acquisition : a study of the factors that enable acquiring firms to successfully obtain intellectual capital from their acquisitions

2008

Multinational Companies (MNCs) have gained an extremely important role in today’s business

environment. Within these MNCs two major developments can be distinguished, namely the

increasing importance of knowledge management and the big impact of acquisitions. However, both

these developments pose considerable problems for its management. Managing knowledge transfer

and acquisitions is even more difficult for MNCs than for purely domestic firms, due to geographic

disparity.

Since knowledge management and acquisitions play such an important role in today’s MNCs and are

expected to even increase in importance for tomorrow’s, it is essential to continue research in these

areas. In both separate areas extensive research has been conducted, but it is only since recent that

the two developments have been combined. Therefore, this paper aims to develop a model of

required management practices necessary for obtaining the acquired company’s intellectual capital.

Only when tacit knowledge transfer takes place, intellectual capital from the acquisition can namely

be transferred to the acquirer.

To be able to specify these management practices, extant empirical literature on knowledge

management and MNC acquisitions to obtain intellectual capital is discussed and analyzed. Based on

this the model of required management practices is developed. The elements of this model are then

illustrated by the case of Cisco that has a long standing track record of pursuing this type of

acquisition deals successfully.

The literature review and development of the model of required management practices necessary

for obtaining the acquired company’s intellectual capital has led to the formulation of nine areas of

management practices that need to be taken care of. Furthermore six internal and six external

barriers are pointed out.

With regard to these findings it can be concluded that the active management of

integration/socialization mechanisms and taking care of areas of management practices that increase

the development of social capital are requirements to success for this type of acquisition.

Furthermore, actively managing the human side of the deal is necessary to create the required level

of employee retention, involvement and participation. Of course economic and financial

considerations still play a role in any acquisition deal. However, when the goal is to obtain

intellectual capital, the management of these considerations alone is not enough.