The Roles of Dynamic Capabilities in the Acquisition Process

Abstract

The aim of this research is to understand the roles of dynamic capabilities in the acquisition process. While a growing stream of literature has shown that dynamic capabilities lead to superior acquisition outcomes, greater attention is needed to understand how these benefits arise. This research begins to address this gap by exploring the roles of three generic types of dynamic capabilities in the acquisition process – sensing, seizing and reconfiguring capabilities.

To do so, this research conducts an in-depth case study of an active acquirer that has demonstrated the ability to sustain long-term acquisitive growth. Interviews were conducted with 14 participants involved in the case firm’s acquisition process. These interviews were supplemented with direct observations from a five-week placement within the case firm, internal company documents and publicly available information. Incorporating these various data sources allowed for deep insight into the capabilities underpinning the case firm’s acquisition process. Data was analysed using a multi-stage coding process encompassing both chronological logic models and pattern-matching techniques.

The findings show that sensing, seizing and reconfiguring capabilities play six important roles throughout the acquisition process and, collectively, help the case firm to successfully manage long-term acquisitive growth. Importantly, the findings imply that while there is value in deploying these capabilities in tandem, their inherent differences and contradictions are likely to cause challenges for acquirers attempting to pursue all three dynamic capabilities simultaneously. Thus, these findings indicate that the use of dynamic capabilities in acquisitions requires careful attention, with acquirers likely to face trade-offs in the capabilities they pursue. The findings also shed light on the importance of firm structure and culture in providing an environment favourable to the deployment of dynamic capabilities. This suggests that while dynamic capabilities may enable more successful management of the acquisition process, their effectiveness may depend on the acquirer’s ability to create an environment that is conducive to their use. Overall, this research contributes to existing literature by explicating the roles of dynamic capabilities and positioning these throughout the acquisition process. Several theoretical and managerial implications are discussed.