Date of news: 18 November 2021
Recently, and together with my great phd student Jasper van Boven and Prof. Wilfred Dolfsma at Wageningen University, I have started to dive into the relationship between restructuring and digitalization. Initiating a new line of research, the approach is to explore – based on prior M&A activities in the global technology domain – how digitalization reshapes a firms approach to acquire.
Increasingly, firms need to start making use of digitalization (Nambisan et al., 2017), as not doing so introduces the risk of losing customer bases and market positions to new digital competitors (Gregory et al., 2018). While firms can choose from a wide array of options to facilitate digitalization, such as internal exploration or forming joint ventures and strategic alliances, recent research highlights that organizations increasingly turn to mergers and acquisitions (M&A) to support these undertakings (Malette & Goddard, 2018). Interesting to note here though, is that prior research on M&A raises serious doubts concerning the potential benefits for the innovativeness (Cloodt et al., 2006) and financial performance outcomes (King et al., 2004; Moeller et al., 2004) that can be expected from such M&A. One of the causes is the substantial similarities after M&A’s in terms of workforce. As such, this leads to many organizations trying to reduce these similarities via workforce downsizing, in an effort to achieve higher efficiency (Budros, 2004; Datta et al., 2010; Krishnan et al., 2007).
However, digital M&A – that is acquisitions and mergers with firms that intensely leverage digital technologies (Bharadwaj et al., 2013) as critical elements of their business model (Huang et al., 2017; Tumbas et al., 2017) – may differ from other M&A given the specifics of digital technologies and the context of digitalization. For example, larger redundancies could arise if the acquired digital capabilities are leveraged to automate certain labor-intensive processes, enhancing the possible benefits of downsizing.
The project foresees to explore the downsizing behavior of organizations engaging in digital M&A, as well as the financial outcomes, in an effort to understand more about how digital M&A can successfully be leveraged by organizations. The focus is on quantitative research, with the intent to approach some of the Centre’s contacts for further deep diving in the internal ongoings in this fascinating domain of tech enabled restructuring.