The effect of merger on employee views of corporate reputation: Time and space dependent theory

https://doi.org/10.1016/j.indmarman.2010.02.010Get rights and content

Abstract

Market relationships are often influenced by factors inside of the firm. Here we examine how the employees' view of corporate reputation of a merged B2B firm, assessed by corporate character (empathy, warmth, integrity and conscientiousness), influences their emotional attachment, satisfaction and job security. Warmth and empathy correlate strongly with satisfaction. Amongst a number of hypothesised ‘proximity’ factors time (e.g. length of service) and space (e.g. work location) had a substantial effect on perceived warmth and empathy. The interaction of the two had the most significant effect on emotional attachment; in that employees working remotely and of longer standing were the most disaffected. We propose the employees' length of service and work location as important factors generally in determining their emotional response to a merger and in predicting where disaffect will be most acute.

Introduction

Relationship management is a key to success in business-to-business (B2B) markets and can involve extensive interactions between employees and customers (Barnes, 1997, Weitz and Bradford, 1999). Maintaining a positive disposition among employees, in other words managing their attitude towards the company and maintaining a positive internal reputation, is consequently important (Cannon & Perreault, 1999). For example, a negative employee view of corporate reputation will lead to employee dissatisfaction and turnover (Davies, Chun, daSilva, & Roper 2003). A key contact employee's leaving can be a catalyst for the customer to re-evaluate its relationship with the firm (Anderson & Robertson 1995; Duboff & Heaton 1999) making that relationship vulnerable (Bendapudi & Leone, 2002).

While there is considerable research into customer loyalty and retention, insights into the internal causes of customer disaffection, particularly in a B2B context, are rare. One source of employee disaffection and turnover is a major organisational change such as a merger or acquisition, our empirical context here. To address the literature gaps, our paper takes an inductive theory building approach through an exploratory, quantitative study (e.g., Bugelman, 1994, Eisenhardt and Bourgeois, 1988). We identify the origin of emotional detachment by considering employee proximity variables; if the employee worked remotely or in head office (space), how long they had been employed (time), and in which job role/function they were involved. Our central argument is that while the proximity variables affect employee views of their company's reputation to a certain extent, the interaction between background and time, and the interaction between time and space, are the most significant factors influencing the level of emotional detachment of employees during the post-merger phase.

Section snippets

Corporate integrity, warmth, empathy

Reputation concerns the associations stakeholders make with any entity (Brown & Dacin 1997). There are a number of ways of assessing corporate reputation including what has been labelled as corporate character (Keller 2003), defined as the collective qualities expressed in terms of human characteristics that distinguish an organization (Davies et al. 2003). There are a number of aspects of corporate character potentially relevant to a positive climate in a post-merger situation: Integrity, do

Sample and data collection

To test our propositions and develop our theory we researched the aftermath of the acquisition by an American company (Company A) of a German firm (Company B). Our study of the 160 employees of the British subsidiary of the merged company (referred to as AB hereafter) began 18 months after the merger. 107 questionnaires were distributed and collected personally in the company's head office to maximise response rate. 53 questionnaires were sent by post to those working remotely (sales and mobile

Results

Table 2a provides descriptive statistics for the categorical variables and Table 2b correlations for all continuous measures. Internal consistency reliabilities for the latter equal or exceed the generally acceptable level of 0.7 and are reported on the diagonal. There were significant correlations between and across the four character dimensions (empathy, warmth, conscientiousness and integrity) and the emotional outcome variables, satisfaction, emotional attachment and job security.

While all

Warmth and empathy: key character factors

Corporate integrity, empathy, warmth and conscientiousness were identified from the literature as likely to influence employees during post-merger integration. The generally low scores for satisfaction (2.82) and emotional attachment (3.12) were associated with warmth (friendly, open, straightforward) and empathy (reassuring, concerned, supportive) or rather the lack of both. Employees rated AB particularly low for concerned, supportive and reassuring (average scores 2.84, 2.89 and 2.58

Conclusion, implications and further study

The origin of employee disaffection with a merger is not homogenous. It can vary by background, which of the merging companies one is from and whether an employee has joined post-merger. Employees from the acquiring company should not be presumed to be more favourably disposed towards a merger. While corporate integrity and conscientiousness are important, warmth and empathy are particularly relevant when two sub-cultures are likely to be competing and we would expect this finding to apply in

Rosa Chun is Professor of Business Ethics and Corporate Social Responsibility at Manchester Business School, England. Her research focuses on corporate reputation and virtue ethics. Her work has appeared in the Harvard Business Review, Journal of the Academy of Marketing Science (JAMS), Journal of Business Ethics, International Journal of Management Reviews, and Corporate Reputation Review.

References (39)

  • N.F. Piercy et al.

    Market orientation and retail operatives' expectation

    Journal of Business Research

    (2002)
  • R.G. Richey et al.

    Market growth through mergers and acquisitions: The role of the relationship marketing manager in sustaining performance Industrial Marketing Management

    (2008)
  • J.G. Barnes

    Closeness, strength, and satisfaction: Examining the nature of relationships between providers of financial services and their retail customers

    Psychology and Marketing

    (1997)
  • N. Bendapudi et al.

    Managing business-to-business customer relationships following key contact employee turnover in a vendor firm

    Journal of Marketing

    (2002)
  • Berkley et al.

    Identifying the information requirement to deliver quality service

    International Journal of Service

    (1995)
  • M.J. Bitner

    Servicescapes: The impact of physical surroundings on customers and employees

    Journal of Marketing

    (1992)
  • T.J. Brown et al.

    The company and the product: Corporate associations and consumer product responses

    Journal of Marketing

    (1997)
  • R.A. Bugelman

    Fading memories: A process theory of strategic business exist in dynamic environments

    Administrative Science Quarterly

    (1994)
  • R.M. Burton et al.

    The impact of organizational climate and strategic fit on firm performance

    Human Resource Management

    (2004)
  • A. Cannella et al.

    Effects of executive departures on the performance of acquired firms

    Strategic Management Journal

    (1993)
  • J.P. Cannon et al.

    Buyer-seller relationships in business markets

    Journal of Marketing Research

    (1999)
  • R. Chun

    Ethical Character and Virtues: An Empirical Assessment and Strategic Implications

    Journal of Business Ethics

    (2005)
  • T.J. Covin et al.

    An investigation of post-acquisition satisfaction with the merger

    The Journal of Applied Behavioral Science

    (1996)
  • G. Davies et al.

    Corporate Reputation and Competitiveness

    (2003)
  • K.M. Eisenhardt et al.

    Politics of strategic decision making in high-velocity environments: Toward a midrange theory

    Academy of Management Journal

    (1988)
  • C.W. Ellison et al.

    Development of interpersonal trust as a function of self-esteem, target status, and target style

    Journal of Personality and Social Psychology

    (1974)
  • S. Finkelstein et al.

    Top management team tenure and organizational outcomes: The moderating roles of managerial discretion

    Administrative Science Quarterly

    (1990)
  • C. Fombrun et al.

    Realizing Value from the Corporate Image

    (1996)
  • J.R. Gibb

    Climate for Trust Formation

  • Cited by (35)

    • The Role of Emotions in Cross-Border Mergers & Acquisitions: A Systematic Review of the Inter-Disciplinary Literature and Future Research Agenda

      2022, Journal of International Management
      Citation Excerpt :

      Fourth, employee psychological safety concerns the employee views of the results of being acquired or merged with another organization (Rao-Nicholson et al., 2016a). Research suggests that when an acquiring firm adopts an appropriate leadership style, it promotes the acquirer's ambidexterity, thus leading to employee psychological safety in the form of job security, acquisition acceptance, and job satisfaction (Chun and Davies, 2010; Rao-Nicholson et al., 2016b). At the firm level, research has only focused on organizational performance outcomes.

    • “I will not let you die”: The effect of anthropomorphism on entrepreneurs' resilience during economic downturn

      2022, Journal of Business Venturing Insights
      Citation Excerpt :

      Literature suggests that stakeholder's evaluation about the business shapes their perceived reputation about the business (Walsh et al., 2009; Hormiga and García-Almeida, 2016). For an instance, when a business is evaluated as empathetic, warm, truthful, and conscientious, stakeholder's perception of its reputation increases (Chun and Davies 2010). Reputation is conceptually defined as the belief stakeholders (e.g., company's owners, managers, employees, and customers) hold about a business based upon their experience with and evaluation of it (Sims, 2009; Fombrun and Foss, 2004).

    • Employee satisfaction and the cost of corporate borrowing

      2021, Finance Research Letters
      Citation Excerpt :

      Prior studies document that corporate reputation induced by CSR investments benefits a firm's business partners and supply chains, as the social legitimacy derived from the CSR activities may encourage the trust-giving from stakeholders (Freeman, 1999; Stuart et al., 1999). Chun and Davies (2010) document that employee satisfaction is strongly correlated with corporate reputation. However, it is less clear about how creditors respond to a firm's reputation that is attributable to employee treatment.

    • Can the green merger and acquisition strategy improve the environmental protection investment of listed company?

      2021, Environmental Impact Assessment Review
      Citation Excerpt :

      On the one hand, based on the effective contract hypothesis, the information advantaged parties will use their own advantages to damage the interests of the information disadvantaged parties, resulting in moral hazard and adverse selection, etc., while reputation is gradually formed by the accumulated efforts, in fact, it constitutes a guarantee for enterprises to themselves. After GMA, in order to maintain green reputation, enterprises will make use of the environmental protection technology and experience of the merged green enterprises to strengthen the effect of corporate environmental governance, so as to increase the EPI (Chun and Davies, 2010). On the other hand, based on the signal transmission theory, green reputation is more attractive to corporate investors and consumers (Schiereck et al., 2009).

    View all citing articles on Scopus

    Rosa Chun is Professor of Business Ethics and Corporate Social Responsibility at Manchester Business School, England. Her research focuses on corporate reputation and virtue ethics. Her work has appeared in the Harvard Business Review, Journal of the Academy of Marketing Science (JAMS), Journal of Business Ethics, International Journal of Management Reviews, and Corporate Reputation Review.

    Gary Davies is professor of Corporate Reputation at Manchester Business School in England where he teaches Strategy, Reputation Management and Crisis management. His current research focuses on reputation and his work has been published in the Journal of the Academy of Marketing Science, The Journal of International Business Studies, Harvard Business Review, Industrial Marketing Management, the Journal of Business Research, the Journal of Advertising Research, Long Range Planning, the European Journal of Marketing and in 15 books and monographs.

    1

    Tel.: +44 161 275 6457; fax: +44 161 275 6464.

    View full text