Exploration driven M&As: Just a matter of leadership?

written by Associate Professor Dr. Andreas Claudius Strobl 27. May 2019

Mergers and acquisitions are a prominent and viable strategy when it comes to developing a company through exploring promising future avenues. For instance, Don Harrison (President for Global Partnerships and Corporate Development at Google) puts it this way: “When we see products or developments or large companies that are solving a problem in a new way, that drives M&A interest.” Such exploratory avenues can include among others access to new technologies or products, promising business models or entering markets new to the firm. However, these exploratory M&A endeavors have in common that acquirers usually have little knowledge about how these organizations really work and what parts of their internal ecosystems makes them so successful. Still acquirers need to provide an answer to the pressing question how post-merger integration should take place. While there is agreement that all value creation takes place after deal closing (Haspeslagh & Jemison, 1991) evidence also points to the fact that this is a decisive stage explaining why so many deals fail (Christensen, Alton, Rising, & Waldeck, 2011). An important yet commonly overlooked success factor of post-merger integration is leadership (Gomes, Angwin, Weber, & Yedidia Tarba, 2013). When it comes to exploration driven M&A transactions, I argue that leadership becomes even more important because it might be the only way to solve the coordination-autonomy dilemma associated to these kind of transactions (Puranam, Singh, & Zollo, 2006) because it enables coordination without enforcing strong means of structural integration. Consequently, target autonomy can be preserved. Especially, socialized charismatic (Waldman & Javidan, 2009) and entrepreneurial leadership behaviors (Strobl, Bauer, & Matzler, 2018) seem to be viable leadership means to solve the coordination-autonomy dilemma. I will outline the reasons in the following and use examples from Googles M&A approach to emphasize my points.

Socialized charismatic and entrepreneurial leadership in exploration driven M&A

The coordination-autonomy dilemma of exploration driven M&A stems from the fact that while acquirers need to coordinate activities between the two merging entities in order capture value from what they have bought, targets need autonomy in order to preserve their innovative capacity (Puranam et al., 2006). Usually, coordination is achieved through structural integration measures which are imposed on the target by the acquirer. For instance, financial and strategic planning systems or human resource management practices are rolled out in the target organization thereby often disrupting the unique innovation ecosystem and company culture. Consequentially, the source of value that caught the acquirer’s attention in the first place and drove the rationale behind the deal is destroyed. An example would be when key talent leaves the merged organization because of a newly imposed company culture. For instance, a key goal of Google’s post-merger integration strategy is founder retention through granting autonomy and entrepreneurial freedom while easing burdens like managing finances or tax administration. “We hold ourselves accountable to make sure that the founders are able to be successful within Google,” Don Harrison reports in the Time magazine .
I argue that leadership behaviors are key means to achieve coordination while reducing the need for structural integration measures to minimum. In general, leadership depicts directing and influencing followers towards achieving predefined goals (Northouse, 2015). In terms of exploration driven M&A, leadership needs to perform two distinct functions: (1) coordinating acquirer and target organizations by establishing accepted goals and (2) leveraging innovation related value sources of the merging entities. This is where socialized charismatic leadership and entrepreneurial leadership behaviors come into play.

Don Harrison emphasizes that a key to M&A success “… is making sure the key leaders at the company share a vision with the founder, making sure the strategy drives the M&A.” A way to achieving a shared vision is socialized charismatic leadership behavior. Socialized charismatic leadership behavior enables an acquirer to achieve coordination without assimilating a target completely. It does so through developing a shared vision in a collaborative way involving acquirer and target organizations based on socially-responsible values putting emphasis on the attractiveness of ideas rather than leaders or organizations promoting ideas (Waldman & Javidan, 2009). Thus, socialized charismatic leadership behavior is heavily based on collaborative efforts to achieve benefits for the collective as a whole. A jointly developed vision between acquirer and target organization enhances coordination without introducing strict measures of structural integration. Consequently, target autonomy can be preserved to a greater extent. Furthermore, structural measures which have to be introduced will receive viewer resistance because the overall goal of these measures is accepted (see Waldman & Javidan, 2009).

Entrepreneurial leadership behavior enables acquirers to leverage innovation potentials between two merging organizations. “Entrepreneurial leaders can transform their subordinates in opportunity seekers during post-merger integration and seek to realize opportunities for exploration and exploitation when merging, re-organizing, and restructuring formerly separated entities” (Strobl et al., 2018, p. 3). Thus, leaders should act as entrepreneurial role models during post-merger integration. Spotting innovation opportunities and protecting them, communicating opportunity benefits to all members from the acquirer and the target as well as providing necessary resources for opportunity exploitation. Overall, acquirers should establish an environment conducive to risk taking and challenging conventional wisdom so that truly innovative capacities between the merging organizations can be leveraged (see Ireland, Hitt, & Sirmon, 2003; Renko, El Tarabishy, Carsrud, & Brännback, 2015; Strobl et al., 2018). An example how entrepreneurial leadership can create value is the case of the acquisition of Keyhole through Google in 2004. Keyhole, a geospatial software firm, provided the key technology behind the successful Google services Google Maps and Google Earth. Keyhole’s CEO John Hanke was a driving force of Googles success in this respect paving the way for many innovations culminating in the 2015 spin-off of Niantic, the company behind the augmented reality mobile game Pokémon Go. The game was the results of Hanke’s opportunity at Google to engage in “exploring the possibility of combining maps with gaming”.


Exploration driven M&A often faces a trade-off between structural integration and autonomy. While structural integration eases coordination it often disrupts the unique innovation related value sources at the target level. Building a shared vision between acquirer and target through socialized charismatic leadership practices while at the same time leveraging joint innovation activities through entrepreneurial leadership practices are a promising avenue for overcoming such trades offs. Consequently, coordination and synergy realization can be realized without employing strict structural integration measures. Of course such leadership practices are no perfect substitute of structural integration measures. However, they enable companies to pursue a more gradual way of integration preserving target autonomy to a certain extent while still leveraging innovation potentials between the merging organizations. Furthermore, the period for developing and implementing the right structural integration measure extends. Especially, cultural disruption at the target level can be reduced in this way which is often associated to failure in exploration driven M&A (Puranam, Singh, & Chaudhuri, 2009; Puranam et al., 2006).


Christensen, C. M., Alton, R., Rising, C., & Waldeck, A. (2011). The New M&A Playbook. Harvard Business Review, 89(3), 48-57.
Gomes, E., Angwin, D. N., Weber, Y., & Yedidia Tarba, S. (2013). Critical Success Factors through the Mergers and Acquisitions Process: Revealing Pre- and Post-M&A Connections for Improved Performance. Thunderbird International Business Review, 55(1), 13-35. doi:10.1002/tie.21521
Haspeslagh, P. C., & Jemison, D. B. (1991). Managing Acquisitions: Creating Value Through Corporate Renewal. New York: The Free Press.
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Northouse, P. G. (2015). Leadership: Theory and Practice (7 ed.). Thousand Oaks, CA: SAGE Publications Inc.
Puranam, P., Singh, H., & Chaudhuri, S. (2009). Integrating Acquired Capabilities: When Structural Integration Is (Un)necessary. Organization Science, 20(2), 313-328. doi:10.1287/orsc.1090.0422
Puranam, P., Singh, H., & Zollo, M. (2006). Organizing for Innovation: Managing the Coordination-Autonomy Dilemma in Technology Acquisitions. Academy of Management Journal, 49(2), 263-280. doi:10.5465/amj.2006.20786062
Renko, M., El Tarabishy, A., Carsrud, A. L., & Brännback, M. (2015). Understanding and Measuring Entrepreneurial Leadership Style. Journal of Small Business Management, 53(1), 54-74. doi:10.1111/jsbm.12086
Strobl, A., Bauer, F., & Matzler, K. (2018). The impact of industry-wide and target market environmental hostility on entrepreneurial leadership in mergers and acquisitions. Journal of World Business, 1-18. doi:
Waldman, D. A., & Javidan, M. (2009). Alternative forms of charismatic leadership in the integration of mergers and acquisitions. The Leadership Quarterly, 20(2), 130-142. doi:

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