Legitimacy defense during post-merger integration: Between coupling and compartmentalization

Abstract

During post-merger integration, the realization of the benefits of potential synergies depends on managing the legitimacy of the merger. However, we still know little about how threats that change stakeholders' assessments of a merger's legitimacy are managed. This study is based on the merger case of Air New Zealand's trans-national acquisition of Ansett Australia where a delegitimizing event occurred at Ansett relatively early after the integration had started. The study builds a framework of an evolving legitimation process depicting the oscillation between legitimation responses that maintain the coupling between the two organizations and a compartmentalization response used to manage diverse stakeholders' legitimacy demands and illegitimacy spillover concerns. We explain how these legitimation responses can create an unproductive oscillation where stakeholder assessments of illegitimacy build up and ultimately become unresolvable. Our processual framework provides novel insights regarding when attempts to defend legitimacy can prove selfdefeating, demonstrating how previous responses emphasizing integration or separation can affect the success of subsequent swings back to coupling or compartmentalization.

Public–private merger integration as a dynamic process of legitimation

“…This type of organization can make decisions lasting longer or being more complex (Aula & Tienari, 2011). Also, as merger integration is a process, legitimation can involve several steps (Sinha et al, 2015), shifting between public and private logics. In this, elements can define dynamics that dominate the work of legitimation.…”

“…In particular, Harmon et al (2015) focused on the rhetoric in the legitimation processes that undergird institutional maintenance or change during a merger. Sinha et al (2015) focused on the dynamics of legitimation and de‐legitimation during integration in the context of a public–private merger between Air New Zealand and Ansett‐Australia. The authors elucidated how shifting legitimation responses followed a de‐legitimizing event.…”

“…Hence, the legitimation of the newly formed organization will guide the strategic choices of the managers involved in these organizational changes. During post‐merger integration, potential synergies depend on managing the legitimacy of the merger (Sinha, Daellenbach, & Bednarek, 2015), and scholars have therefore called for a deeper understanding of the legitimation dynamics in this crucial period (Sinha et al, 2015; Vaara & Monin, 2010). Legitimation is an ambiguous concept, and when considered from the legitimacy‐as‐process perspective, legitimation dynamics need more in‐depth investigation (Suddaby, Bitektine, & Haack, 2017).…”

Toward a Structural Model of Organizational-Level Institutional Pluralism and Logic Interconnectedness

“…With regard to a constellation's micro-foundations, this is due to the fact that no 'brokers' exist, since each role category is exclusively assigned to one logic only. Essentially, such a constellation can be found in completely segregated logics (Thornton et al, 2012), in the case of perfectly compartmentalized communication arenas (on compartmentalization, see, e.g., Kraatz & Block, 2008;Pache & Santos, 2013;Pratt & Foreman, 2000;Sinha, Daellenbach, & Bednarek, 2015), or in what Greenwood et al (2011) called 'structurally differentiated hybrids' ('structural compartmentalization' in Raynard [2016]). Fragmentation does not require a hierarchization of logics within the organization so that all logics can be equally relevant for the organization's functioning (Besharov & Smith, 2014).…”

Laying a smoke screen: Ambiguity and neutralization as strategic responses to intra-institutional complexity

“…In settings where organizations are expected to adhere to multiple sets of institutional expectations, compliance is relatively unproblematic when expectations are seen as compatible, and/or an organization is able to split its audiences and attend to them in turns (e.g., Kraatz and Block, 2008;Pratt and Foreman, 2000;Sinha et al, 2015). However, if such 'compartmentalization' of audiences into separate communication arenas is no option, an organization faces a considerable challenge.…”