Overcoming Relational Inertia

Abstract

This paper examines how organizational members overcome relational inertia and contribute to integration and value creation following an acquisition, through an analysis of a large law firm’s acquisition of two smaller firms. When merging law firm partners share clients with one another, both within and across the boundaries of the formerly separate firms, they create new relationships that connect the organizational units together. We examine both the antecedents and consequences of post-acquisition integration through client sharing. Drawing on network theory, we consider how the configuration of prior referral relationships influences new sharing of clients undertaken by individual partners. We also use the prior referral-network structure to predict which partners will cut their former intraunit client-sharing ties. To ascertain how client sharing creates value for the combined organization, we analyze the effects of client sharing on revenue generation and human capital development. Our findings uncover a paradox in integration behavior: the same referral-network structures that contribute to integration by increasing interunit sharing also tend to detract from integration because they are associated with cutting existing intraunit ties. We also find that interunit client sharing is positively associated with revenue generation but negatively associated with human capital development. Overall, this research advances a relational perspective on post-acquisition integration and sheds new light on how networks are formed and become reconfigured inside organizations.