A Knowledge-Based View of Mergers and Acquisitions Revisited: Absorptive Capacity and Combinative Capability

This chapter revisits central knowledge-based mechanisms that explain variance in value creation through mergers and acquisitions (M&As). It places the organizational capabilities of absorptive capacity and combinative capability in the context of M&As. Absorptive capacity – i.e., the combining firms’ ability to explore new knowledge – relies on the extent of prior related experiences of acquirers and their acquired firms, and available complementary knowledge among the two. Combinative capability – i.e., the combining firms’ ability to combine and recombine available existing knowledge – depends on the opportunity, motivation, and ability to share knowledge. The chapter concludes with several contextual factors that intensify the roles of knowledge, and reveal important contradictory roles in the development and value of absorptive capacity and combinative capability.