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Peter M. Madsen Brigham Young University

The Persistence of Organizational Knowledge across Merger and Acquisition Events: An Examination of the U.S . Airline Industry. Peter M. Madsen Brigham Young University. Motivating Question.

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Peter M. Madsen Brigham Young University

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  1. The Persistence of Organizational Knowledge across Merger and Acquisition Events: An Examination of the U.S. Airline Industry Peter M. Madsen Brigham Young University INFORMS, San Diego, CA, 10-13-2009

  2. Motivating Question • What effect do mergers and acquisitions have on the stock of experientially-derived knowledge possessed by involved organizations? INFORMS, San Diego, CA, 10-13-2009 Peter M. Madsen

  3. M&A and Organizational Knowledge • Prior work: • Experientially-derived knowledge enhances organizational effectiveness (learning curve) • M&A events disrupt organizational functioning • Barkema & Schijven 2008; Walsh 1988; Weber & Camerer 2003 • Effect of M&A on knowledge? • Knowledge acquisition motivation (Capron & Mitchell 1998; Higgins & Rodriguez 2006; Hoskisson & Busenitz 2002; ) • Knowledge complementarity enhances post-event performance (Hitt et al. 2001; King et al. 2008) INFORMS, San Diego, CA, 10-13-2009 Peter M. Madsen

  4. Hypotheses • Direct performance effect • H1: Ongoing M&A events reduce organizational performance • H2: Recently completed M&A events reduce organizational performance • Knowledge effect • H3: Ongoing M&A events enhance the value of previously developed organizational knowledge (positively moderate the relationship between knowledge stocks and performance) • H4: Recently completed M&A events reduce the value of previously developed organizational knowledge (negatively moderate the relationship between knowledge stocks and performance) INFORMS, San Diego, CA, 10-13-2009 Peter M. Madsen

  5. Sample • All US airlines accounting for at least 1% of domestic passenger air travel 1990-2009 • AirTran Airways Corporation • Alaska Airlines Inc. • Aloha Airlines • America West Airlines Inc. • American Airlines Inc. • American Eagle Airlines Inc. • ATA Airlines d/b/a ATA • Atlantic Southeast Airlines • Comair Inc. • Continental Air Lines Inc. • Delta Air Lines Inc. • Expressjet Airlines Inc. • Frontier Airlines Inc. • Hawaiian Airlines Inc. • Independence Air • JetBlue Airways • Mesa Airlines Inc. • Northwest Airlines Inc. • Pinnacle Airlines Inc. • Skywest Airlines Inc. • Southwest Airlines Co. • Trans World Airways LLC • United Air Lines Inc. • US Airways Inc. INFORMS, San Diego, CA, 10-13-2009 Peter M. Madsen

  6. Sample • 3 M&A Events (operational only) • American acquisition of Trans World • America West, US Airways Merger • Delta, Northwest Merger INFORMS, San Diego, CA, 10-13-2009 Peter M. Madsen

  7. Method • Unit of analysis: airline-flight-segment-month • OLS regression • Traditional learning curve model: Y = a*Xb • Dependent variables • Fraction of flights: delayed (15, 30 & 60 minutes; diverted; cancelled) • Independent variables • M&A ongoing (operational integration not completed) • M&A recently completed (within 3 yr) • Flight segment experience (total # of flights between a given city pair over previous 5 years) • Aircraft experience (total # of flights over previous 5 years) • Controls INFORMS, San Diego, CA, 10-13-2009 Peter M. Madsen

  8. Results: Controls

  9. Results: IVs

  10. Conclusion • Ongoing M&As disrupt organizational functioning, but heighten attention to previously-obtained knowledge • The value of previously-obtained knowledge decreases following the completion of M&A events INFORMS, San Diego, CA, 10-13-2009 Peter M. Madsen

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