Managing the R&D integration process after an acquisition : Ford Motor Company's acquisition of Volvo Cars

Abstract: In January 1999 Ford Motor Company acquired Volvo Cars. This thesis analyses some of the integration processes that followed the acquisition. It focuses, particularly, on the integration of the research and development organizations (R&D). The overall aim is to contribute to a better understanding of areas that require special attention when managing the R&D integration process after an acquisition. The analysis is based on internal corporate financial reports, project documentation, observations, and more than 150 interviews, conducted between 1999 and 2003. Previous research on R&D operations has mostly used single-firm perspectives. The results of this thesis indicate that the single-firm perspective is important, but in an acquisition situation it has to be complemented with an inter-firm R&D integration perspective. The results depict this, when organization of R&D is changed to optimize and facilitate the inter-firm co-operation. These changes do not always contribute to strengthen the individual firm’s long-term competitive advantage. Some organizational structures, technologies, managerial principles, etc. should be brought into line in the two firms, while other factors should not be adopted in order to keep the firms’ long-term unique value-creation capabilities intact. There are thus several parallel interdependencies that have to be taken care of simultaneously. For example, organizational issues will create demands and constraints on the products. However, there is also an equally defendable logic of starting with the product and what it means to organizational structures of the different firms. For example, the use of different visible components, such as a steering wheel and door handle, will place demands on organizations, preferable undertaken by separate design resources and departments. This means that a high organizational autonomy may result in a low level of commonality, while simultaneously build firm uniqueness. On the other hand, a low organizational autonomy may well result in a high level of commonality, but at the same time damaging the firms’ long-term unique value-creation capabilities. The results stress the importance of relating decisions about issues raised during the integration process to the acquiring firm’s long-term acquisition objectives. The challenge for management in both firms is therefore to manage the balance between short-term goals and long-term acquisition objectives. The thesis is organized into an extended summary and five appended papers.