DIVERSIFICATION AND TOP MANAGEMENT TEAM COMPLEMENTARITY - IS PERFORMANCE IMPROVED BY MERGING SIMILAR OR DISSIMILAR TEAMS

This study examines the impact of complementary top management reams ( defined as differences in functional backgrounds between the acquiring and acquired firm managers) on post-acquisition performance. Based on a sample of 147 acquisitions completed during 1986-88, we find that c omplementary backgrounds have a positive impact on postacquisition per formance in both related and unrelated acquisitions. Another major fin ding is that complementarity is negatively related to top management t eam turnover among acquired managers, suggesting that differences in f unctional backgrounds are more easily integrated into the new organiza tion. Finally, top management team turnover among acquired managers is negatively related to postacquisition performance. These findings hig hlight the importance of examining complementarity in terms of differe nces, and reinforce the notion that differences have the potential to create unique value for the organization. (C) 1997 by John Wiley & Son s, Ltd.