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president’s answers, I was able to create a 29×29 top managers’ friendship matrix for 2001 and a 35×35 matrix for 2007. These friendship matrices are cognitive maps which represent an individual’s perceptions of who links to whom in a particular social system (Kilduff & Tsai, 2003). However, there is a gap between how people perceive this network and the actual pattern of connections existing in this network.
In another word, people have biases in social perceptions (Kilduff & Krackhardt, 1994; Kumbasar, Romney, & Batchelder, 1994). For the sake of reducing biases, I chose another two presidents (one from a central firm and the other from a peripheral firm) to fill out this questionnaire.
Archival data.
To investigate the process of resolving identity conflict and understand the thought behind it, I collected a wide scope of information. First, the main source was different kinds of documents (i.e., meeting memos, statistics) collected from all functional areas within the Ba Co. These archival data helped me to illustrate the evolution of organizational identities and understand the response from outsiders, including the headquarters of BETA Group, other group-affiliated firms, and external stakeholders such as customers. The second source was the Excellent Business Database System (EBDS), an electronic database, providing full-text of more than 200 periodicals and newspapers published in Taiwan. The third one was the directory of Business Groups in Taiwan which is compiled by the China Credit Information Service (CCIS), an affiliate of Standard & Poor of the United States and the most prestigious credit checking agency in Taiwan. Since 1972, the China Credit Information Service (CCIS) has compiled more than 6,000 individual companies from nearly 300 groups for Business Groups in Taiwan. This directory has become the most complete source for business groups in Taiwan and has been widely used in
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previous literatures (e.g., Luo & Chung, 2005; Khanna & Rivkin, 2001). For each group, this directory contains not only the history of groups’ growth but also various financial analyses of group-affiliated firms. Fourth, I referred to Tsai Hsun (Wealth
Magazine) database which has periodical articles about large business groups in
Taiwan. Fifth, I surveyed biographies, corporate annual reports, and books that were related to this topic.‧
The initial stage of post-acquisition: Identity conflicts and the paucity of contacts
Originally, Ba Co. was a member of Alpha Group. Until 2000, Ba Co. did not increase the volume of production and its liabilities went up to $5 billion (U.S. dollars) (Hsu, 2000). The leader of Alpha Group could not stand its continued losses, so he decided to sell it to the BETA Group. When the boss of BETA Group announced the acquisition of Ba Co., he faced a wave of opposition which mainly came from BETA Co.’s labor union (Liu, 2002; Wong, 2002). The blast showed the depth of worry among group members over negative effects of this acquisition, including not merely a financial burden on them but also a wide gap between the buyer and the target. For example, Ba Co. had a bad reputation in the market because it was used to breach a contract to maximize its profits. One executive noted:When the market price went up, our boss [at that time] would request customers to raise the price. If they (customers) insisted on buying our products with the same price noted on the contract, he would refuse to sell goods. As for him (the boss of Ba Co.), our company did not violate the [transaction]
contract because he did inform customers to raise the price before he refused to sell goods.
Conversely, BETA Group stood as a model group of trustworthy (Wu, 1997). A vice president of one group-affiliated firm stated:
The year 2000 was a period of economic recession. I [remembered that I] signed a contract to buy some raw materials from a supplier in Russia. After a week, the exchange rate changed; the change went beyond my imagination. Although I knew the deal would lead to a huge amount of losses, I still executed the contract. At that time, I was in China. I roamed around China for several months and did not have the courage to go home because I felt very sorry for my fellows.
The significant differences between the attitudes toward trustworthy of both sides just revealed the tip of the iceberg. Table 3.3 summarized varied dimensions of identity and examples to show how Ba Co.’s actions were far away from or even contradicted BETA Group’s actions. Reminiscing about his reaction to the news of acquisition,
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[For instance,] We could borrow funds from banks with extremely low interest rates. Sometimes bankers actively [knocked our doors and] asked us whether we could borrow some money from them.
They (those bankers) were not fools; they were willing to do so because of the name of our company.
The name embroidered on here (our uniforms) and printed on [our] business cards represented trustworthiness. They (the bankers) never have a doubt about whether our company would [follow the contract to] give the money back. Me either. [On the contrary,] Ba Co. was a firm to which bankers refused to lend the money. I didn’t understand why our boss would like to acquire such a compa ny.
The example is illustrative of a serious problem that group members were confused and refused to accept a newcomer when they were aware that the newcomer did not conform to or contradict the salient part of their identities. Those conflicting beliefs or actions gradually and imperceptibly drew a clear line between “us” and “them”.
In the primary stage of post-acquisition, Ba Co. had few links with members of BETA Group. One executive recalled: “We had no connections with group members.
I knew our boss and the leader of the group were good friends. Except friendships between them, we had very few, nearly no, links with the group headquarters or other members [in BETA Group].” The paucity of contacts resulted in Ba Co. being viewed as anything but not a member of “us”, because lack of a contact resulted in lack of a feeling of membership. Besides, group members made sense of “what does Ba Co. stand for” by observing the portfolio of its partners. One president of a group-affiliated firm told us:
Its boss (the boss of Ba Co.) came from Alpha Group. Although the group headquarters (BETA Co.) assigned the boss and had a stake in it (Ba Co.), ownership could not represent membership; they (Ba Co.) still belonged to Alpha Group. … because it was still difficult for us to obtain some orders from Ba Co. They (Ba Co.) still traded with those people (original suppliers) and they did not back me up as a family.