Knowledge Transfers following Acquisition: The Impact of Prior Trust-based Relations

Prior relations between the acquiring firm and the target company pave the way for knowledge transfers subsequent to the acquisitions. One major reason is that through the market-based relations the two actors build up mutual trust and simultaneously they learn how to communicate. An empirical study of 54 Danish acquisitions taking place abroad from 1994 to 1998 demonstrated that when there was a high level of trust between the acquiring firm and the target firm before the take-over, then medium and strong tie-binding knowledge transfer mechanisms, such as project groups and job rotation, were used more intensively. Further, the degree of stickiness was significantly lower in the case of prior trust-based relations.