Contents lists available at ScienceDirect Journal of World Business journal homepage: www.elsevier.com/locate/jwb Fostering integration through HRM practices: An empirical examination of absorptive capacity and knowledge transfer in cross-border M&As Abby Jingzi Zhou a , Carl Fey b,c , H. Emre Yildiz d, ⁎ a Nottingham University Business School China, 199 Taikang East Road, Ningbo, 315100, China b Aalto University, P.O. Box 21210, FI-00076 Aalto, Finland c Chinese University of Hong Kong, Hong Kong d Uppsala University, Box 513, 75120 Uppsala, Sweden ARTICLE INFO Keywords: HRM practices Absorptive capacity Cross-border knowledge transfer Mergers and acquisitions Emerging economies ABSTRACT Transfer of knowledge-based resources from acquirers to the acquired units has been ubiquitously emphasized as an important driver of post-acquisition integration. Equally emphasized is the importance of recipient unit’s absorptive capacity for the success of knowledge transfer and the facilitating role of HRM practices in developing absorptive capacity. In this paper, we integrate different streams of research on post-acquisition integration, knowledge transfer, absorptive capacity and HRM practices. Different from most past research, we pay attention theoretically and empirically to the multi-dimensional nature of both knowledge transfer and absorptive capa- city. We test our hypotheses on a sample of acquired Chinese subsidiaries of 181 multinational corporations from seven countries. We find that successful inflow and implementation of knowledge require the acquired unit to have distinct types of capabilities each of which can be developed by a specific HRM practice. These results contribute literature by recognizing absorptive capacity as a manageable capability and identifying how dif- ferent components of this capability could be developed by specific HRM practices. Furthermore, our results shed light on human side of M&As by examining how companies can foster post-acquisition integration by fine- tuning the absorptive capacity of acquired units. 1. Introduction Mergers and acquisitions (M&As) have been one of the dominant modes of growth during the past few decades. However, cross-border M &As are risky and the majority of these deals fail to meet expectations (e.g. Gomes, Angwin, Weber, & Tarba, 2013; King, Dalton, Daily, & Covin, 2004; Moeller & Schlingemann, 2005; Weber, Tarba, & Oberg, 2013). A meta-analysis of the M&A literature revealed that none of the strategic and financial variables studied were significant in explaining variance in post-acquisition performance, thus suggested it might be fruitful to look to other types of variables to explain what differentiates successful and unsuccessful M&As (King et al., 2004). Lack of effective post-merger integration has been suggested as a key reason for poor performance of M&As, which could be resolved by successful transfer between acquirers and acquired units (Bresman, Birkinshaw, & Nobel, 1999). In their seminal work, Haspeslagh and Jemison (1991, p. 28) emphasize this point by noting that “acquisitions create value when the competitive advantage of one firm is improved through the transfer of strategic capabilities”. This argument is also echoed by Zollo and Meier (2008) who identify transfer of capabilities between acquiring and target firm as one of the main pillars of integration process, which in turn is argued to have direct and indirect effects on other aspects of post-acquisition performance. Other studies (e.g. Ahammad, Tarba, Liu, & Glaister, 2016; Björkman, Stahl, & Vaara, 2007; Junni, Sarala, & Vaara, 2012; Ranft, 2006; Sarala, Junni, Cooper, & Tarba, 2016) simi- larly single out knowledge transfer as an important goal and pillar of post-acquisition success in M&As (for an interesting counterpoint, also see Reus, Lamont, & Ellis, 2016). However, due to its tacit and socially- complex nature, transfer of knowledge across organizational bound- aries is not an easy task. In this regard, absorptive capacity plays a crucial role since it is widely identified as the main precursor of knowledge transfer (Cohen & Levinthal, 1990; Kostopoulos, Papalexandris, Papachroni, & Ioannou, 2011; Schleimer & Pedersen, 2013; Zahra & George, 2002). Compared to organic growth trajectories of multinational corporations (MNCs), development of absorptive capacity is especially important in M&As to facilitate successful transfer of knowledge-based assets to acquired units (Junni et al., 2012) and, thereby, harmonize their processes and prac- tices with those of acquirers (Lakshman, 2011). The role of absorptive capacity is thus paramount in M&As where knowledge transfer involves https://doi.org/10.1016/j.jwb.2018.05.005 Received 27 January 2017; Received in revised form 14 May 2018; Accepted 31 May 2018 ⁎ Corresponding author. E-mail addresses: Abby.Zhou@nottingham.edu.cn (A.J. Zhou), Carl.Fey@aalto.fi (C. Fey), Emre.Yildiz@fek.uu.se (H.E. Yildiz). Journal of World Business xxx (xxxx) xxx–xxx 1090-9516/ © 2018 Elsevier Inc. All rights reserved. Please cite this article as: Zhou, A.J., Journal of World Business (2018), https://doi.org/10.1016/j.jwb.2018.05.005