Acquisition Strategy and Dominant Logic in an Engineering Firm

This paper presents a dynamic model of acquisition strategy and applies it to the case history of a large engineering firm. The paper uses the notion of ‘dominant logic’ first put forward by Prahalad and Bettis (1986) to explain how the firm's acquisition strategy and management approach evolved. It is suggested that the core activities and history of the firm led to the development of a management approach that emphasized individual autonomy and development, ad hoc structural arrangements, a short‐term focus, and flexibility and opportunism. These characteristics persisted over time and tended to inhibit both commitment to intended strategies and extension of core competencies. At the same time, this logic encouraged opportunistic acquisitions which snowballed into a major new strategic thrust. It is concluded: (a) the firm's ‘dominant logic’ rooted in core activities and in the history of a firm can be used to explain its acquisition management behaviour; (b) the more malleable elements of a dominant logic can be somewhat extended under the thrust of key managers, but permanent change will not occur as long as these shifts conflict with more immutable elements; (c) in a process of growth by acquisition, a firm will tend to preserve its unique dominant logic until the inconsistencies it creates are revealed in a crisis or series of crises. One mode of adjustment may then be to operate under more than one dominant logic to accommodate the firm's heterogeneity.