Acquisitions and Organizational Purpose

52 Pages Posted: 26 Mar 2021 Last revised: 30 Jan 2022

See all articles by Claudine Madras Gartenberg

Claudine Madras Gartenberg

Wharton School, University of Penn

Shun Yiu

The Wharton School, University of Pennsylvania

Date Written: October 21, 2021


This study explores the relationship between boundary decisions and the sense of purpose within firms. Using data from approximately 1.6 million employees and 831 acquisitions, we find that purpose is substantially weaker in companies in the three years following a transaction. This relationship is particularly pronounced when information asymmetry is high, specifically when disclosed rationales use non-specific language or represent unique industry combinations. Moreover, this weakened purpose has implications for the performance of the transaction. Unique transactions are met with outsized market returns upon announcement, consistent with market perception of the strategic value of uniqueness. However, they do not outperform over the long run. Only unique transactions that simultaneously sustain strong purpose ultimately outperform. Altogether, our evidence suggests a possible tension between strategic and motivational implications of firm boundaries: while firms benefit strategically from uniqueness, it may also erode the sense of purpose within firms, with implications for downstream performance.

Keywords: Mergers and Acquisitions, Corporate Purpose, Corporate Strategy

Suggested Citation

Gartenberg, Claudine Madras and Yiu, Shun, Acquisitions and Organizational Purpose (October 21, 2021). Available at SSRN: or

Claudine Madras Gartenberg (Contact Author)

Wharton School, University of Penn ( email )

2035 Steinberg-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States
2158987755 (Phone)

Shun Yiu

The Wharton School, University of Pennsylvania ( email )

3620 Locust Walk
Steinberg-Dietrich Hall
Philadelphia, PA 19104-6370
United States

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