Are complementary management teams similar or different? : the impact of managers' functional backgrounds on post-acquisition corporate performance

The purpose of this research was to understand the meaning of complementarity and to examine the impact of complementary functional backgrounds on post- acquisition corporate performance. Complementarity was defined in terms of differences in functional backgrounds between top management teams. To answer the research question, a theoretical model was developed and tested.

Analyses were conducted using both accounting and market measures of performance as the dependent variable. The hypotheses were tested using multiple regression and moderated regression analysis. Results revealed strong support for the benefits of complementarity when accounting measures of performance were used. That is, differences in overall backgrounds between top managements of acquiring and acquired firms had a positive impact on post-acquisition performance. Also, the impact of these differences were greater in related acquisitions. For market measures, none of the major hypotheses were supported.

The findings reveal the key difference between accounting and market measures of performance. Whereas, accounting measures reflect a firm's past performance, market-based measures reflect the market's perception of the future. Therefore, unlike accounting measures, the market is not sensitive to changes in the top management team composition.