New Opportunities or Just a Pawn in the Game : Effects of Psychological Ownership on Employee Retention in M&A

Abstract: Mergers and acquisitions (M&A) is a widely used strategy, however, the failure rate is high, and especially in the acquired firm, acquisitions often result in higher turnover rates. There is a lack of understanding of psychological processes causing employee turnover. Therefore, the purpose of this study is to gain a deeper understanding of employees’ psychological processes that determine employee retention following an acquisition, which will be achieved by studying the relationship between perceived psychological ownership and employee retention from the perspective of employees at the acquired firm. Nine interviews were conducted with employees at two acquired firms, one finance firm and one IT consultancy firm. Using a conceptual model, employees’ psychological processes are analyzed. The data illustrates that psychological ownership, commitment, and involvement decreased due to loss of control and changed feelings towards the organizations. In conclusion, it was found that there was a loss in psychological ownership for most respondents, which further decreased their commitment and involvement, leading to their resignation. The respondents who chose to stay indicated higher psychological ownership and higher commitment. The findings support the conceptual model and contribute to more understanding of employees' psychological processes in acquisitions.