Dynamic Capabilities in Acquisitions: When Acquirer and Target Employees Face Contradictory and Complementary Human Resource Signals

Abstract Dynamic capabilities are crucial for firm survival and success, but to survive and succeed firms must manage multiple higher‐ and lower‐order dynamic capabilities that can be complementary, but also conflicting. Utilizing human resource (HR) signalling theory, we provide new theoretical insights into the conditions, mechanisms and reasons why merger and acquisition (M&A) capabilities (a lower‐order dynamic capability) and organizational agility (a higher‐order dynamic capability) are sometimes complementary and at other times contradictory during acquisition integration. Our theory disentangles the interaction between these capabilities and explains how they act as a double‐edged sword. We test our theory development using survey data from 91 acquisitions taking place in Germany, Austria, Switzerland and Lichtenstein. Our results show that conflicting HR signals from M&A capabilities and organizational agility cause acquirer–target conflict, complicating post‐merger integration and hindering knowledge transfer, while complementary signals enhance knowledge transfer. The findings provide important implications for the M&A, HR management and dynamic capabilities literature, as well as valuable insights for M&A practitioners.