Calm in the Storm: Job Security and Post-Merger Performance in Family versus Nonfamily Firms

Building on social identity theory, we theorize and find that in a merger, paired family firms are better able to retain employees and improve post-merger performance compared to other merger pairs. We contribute to social identity theory by theorizing better post-merger performance as mediated by job security for family firm combinations. We also contribute to the job security and merger and acquisition literature by examining how job security and post-merger performance vary based on the paired social identity of owners. In addition to identity similarity, the type of identity also matters in mergers. We argue that family owner social identity similarity fosters greater integration between merging parties while allowing family owner pairs to retain some autonomy through their employees, thereby maximizing post-merger performance. Our data on private Swedish firms, complemented by 11 qualitative interviews across five countries and three continents, confirm that family mergers outperform other merger combinations via job security. In a supplementary critical experiment examining industry dissimilarity, we compare the socioemotional wealth perspective—which emphasizes loss aversion and predicts family firms’ unrelated diversification avoidance—to social identity theory. Consistent with social identity theory, our results show that both job security and post-merger performance improve with unrelated family firm mergers.