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# In an effort to explain why business acquisitions often fail, scholars

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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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(Book Question: 427)
According to the passage, the research mentioned in line 6 suggests which of the following about lower-ranked top executives and post acquisition success?
A. Given that these executives are unlikely to contribute to postacquisition success, little effort should be spent trying to retain them.
B. The shorter their length of service, the less likely it is that these executives will play a significant role in postacquisition success. - This is a RBV proponent view.
C. These executives are less important to postacquisition success than are more highly ranked top executives. - Stated in passage
D. If they have long tenures, these executives may prove to be as important to postacquisition success as are more highly ranked top executives. - Not stated in passage
E. Postacquisition success is unlikely if these executives are retained. - Out of scope/ Passage does not mention about failure of acquisition if such employees are retained, instead it talks about success if top executives are retained.

Question Type - Supporting Idea
Line No. 7 to 10 states - "Furthermore, existing research suggests that retaining the highest-level top executives, such as the CEO (chief executive officer) and COO (chief operating officer), is related more positively to post acquisition success than retaining lower-ranked top executives."

(Book Question: 428)
The resource-based view, as described in the passage, is based on which of the following ideas?
A. The managerial skills of top executives become strongest after the first five years of their tenure. - Out of Scope
B. Company-specific knowledge is an important factor in the success of an acquisition process.
C. The amount of nontransferable knowledge possessed by long-tenured top executives tends to be underestimated. - RBV does not underestimate
D. Effective implementation of an acquisition depends primarily on the ability of executives to adapt to change. - UEP View
E. Short-tenured executives are likely to impede the implementation of a successful acquisition strategy. - RBV talks about positive inputs from retained top executives and not ill-effect of short tenured eecutives

Question Type - Evaluate
My query with the ans is, it mentions success of an acquisition process - (Acquisition process/ Implementation/ Post acquisition) Such differences would matter if solving a 700+ lvl question
Line 21 says - The resource-based view (RBV) suggests that keeping acquired company top executives with longer organizational tenure would lead to more successful outcomes, as those executives have idiosyncratic and nontransferable knowledge of the acquired company that would be valuable for the effective implementation of the acquisition.
Line No 45 - While longer tenured top executives may have trouble adapting to change, it appears that their perspectives and knowledge bases offer unique value after the acquisition.

(Book Question: 429)
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

Question Type - Evaluate
The justification here is Bergh discussed only about the (tenure = knowledge) of the executive in his study,
Hence an option talking about adaptability or knowledge is out - A / B / C
Option (E) talks about highest ranked and lower ranked executives and not their tenures. - Out
After elimination - Answer is D - and it also follows the flow of the question - disagreement is on optimal acquisition strategy.

Now my query in question (2) solidifies - Question 2 states Implementation process whereas this question states post acquisition.
It is a nimble difference but if noticed can alter the answer for a specific question.

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Question type - Inference
Justification - Line no. 12 - "two limitations. First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies"

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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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Passage breakdown

In the first paragraph (P1), the author exposes some flaws in a study, then presents a debate regarding those flaws:

• The flaws: the study failed to examine how acquisition success is impacted by how long retained executives had worked for the company
• One side of the debate (the RBV view): keeping executives with longer tenure leads to success
• The other side (UEP): keeping executives with shorter tenure leads to success.

In the second paragraph, the author cites research that supports the RBV theory introduced in P1.

For more on the process of breaking down RC passages, check out this article and our live RC videos.

Explanations for individual questions

General Discussion
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Question type - Inference
Justification - Line no. 12 - "two limitations. First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies"

You're quoting the wrong section here. Limitation 1 as stated in the passage talks about the variation in length of service that may exist in top executive posts across companies....it talks about inter-companies variance in the respective tenures.

It was the theoretical explanations regarding the second Limitation (pertaining to length of service ) that had opposing view...Berjh collected data for 5 years and hence was able to support one theory and addressed how the organizational tenure of top executives affects post-acquisition success i.e. length of tenure is directly proportional to the post acquisition success(same as option A). Hence he addressed Limitation 2.

Regards
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
I have a question regarding 430.
(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Aren't RBV and UEP studies conducted before Bergh's study? If so, there are some studies which took CEO's tenure into consideration than how is A a correct answer?
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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This passage should not take more than 6 minutes to solve .

you should take 15min to 2 min at max to rad the paragraph

STEP 1 : Read the first few line of Passage.Get the TOPIC/SCOPE of the passage
Topic/Scope :
Write down on the scratch pad

STEP 2: Specialty of the passage as to why Author is writing this passage.
Mostly this will be in the second line of the passage
Specialty :
Write down on the scratch pad.

STEP 3: Next lines should simply describe either topic or specialty or supporting ideas or evidence.
Don't Even read these lines , you can always come back to these lines as long as you have your notes from STEP 1/STEP 2.

STEP 4: Very important ,
4a) SKIM for change in direction (Ex: However , yet , but, Despite, in spite, Although , even though ,Nonetheless, )
And note this change in Idea.
4b) SKIM for Tonal Words and note this tonal idea.(Ex: Unfortunately, one enemy , someone came in right timing,
truly , admittedly, unwillingly , and note this down.

Now you have to look at the scratch pad between STEP 1/STEP 2 and STEP 4 and carefully look what exactly is the CHANGE OF IDEA/Tonal Variation.

Repeat this for every Paragraph.Overall you should read only 4 to 5 sentences in the entire Passage in 1 to 2 minutes.

Notes should look like for each paragraph,
TOPIC/SCOPE:
SPECIALTY :
CHANGE in IDEA:
Not down any Nouns, Dates, Names etc....You can always come back to this section

Note:for some paragraphs you might not see any CHANGE in IDEA or any tonal variation so just get STEP 1/STEP 2 for that Paragraph

With this you can easily crack RC.
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
GMATNinja GMATNinjaTwo
Book Q: 429
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

I am confused with correct strategy to answer this question. The passage suggests that Bergh supported RBV and this question asks what people who supported UEP (or opposed RBV) would disagree with? How can both mean the same thing?
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
No because the debate is on the post acquisition success .
So the correlation has to be between Organizational tenure and post acquisition success.

B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
Again the correlation has to be between Organizational tenure and post acquisition success.

C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
No. Adaptability is a reason given by UEP as to why short organizational tenure executives will have impact on post acquisition success.

D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving post acquisition success

E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives
The contrast between Bergh and UEP is whether tenure plays an important role on post acquisition success not on the position of executivels
Question 3
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
Hi,

I'm still not sure about the explanation for 430:

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Doesn't D refer to the following line : "or does it address which particular top executives (with respect to length of service) should be retained
to achieve a successful acquisition outcome"?
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
AbdurRakib wrote:
OG 2017 New RCLine
In an effort to explain why business acquisitions
often fail, scholars have begun to focus on the role
of top executives of acquired companies. Acquired
companies that retain their top executives tend to
(5)
have more successful outcomes than those that do
not. Furthermore, existing research suggests that
retaining the highest-level top executives, such as the
CEO (chief executive officer) and COO (chief operating
officer), is related more positively to post acquisition
(10)
success than retaining lower-ranked top executives.
However, this explanation, while insightful, suffers from
two limitations. First, the focus on positional rank does
not recognize the variation in length of service that
may exist in top executive posts across companies,
(15)
nor does it address which particular top executives
(with respect to length of service) should be retained
to achieve a successful acquisition outcome. Second,
the relationship between retained top executives and
acquisition outcomes offered by existing research
(20)
is subject to opposing theoretical explanations
related to length of service. The resource-based view
(RBV) suggests that keeping acquired company top
executives with longer organizational tenure would lead
to more successful outcomes, as those executives
(25)
have idiosyncratic and nontransferable knowledge
of the acquired company that would be valuable for
the effective implementation of the acquisition. The
opposing position, offered by the upper echelons
perspective (UEP), suggests that retaining top
(30)
executives having short organizational tenure would
lead to more successful outcomes, as they would have
the adaptability to manage most effectively during the
uncertainty of the acquisition process

Responding to these limitations, Bergh conducted
(35)
a study of executive retention and acquisition
outcome that focused on the organizational tenure of
retained company top executives in 104 acquisitions,
followed over 5 years. Bergh considered the
acquisition successful if the acquired company was
(40)
retained and unsuccessful if it was divested. Bergh’s
findings support the RBV position. Apparently, the
benefits of long organizational tenure lead to more
successful outcomes than the benefits of short
organizational tenure. While longer tenured top
(45)
executives may have trouble adapting to change, it
appears that their perspectives and knowledge bases
offer unique value after the acquisition. Although
from the UEP position it seems sensible to retain
less tenured executives and allow more tenured
(50)
ones to leave, such a strategy appears to lower the
probability of acquisition success.
(Book Question: 427)
According to the passage, the research mentioned in line 6 suggests which of the following about lower-ranked top executives and postacquisition success?
A. Given that these executives are unlikely to contribute to postacquisition success, little effort should be spent trying to retain them.
B. The shorter their length of service, the less likely it is that these executives will play a significant role in postacquisition success.
C. These executives are less important to postacquisition success than are more highly ranked top executives.
D. If they have long tenures, these executives may prove to be as important to postacquisition success as are more highly ranked top executives.
E. Postacquisition success is unlikely if these executives are retained.

(Book Question: 428)
The resource-based view, as described in the passage, is based on which of the following ideas?
A. The managerial skills of top executives become strongest after the first five years of their tenure.
B. Company-specific knowledge is an important factor in the success of an acquisition process.
C. The amount of nontransferable knowledge possessed by long-tenured top executives tends to be underestimated.
D. Effective implementation of an acquisition depends primarily on the ability of executives to adapt to change.
E. Short-tenured executives are likely to impede the implementation of a successful acquisition strategy.

(Book Question: 429)
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

The Lines - 13 to 17

"First, the focus on positional rank does
not recognize the variation in length of service that
may exist in top executive posts across companies,
(15)
nor does it address which particular top executives
(with respect to length of service) should be retained
to achieve a successful acquisition outcome. "

The length of service refers to which of these ??

a) The tenure spent in the company

or

b) The tenure left in the company

A top company executive may be quite young but quite inexperienced in the company , so his tenure completed in the company may be short but his tenure to ;ead the company will be quite long .

Which tenure/length of service is mentioned in the lines 13 to 17 ??
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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p1 - business acquisitions fails, a reason given, then in what cases that reason is not good.
P2 - on these limitation, Bergh gave more reasons on acquisition success

(Book Question: 427)
According to the passage, the research mentioned in line 6 suggests which of the following about lower-ranked top executives and post acquisition success?
Ans - retaining them is not a good idea.
A. Given that these executives are unlikely to contribute to post acquisition success, little effort should be spent trying to retain them. --- not the correct reason.
B. The shorter their length of service, the less likely it is that these executives will play a significant role in post acquisition success. --- this is given as flaw
C. These executives are less important to post acquisition success than are more highly ranked top executives. --- to the point
D. If they have long tenures, these executives may prove to be as important to post acquisition success as are more highly ranked top executives. --- no
E. Post acquisition success is unlikely if these executives are retained. --- no
-----------------------------------------
(Book Question: 428)
The resource-based view, as described in the passage, is based on which of the following ideas?
lines to read - The resource-based view (RBV) suggests that keeping acquired company top executives with longer organizational tenure would lead to more successful outcomes, as those executives have idiosyncratic and nontransferable knowledge of the acquired company that would be valuable for the effective implementation of the acquisition.
B. Company-specific knowledge is an important factor in the success of an acquisition process.
------------------------------------------

(Book Question: 429)
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability -- just talking about Bergh's view.
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge --- UEP's view
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process --- no
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving post acquisition success --- they differed on less-tenured top executive
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives --- both agree at some point that retaining top executives is good.
------------------------------------------

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways
Q - Role of top executive before Bergh’s study.
Ans - So suppose they are retained. now what will they do. it is not mentioned in the passage. A is on the same lines.
A. It did not address how the organizational tenure of top executives affects postacquisition success.
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?

One thing to consider when answering this is that Bergh's study followed 104 acquisitions over a 5 year period - a longer term and thus more conclusive evidence. Prior to Bergh's research, scholars merely concluded that tacit knowledge (as inherit in RBV staff) is important to post-acquisition success, but there was no evidence clarifying WHY it was important or how post-acquisition success was measured.
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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AbdurRakib wrote:
GMAT® Official Guide 2018

Practice Question
Question No.: RC 427 ~ 430
Page: 381

In an effort to explain why business acquisitions often fail, scholars have begun to focus on the role of top executives of acquired companies. Acquired companies that retain their top executives tend to have more successful outcomes than those that do not. Furthermore, existing research suggests that retaining the highest-level top executives, such as the CEO (chief executive officer) and COO (chief operating officer), is related more positively to postacquisition success than retaining lower-ranked top executives. However, this explanation, while insightful, suffers from two limitations. First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies, nor does it address which particular top executives (with respect to length of service) should be retained to achieve a successful acquisition outcome. Second, the relationship between retained top executives and acquisition outcomes offered by existing research is subject to opposing theoretical explanations related to length of service. The resource-based view (RBV) suggests that keeping acquired company top executives with longer organizational tenure would lead to more successful outcomes, as those executives have idiosyncratic and nontransferable knowledge of the acquired company that would be valuable for the effective implementation of the acquisition. The opposing position, offered by the upper echelons perspective (UEP), suggests that retaining top executives having short organizational tenure would lead to more successful outcomes, as they would have the adaptability to manage most effectively during the uncertainty of the acquisition process.

Responding to these limitations, Bergh conducted a study of executive retention and acquisition outcome that focused on the organizational tenure of retained company top executives in 104 acquisitions, followed over 5 years. Bergh considered the acquisition successful if the acquired company was retained and unsuccessful if it was divested. Bergh’s findings support the RBV position. Apparently, the benefits of long organizational tenure lead to more successful outcomes than the benefits of short organizational tenure. While longer tenured top executives may have trouble adapting to change, it appears that their perspectives and knowledge bases offer unique value after the acquisition. Although from the UEP position it seems sensible to retain less tenured executives and allow more tenured ones to leave, such a strategy appears to lower the probability of acquisition success.
[/list]
Passage: Failed Acquisitions

Question: Lower-Ranked Executives

The Simple Story

Research has shown that acquired companies that retain their top executives are more successful post-acquisition. This research does not provide an explanation for how the executives’ tenure influences this relationship. The resource-based view (RBV) suggests that executives with longer tenures should result in better performance because they have company-specific knowledge. Alternatively, the upper echelons perspective (UEP) suggests that executives with shorter tenures should result in better performance because they are more adaptable. A study by Bergh provides data supporting RBV.

Sample Passage Map

Here is one way to map this passage. (Note: abbreviate as desired!)

1) Acq à better when CEO/CFO retained

Effect of tenure?

RBV – longer better (knowledge)

2) Bergh study à support RBV

Step 1: Identify the Question

The words According to the passage normally indicate that a question a Specific Detail question. However, this question stem also includes the word suggests, which indicates an Inference question. When you have both markers, the Inference clue is the more important clue. This is an Inference question.

Step 2: Find the Support

You are asked about the research in a particular line of the passage. Read the sentence describing this research.

“Furthermore, existing research suggests that retaining the highest-level top executives, such as the CEO and COO, is related more positively to postacquisition success than retaining lower-ranked top executives.”

The text states that retaining the top-level executives relates more positively to success. This suggests, then, that retention of lower-ranked executives is less related to positive outcomes after acquisitions.

Step 4: Eliminate and Find a Match

(A) The passage suggests that lower-ranked executives contribute less to positive outcomes than top-ranked executives. It does not state that the lower-ranked executives are unlikely to contribute at all. Further, it does not discuss whether any efforts should be made to retain these executives.

(B) The influence of length of service is discussed later in the passage and with respect to higher-ranked executives, not in this portion related to lower-ranked executives.

(C) CORRECT. The sentence describing the research says that retention of top-ranked executives is related more positively, so it follows that the lower-ranked executives are less important to postacquisition success.

(D) The influence of tenure is discussed later in the passage and with respect to higher-ranked executives, not in this portion related to lower-ranked executives.

(E) The research states that these lower-ranked executives are less associated with positive outcomes than top executives, but it does not state that retaining the lower-ranked executives harms outcomes.

(Book Question: 427)
According to the passage, the research mentioned in line 6 suggests which of the following about lower-ranked top executives and postacquisition success?

(A) Given that these executives are unlikely to contribute to postacquisition success, little effort should be spent trying to retain them.
(B) The shorter their length of service, the less likely it is that these executives will play a significant role in postacquisition success.
(C) These executives are less important to postacquisition success than are more highly ranked top executives.
(D) If they have long tenures, these executives may prove to be as important to postacquisition success as are more highly ranked top executives.
(E) Postacquisition success is unlikely if these executives are retained.

Passage: Failed Acquisitions

Question: Resource-based View

The Simple Story

Research has shown that acquired companies that retain their top executives are more successful post-acquisition. This research does not provide an explanation for how the executives’ tenure influences this relationship. The resource-based view (RBV) suggests that executives with longer tenures should result in better performance because they have company-specific knowledge. Alternatively, the upper echelons perspective (UEP) suggests that executives with shorter tenures should result in better performance because they are more adaptable. A study by Bergh provides data supporting RBV.

Sample Passage Map

Here is one way to map this passage. (Note: abbreviate as desired!)

1) Acq à better when CEO/CFO retained

Effect of tenure?

RBV – longer better (knowledge)

2) Bergh study à support RBV

Step 1: Identify the Question

The words as described in the passage in the question stem indicate that this is a Specific Detail question.

Step 2: Find the Support

The resource-based view is defined in the second part of the first paragraph.

“The resource-based view (RBV) suggests that keeping acquired company top executives with longer organizational tenure would lead to more successful outcomes, as those executives have idiosyncratic and nontransferable knowledge of the acquired company that would be valuable for the effective implementation of the acquisition.”

RBV says that retaining longer-serving executives will lead to better outcomes because they have company-specific knowledge.

Step 4: Eliminate and Find a Match

(A) While RBV does hold that longer-serving executives might lead to better performance after acquisitions, it is not mentioned that these executives have stronger managerial skills. Further, the passage does not mention five years (or any other number of years) of service as an inflection point.

(B) CORRECT. RBV emphasizes the importance of the company-specific knowledge that longer-serving executives possess.

(C) RBV states that the nontransferable knowledge of long-tenured executives is important to postacquisition success, but there is no suggestion that this knowledge is underestimated.

(D) The importance of adapting to change is the basis of the upper echelons perspective (UEP), not RBV.

(E) RBV suggests that long-tenured executives will be associated with better performance, but it does not state that short-tenured executives would impede successful strategies.

(Book Question: 428)
The resource-based view, as described in the passage, is based on which of the following ideas?

(A) The managerial skills of top executives become strongest after the first five years of their tenure.
(B) Company-specific knowledge is an important factor in the success of an acquisition process.
(C) The amount of nontransferable knowledge possessed by long-tenured top executives tends to be underestimated.
(D) Effective implementation of an acquisition depends primarily on the ability of executives to adapt to change.
(E) Short-tenured executives are likely to impede the implementation of a successful acquisition strategy.

Passage: Failed Acquisitions

Question: Bergh versus UEP

The Simple Story

Research has shown that acquired companies that retain their top executives are more successful post-acquisition. This research does not provide an explanation for how the executives’ tenure influences this relationship. The resource-based view (RBV) suggests that executives with longer tenures should result in better performance because they have company-specific knowledge. Alternatively, the upper echelons perspective (UEP) suggests that executives with shorter tenures should result in better performance because they are more adaptable. A study by Bergh provides data supporting RBV.

Sample Passage Map

Here is one way to map this passage. (Note: abbreviate as desired!)

1) Acq à better when CEO/CFO retained

Effect of tenure?

RBV – longer better (knowledge)

2) Bergh study à support RBV

Step 1: Identify the Question

The word suggests in the question stem indicates that this is an Inference question.

Step 2: Find the Support

The question asks what Berqh and a UEP proponent would disagree about. Review the findings of Bergh’s study in the second paragraph. If needed, review the text about UEP at the end of the first paragraph, but your passage map may be sufficient.

“Bergh’s findings support the RBV position. Apparently, the benefits of long organizational tenure lead to more successful outcomes than the benefits of short organizational tenure.”

Bergh’s study supports RBV, the opposing view to UEP. RBV states that longer-serving top executives are more valuable to company success because of their specific knowledge; UEP states that less tenured top executives are more valuable because they are more adaptable.

Step 4: Eliminate and Find a Match

(A) Bergh and UEP proponents would disagree on whether short-tenured executives lead to better company outcomes. There is no suggestion that Bergh disagrees with the idea that short tenure is positively correlated with adaptability.

(B) Bergh and UEP proponents would disagree on whether long-tenured executives lead to better company outcomes. There is no suggestion that proponents of UEP disagree with the idea that long tenure is positively correlated with idiosyncratic and nontransferable knowledge.

(C) It is never claimed that RBV proponents do not believe that adaptability is useful in general. Further, RBV supports retaining long-tenured executives to continue running the acquired company; this choice talks about the executive who is managing the acquisition process—that is, probably not the same executives who will continue to run the acquired company.

(D) CORRECT. Bergh’s research suggests that longer-tenured executives should be retained while UEP favors the retention of executives with shorter tenure.

(E) The focus of Bergh’s study is about the influence of the length of tenure of top executives, not lower-ranked top executives. The relative importance of lower-ranked executives is discussed in relation to the prior research in the first paragraph.

(Book Question: 429)
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?

(A) Whether there is a positive correlation between short organizational tenure and managerial adaptability
(B) Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
(C) Whether adaptability is a useful trait for an executive who is managing an acquisition process
(D) Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
(E) Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

Passage: Failed Acquisitions

Question: Research Limitations

The Simple Story

Research has shown that acquired companies that retain their top executives are more successful post-acquisition. This research does not provide an explanation for how the executives’ tenure influences this relationship. The resource-based view (RBV) suggests that executives with longer tenures should result in better performance because they have company-specific knowledge. Alternatively, the upper echelons perspective (UEP) suggests that executives with shorter tenures should result in better performance because they are more adaptable. A study by Bergh provides data supporting RBV.

Sample Passage Map

Here is one way to map this passage. (Note: abbreviate as desired!)

1) Acq à better when CEO/CFO retained

Effect of tenure?

RBV – longer better (knowledge)

2) Bergh study à support RBV

Step 1: Identify the Question

The words According to the passage in the question stem indicate that this is a Specific Detail question.

Step 2: Find the Support

The question asks about the limitations of research prior to Bergh’s study. This research is discussed in the first paragraph; specifically look for ways in which this research was limited.

“However, this explanation, while insightful, suffers from two limitations. First, the focus on positional rank does not recognize the variation in length of service… nor does it address which particular top executives (with respect to length of service) should be retained… Second, the relationship between retained top executives and acquisition outcomes offered by existing research is subject to opposing theoretical explanations related to length of service.”

The correct answer should mention one or both of the limitations discussed.

(1) No recognition of variation in length of service and outcomes

(2) Opposing theoretical explanations about length of service

Step 4: Eliminate and Find a Match

(A) CORRECT. This answer is a good match to the first limitation mentioned; the research does not discuss the relationship between variations in executives’ tenures and performance after acquisitions.

(B) The reason why some companies have longer-tenured CEOs is not mentioned as the issue; rather the concern is that the research does not explain how tenure affects company performance after the acquisition.

(C) Retaining executives may be important to companies in order to improve performance, but it is not mentioned as a limitation of the research.

(D) The existing research does explore these differences, finding that top executives are more positively associated with performance than lower-level top executives.

(E) The research suggests that lower-level top executives may be less important than top-ranked ones; there is no mention that the research underestimated the importance of lower-ranked executives.

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?

(A) It did not address how the organizational tenure of top executives affects postacquisition success.
(B) It did not address why some companies have longer-tenured CEOs than others.
(C) It did not consider strategies for retaining long-tenured top executives of acquired companies.
(D) It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
(E) It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

OG 2019 ID's
RC0097-02
RC0097-03
RC0097-04
RC0097-05

Hi GMATNinja

On Question 430, Why isn't B right ...

Below is an excerpt in blue specifically from the passage that refers to B does it not ? The blue clearly says, there is a limitation because
a) across companies, some people may be forced to be at certain levels longer based on organizational structure (Atleast thats my inference of the blue) ...This is exactly what option B is per my understanding

Excerpt from passage

First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies, nor does it address which particular top executives (with respect to length of service) should be retained to achieve a successful acquisition outcome
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
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jabhatta@umail.iu.edu wrote:
Hi GMATNinja

On Question 430, Why isn't B right ...

Below is an excerpt in blue specifically from the passage that refers to B does it not ? The blue clearly says, there is a limitation because
a) across companies, some people may be forced to be at certain levels longer based on organizational structure (Atleast thats my inference of the blue) ...This is exactly what option B is per my understanding

Excerpt from passage

First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies, nor does it address which particular top executives (with respect to length of service) should be retained to achieve a successful acquisition outcome

The portion of the passage that you highlighted in blue doesn't actually contain the information you added in your inference!

How long top executives have been in their roles could vary because of any number of factors. Maybe they stayed in the same role forever because their commute to work is convenient, or maybe they just got promoted because they bribed HR with donuts every day. It could be that they were "forced to be at certain levels longer based on organizational structure," as you inferred, but the passage does not specify this information.

Our task in answering this question is to determine how research prior to Bergh's study was limited. Answer choice (B) focuses on why some companies have longer-tenured CEOs, but that is not the limitation that Bergh identifies addresses in his study.

You found the relevant portion of the passage to answer this question, but misinterpreted the exact meaning of the sentence. Let's take a closer look:

Quote:
First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies...

This means that just studying someone based on their position (CEO, CFO, etc.) does not account for how long they have been in that role.

Quote:
...nor does it address which particular top executives (with respect to length of service) should be retained to achieve a successful acquisition outcome.

This means that the previous research does not provide a link between keeping long vs. short tenured executives and the success of an acquisition.

With this in mind, let's go back to answer choice (A):

Quote:
(A) It did not address how the organizational tenure of top executives affects postacquisition success.

This answer choice mirrors the limitation in the previous research as explained above. (A) is our answer.

I hope this helps!
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
Hi

IN question 429
Can someone please explain why option E is a statement that is agreed by Bergh and UEP?

I eliminated this option since I inferred that UEP doesnot talk about preference between high ranked top executives and low ranked top executives.

My understanding:

Uep is one of the theories that are presented as part of the objection to the following explanation:

Retaining the highest-level top executives is related more positively to post-acquisition success than retaining lower-ranked top executives.

UEP states that low tenure leads to more postacquision success.

Now Bergh conducted research whose findings suggested that high ranked top executives (long tenure) are more successful than other top executives(short tenure) in post-acquisition success.

Now in both these explanations, it doesnot talk about the preference of higest level top executives to lower ranked top executives.

then how can both of them agree on option E?

Regards

Nitesh

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nitesh50 wrote:
Hi

IN question 429
Can someone please explain why option E is a statement that is agreed by Bergh and UEP?

I eliminated this option since I inferred that UEP doesnot talk about preference between high ranked top executives and low ranked top executives.

My understanding:

Uep is one of the theories that are presented as part of the objection to the following explanation:

Retaining the highest-level top executives is related more positively to post-acquisition success than retaining lower-ranked top executives.

UEP states that low tenure leads to more postacquision success.

Now Bergh conducted research whose findings suggested that high ranked top executives (long tenure) are more successful than other top executives(short tenure) in post-acquisition success.

Now in both these explanations, it doesnot talk about the preference of higest level top executives to lower ranked top executives.

then how can both of them agree on option E?

Regards

Nitesh]

Hi Nitesh.

RC questions can be set up to challenge test takers by involving concepts that seem the same or can somehow be confused with each other by test-takers. So, to correctly answer RC questions, one has to be sure to keep concepts straight.

In this case we have two concepts that can be confused with each other. They are:

- level within the company.

- length of tenure (or length of time spent) at the company.

If you go back through the passage, you will see that RBV, and specifically Bergh, and UEP actually agree on the need to retain high level executives and that their disagreement centers on executive tenure, in other words, how long the executives have been at the companies.

So, (E) mentions something that they agree on, while (D) mentions something that they disagree on.
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Re: In an effort to explain why business acquisitions often fail, scholars [#permalink]
MartyTargetTestPrep wrote:
nitesh50 wrote:
Hi

IN question 429
Can someone please explain why option E is a statement that is agreed by Bergh and UEP?

I eliminated this option since I inferred that UEP doesnot talk about preference between high ranked top executives and low ranked top executives.

My understanding:

Uep is one of the theories that are presented as part of the objection to the following explanation:

Retaining the highest-level top executives is related more positively to post-acquisition success than retaining lower-ranked top executives.

UEP states that low tenure leads to more postacquision success.

Now Bergh conducted research whose findings suggested that high ranked top executives (long tenure) are more successful than other top executives(short tenure) in post-acquisition success.

Now in both these explanations, it doesnot talk about the preference of higest level top executives to lower ranked top executives.

then how can both of them agree on option E?

Regards

Nitesh]

Hi Nitesh.

RC questions can be set up to challenge test takers by involving concepts that seem the same or can somehow be confused with each other by test-takers. So, to correctly answer RC questions, one has to be sure to keep concepts straight.

In this case we have two concepts that can be confused with each other. They are:

- level within the company.

- length of tenure (or length of time spent) at the company.

If you go back through the passage, you will see that RBV, and specifically Bergh, and UEP actually agree on the need to retain high level executives and that their disagreement centers on executive tenure, in other words, how long the executives have been at the companies.

So, (E) mentions something that they agree on, while (D) mentions something that they disagree on.

Hi MartyTargetTestPrep
If you go back through the passage, you will see that RBV, and specifically Bergh, and UEP actually agree on the need to retain high level executives and that their disagreement centers on executive tenure, in other words, how long the executives have been at the companies.

^^^
THis is what i have not been able to find conclusively.

furthermore, existing research suggests that retaining the highest-level top executives, such as the CEO (chief executive officer) and COO (chief operating officer), is related more positively to postacquisition success than retaining lower-ranked top executives. However, this explanation, while insightful, suffers from two limitations.

The However in the text indicates the contrast/limitations of the theory.
the 2nd limitation presents 2 theories that do not agree on tenure aspect to achieve postacquisition success.
Bergh agrees with the former theory.(RBV).

How can we infer that both of RBV and UEV positions agree on highest-level top executives of acquired companies is more important than retaining lower-ranked top executives?

Can you try quoting the passage to try and explain me the inference?

Regards
Nitesh
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nitesh50 wrote:
Hi MartyTargetTestPrep
If you go back through the passage, you will see that RBV, and specifically Bergh, and UEP actually agree on the need to retain high level executives and that their disagreement centers on executive tenure, in other words, how long the executives have been at the companies.

^^^
THis is what i have not been able to find conclusively.

furthermore, existing research suggests that retaining the highest-level top executives, such as the CEO (chief executive officer) and COO (chief operating officer), is related more positively to postacquisition success than retaining lower-ranked top executives. However, this explanation, while insightful, suffers from two limitations.

The However in the text indicates the contrast/limitations of the theory.
the 2nd limitation presents 2 theories that do not agree on tenure aspect to achieve postacquisition success.
Bergh agrees with the former theory.(RBV).

How can we infer that both of RBV and UEV positions agree on highest-level top executives of acquired companies is more important than retaining lower-ranked top executives?

Can you try quoting the passage to try and explain me the inference?

Regards
Nitesh

"existing research suggests that retaining the highest-level top executives, such as the CEO (chief executive officer) and COO (chief operating officer), is related more positively to postacquisition success than retaining lower-ranked top executives."

Neither RBV nor UEP is described as disagreeing with the above suggestion. Rather the more logical interpretation of the passage is that they are examples of schools of thought in that that agree with that suggestion as the passage describes the two schools of thought as different in their takes on retaining "top executives."

At the same time the passage describes the two as disagreeing as described below.

"The resource-based view (RBV) suggests that keeping acquired company top executives with longer organizational tenure would lead to more successful outcomes, as those executives have idiosyncratic and nontransferable knowledge of the acquired company that would be valuable for the effective implementation of the acquisition. The opposing position, offered by the upper echelons perspective (UEP). suggests that retaining top executives having short organizational tenure would lead to more successful outcomes ..."

We can concede that the passage never directly states that the two schools of thought agree on the point related to level of executives. However, by introducing the highest-level top executives conclusion and then the two schools of thought, and by associating both schools of thought with "top executives" it does seem to indicate that they agree on the point related to level of executives. At the same time, what you are saying makes some sense, and perhaps I went slightly too far in saying that the passage indicates that they agree on that point.

At the same time, question 429, does not ask us whether they agree on that point. Rather it asks us to identify a point of DISAGREEMENT, and the passage clearly does not indicate that they disagree on the the point related to levels of executives. It indicates that they disagree on the point related to tenure.

Vision, finding key details, and clarity are key.
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