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IMPACT OF CULTURAL DIFFERENCES ON MERGER AND ACQUISITION PERFORMANCE: A CRITICAL RESEARCH REVIEW AND AN INTEGRATIVE MODEL

G unter K. Stahl and Andreas Voigt


ABSTRACT
This paper provides a review of theoretical perspectives and empirical research on the role of culture in mergers and acquisitions [M&A], with a particular focus on the performance implications of cultural differences in M&A. Despite theoretical and anecdotal evidence that cultural differences can create major obstacles to achieving integration benets, empirical research on the performance impact of cultural differences in M&A yielded mixed results: while some studies found national or organizational cultural differences to be negatively related to measures of M&A performance, others observed a positive relationship or found cultural differences to be unrelated to M&A performance. We offer several explanations for the inconsistent ndings of previous research on the performance impact of cultural differences in M&A and develop a model that synthesizes our current understanding of the role of culture in M&A. We conclude that the relationship between cultural differences and M&A performance is more complex than

Advances in Mergers and Acquisitions Advances in Mergers and Acquisitions, Volume 4, 5182 Copyright 2005 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN: 1479-361X/doi:10.1016/S1479-361X(04)04003-7

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previously thought and propose that, rather than asking if cultural differences have a performance impact, future research endeavors should focus on how cultural differences affect M&A performance. The cultural distance hypothesis, in its most general form, suggests that the difculties, costs, and risks associated with cross-cultural contact increase with growing cultural differences between two individuals, groups, or organizations (Hofstede, 1980). Cultural distance, as measured in terms of differences in management style, business practices or work-related values, has been shown to have a profound impact on processes such as the choice of foreign entry mode and the perceived ability to manage foreign operations (e.g. Kogut & Singh, 1988), organizational learning across cultural barriers (e.g. Barkema, Bell & Pennings, 1996), the longevity of global strategic alliances (e.g. Parkhe, 1991), and cross-cultural adjustment and effectiveness of expatriate managers (e.g. Black, Mendenhall & Oddou, 1991). In the context of mergers and acquisitions [M&A], it has often been argued but less often been researched that cultural differences can be a source of confusion, hostility and distrust between the members of merging organizations (e.g. Buono & Bowditch, 1989; Cartwright, 1997; Krug & Nigh, 2001; Olie, 1990), and a major contributor to the high failure rates reported in M&A literature (see Datta, Pinches & Narayanan, 1992; King, Dalton, Daily & Covin, 2004 for meta-analyses of postacquisition performance research). In a survey of more than 200 chief executives of European companies conducted by Booz, Allen and Hamilton, respondents ranked the ability to integrate culturally as more important to the success of acquisitions than nancial and strategic factors (cited in Cartwright & Cooper, 1996, p. 28). Problems may be exacerbated in international settings. Cross-border M&A are difcult to integrate because they require what Barkema and his colleagues have called double layered acculturation (Barkema et al., 1996, p. 151), whereby not only different corporate cultures, but also different national cultures have to be combined. Fundamentally different values, goals and beliefs concerning what constitute appropriate organizational practices may lead to conicts and political struggles, and limit the potential for trust to emerge between the parties involved in an M&A (Elsass & Veiga, 1994; Olie, 1990; Stahl & Sitkin, 2005). In international settings, such conicts tend to be fueled by cultural stereotypes, increasing nationalism or even xenophobia (Vaara, 2001, 2003). Foreign language barriers, different legal systems and administrative practices, and other aspects of organizational life that differ between countries pose additional obstacles to integrating the different cultures and workforces in cross-border M&A. Not surprisingly, a survey of top managers in large European acquirers showed that

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61% of them believed that cross-border acquisitions are riskier than domestic ones (Angwin & Savill, 1997). Despite anecdotal claims that cultural differences create major obstacles to successful integration in M&A, the empirical research evidence is mixed (Schoenberg, 2000; Schweiger & Goulet, 2000; Teerikangas & Very, 2003). While some studies found national or organizational cultural differences to be negatively related to different measures of M&A performance, others found cultural differences to be unrelated or even positively related to the success of M&A. These ndings suggest that the relationship between cultural differences and M&A performance is more complex than how it is portrayed in M&A literature. More conceptual and empirical work is needed to examine how cultural differences affect the post-combination integration process and to determine which variables moderate the effects of cultural differences on M&A performance. We begin with a discussion of our current understanding of the role of cultural differences in M&A, followed by a review of previous studies that examined the impact of cultural differences on three types of M&A outcome measures: accounting-based performance measures, stock market returns, and socio-cultural integration outcomes. We will offer several explanations for the inconsistent ndings that emerge from this review, and present a framework for studying the role of cultural differences in M&A that synthesizes the extant research in this area. We will conclude with a discussion of avenues for future research on the role of culture in M&A.

THEORETICAL PERSPECTIVES ON THE ROLE OF CULTURE IN MERGERS AND ACQUISITIONS


Various theories and models have been proposed to explain the role of culture in M&A and how cultural differences may affect the integration process following M&A. The Appendix provides a synopsis of the most widely used theories and models. They can be grouped into three categories: cultural t models, acculturation models, and models adopting a social constructivist perspective on culture. Each of them is discussed below.

The Cultural Fit Perspective Cultural t models rest on the idea that the degree of culture compatibility between the organizations involved in a merger or an acquisition is a critical determinant of the subsequent integration process (Cartwright & Cooper, 1996; David & Singh,

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1994; Javidan & House, 2002; Morosini & Singh, 1994). Cultural t models focus mainly on the relationship between pre-merger cultural differences (both national and organizational) and post-merger integration outcomes. They are inherently static and do not fully capture the dynamics of the integration process. Perhaps the most widely cited cultural t model is Cartwright and Coopers (1993, 1996) model of culture compatibility in M&A. The model is based on a typology of organizational cultures that vary along a continuum from high to low individual constraint: power, role, task, and person cultures, with the former imposing the highest and the latter imposing the lowest degree of constraint on individuals. Cartwright and Cooper propose that in mergers of equals (collaborative marriages), the cultures of the combining rms must be similar or adjoining types (e.g. role and task cultures) in order to integrate successfully. The logic is that if there is a balance of power, the organizations involved in the merger have to adapt to each others culture and create a coherent third culture. Since organizations normally strive to retain their own culture, mergers between culturally distant partners are proposed to result in major integration problems. In the case of an asymmetrical relationship (traditional marriages), Cartwright and Cooper propose that the impact of cultural differences depends primarily on the direction of the culture change, rather than the cultural distance between the acquirer and the target. If the degree of individual constraint increases as a result of the takeover (e.g. a rm with a task culture is acquired by one with a power culture), this is likely to lead to employee resistance and major integration problems. The important contribution of cultural t models such as the one proposed by Cartwright and Cooper (1996) is that they illustrate that cultural differences can pose signicant barriers to achieving integration benets, and that they have to be considered at an early stage of the M&A process as early as the evaluation and selection of a suitable target and the planning of the integration process.

The Acculturation Perspective Another perspective centers on the acculturation process (Elsass & Veiga, 1994; Larsson & Lubatkin, 2001; Nahavandi & Malekzadeh, 1988; Sales & Mirvis, 1984), rather than on stable cultural differences between the parties involved in an M&A. In anthropology, the term acculturation is dened as changes induced in (two cultural) systems as a result of the diffusion of cultural elements in both directions (Berry, 1980, p. 215). In the context of M&A, Larsson and Lubatkin (2001) dene acculturation as the outcome of a cooperative process whereby the beliefs, assumptions and values of two previously independent work forces form a jointly determined culture. Acculturation is achieved through development of

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a common organizational language, mutual consideration, and values promoting shared interests. As such, acculturation can be considered a prerequisite for M&A success, especially when high levels of integration are required. In contrast to Larsson and Lubatkins (2001) conceptualization of acculturation as an inherently cooperative process, it has been suggested that acculturation outcomes can be positive or negative (Elsass & Veiga, 1994; Nahavandi & Malekzadeh, 1988; Sales & Mirvis, 1984). Nahavandi and Malekzadehs (1988) model of acculturative stress proposes that the degree of congruence between the acquiring and acquired rms preferred modes of acculturation will affect the amount of stress and conict experienced during the acculturation process. According to this model, the acquired rms preferred acculturation mode depends on the extent to which organizational members want to preserve their own cultural identity and to which they feel attracted to the acquirers culture. The acquiring rms preferred acculturation mode is largely determined by its diversication strategy and tolerance for diversity. The model suggests a variety of factors that moderate the impact of cultural differences on post-acquisition integration outcomes, most notably the acquirers diversication strategy and the integration mode chosen. If the level of attempted integration is high, this is proposed to result in acculturative stress and disruptive culture clashes, as the members of the acquired organization struggle to preserve their cultural identity. Consistent with the Nahavandi and Malekzadeh model, a longitudinal casestudy conducted by Mirvis and Sales (1990) suggests that the outcome of the acculturation process depends on the extent to which the acquired rm is allowed to determine its preferred mode of acculturation, to which the relationships between the members of the two companies are positive and involve reciprocity, and to which the acquired rm desires to retain its own cultural identity.

The Social Constructivist Perspective While the extant cultural t and acculturation models rest on a predominantly functionalist and objectivist understanding of culture (Morgan & Smircich, 1980), social constructivists view culture as based on shared or partly shared patterns of interpretation which are produced, reproduced, and continually changed by the people identifying with them (e.g. Kleppest, 1998; Vaara, 2002). This perspective emphasizes symbolization and communication processes and sees culture as an essentially dynamic and emergent phenomenon that comes into existence in relation to and in contrast with another culture (Gertsen, Sderberg & Torp, 1998).

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Kleppest (1993) denes culture as constantly ongoing attempt of the collective to dene itself and its situation (cited by Gertsen et al., 1998, p. 33). This view of culture as an interpretative and evolving process rather than a stable system of norms and values differs markedly from Hofstedes (1980) widely cited denition of culture as collective mental programming. According to Kleppest (1998, 2005), each organization consists of numerous individuals with distinct self-identities that are socially produced and that help create meaning at both the individual and collective level. Organizational culture is seen as a process by which distinct organizational identities are created and maintained. Cultural contact can then be understood as a confrontation between different organizational self-images and interpretation patterns which develop and unfold in interaction with one another. Building on social identity theory (Tajfel, 1982; Turner, 1982), the social constructivist position suggests that the problems surrounding the integration process after M&A may be best understood in terms of in-group out-group bias and a quest for social identity. Under this perspective, the exaggerated view of differences and lack of attention to similarities that can often be observed in M&A can be interpreted as a sense-making mechanism: we cannot establish an identity without stressing our uniqueness and their otherness (Kleppest, 1998, 2005). In summary, extant theories and models of the role of culture in M&A have adopted one of three perspectives to explain how cultural differences affect the M&A process: a cultural t perspective, an acculturation perspective, or a social constructivist perspective. Cultural t models are rooted in a functionalist and objectivist understanding of culture as relatively stable system of norms, values, and behavior patterns. In contrast, the social constructivist perspective emphasizes cultural transformation processes during which organizational self-images develop and change through interaction, so that new socially negotiated cultural identities are being formed. Cultural t and acculturation models highlight the inherent potential of M&A for culture clash and the need for cultural assessment to predict and minimize integration problems. Social constructivists take a more nuanced view in suggesting that it is not cultural differences per se that create problems in M&A but rather the way cultural boundaries are drawn and managed. Under this perspective, analysis of pre-combination cultural differences has little prognostic value in predicting M&A outcomes. Despite fundamental differences between the three paradigms, the cultural t, acculturation, and social constructivist perspectives seem to converge on the assumption that cultural issues cannot be considered in isolation from other aspects of the integration process, such as the integration approach taken by the acquirer, the degree of retained autonomy on the part of the acquired rm, and the interventions chosen to manage cultural differences.

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THE PERFORMANCE IMPACT OF CULTURAL DIFFERENCES IN MERGERS AND ACQUISITIONS: A RESEARCH REVIEW
While theoretical models of the role of culture in M&A emphasize the dark side of cultural diversity, empirical research evidence indicates that cultural differences, under some conditions, may be an asset rather than a liability in M&A (see Schoenberg, 2000; Schweiger & Goulet, 2000; Teerikangas & Very, 2003 for reviews). To explain the lack of consensus that emerged from previous research on the role of culture in M&A, we conducted a comprehensive review of studies that examined the performance impact of cultural differences in M&A, with the goal of identifying key moderators of the culture-performance relationship. It was hoped that a research review that is sensitive to potential moderating effects, as well as differences in research design characteristics between studies, would shed light on the complexity of the process by which cultural differences affect M&A outcomes. Using multiple search strategies (including computerized searches of various databases, manual searches of published materials, and consultation of M&A researchers to identify unpublished research), we identied a total of 36 empirical studies with a combined sample size of 9,431 M&A, which had been consummated over a 50-year period. The majority of the studies had been published in academic journals while the rest were doctoral dissertations, book chapters, and unpublished working papers. For the purpose of this research review, we grouped the identied studies into three categories, based on the M&A outcome variable that was examined (Stahl & Voigt, 2004): Studies using accounting-based measures, such as return on assets, return on equity, and sales growth. These measures evaluate the relatively long-term performance of an M&A and thus capture whether envisaged synergies could be reached. Studies using stock market-based measures. These measures reect the investment communities evaluations of the immediate and longer term impacts of the M&A. They are usually measured around the time of the announcement of the deal and can thus be considered a predictor of future performance. If measured some time after the announcement, stock market returns may reect actual performance. As additional information about the M&A and its success or failure becomes known, it is usually assimilated by the market and the value of the rm is affected (Datta et al., 1992).

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Studies examining socio-cultural integration outcomes, such as employee satisfaction, voluntary turnover, and acculturative stress. These variables capture the degree of conict and strain at the socio-cultural level and can thus be considered an important dimension of M&A success and failure from the perspective of the employees and the organization as a whole. Next, we will summarize the key ndings of studies that examined the impact of cultural differences on the three types of M&A outcome measures.

Impact of Cultural Differences on Accounting-Based Performance Measures We identied 18 studies that examined the impact of cultural differences on accounting-based measures of post-acquisition performance. Table 1 summarizes the key ndings of these studies. Consistent with the cultural distance hypothesis, eight of the studies found a negative relationship between cultural differences and M&A performance. Organizational cultural differences were found to be negatively related to various accounting measures in samples of domestic M&A (Datta, 1991; Datta, Grant & Rajagopalan, 1991; Weber & Pliskin, 1996). A negative relationship between organizational cultural differences and postacquisition performance could be observed under conditions of low and high integration levels (Datta, 1991), and was most pronounced when the degree of autonomy given to the target rm was low (Datta et al., 1991). Consistent with Datta et al. (1991), Very, Lubatkin, Calori and Veiga (1997) found that cultural incompatibility had the most negative impact on post-acquisition performance when autonomy was removed from the target. In contrast, Schoenberg (1996), in a study of cross-border acquisitions, found that cultural differences were negatively associated with post-acquisition performance regardless of the integration approach taken. This negative relationship could only be observed for acquisitions in the service industry but not in manufacturing. Contrary to expectations, several studies revealed a positive relationship between cultural differences and M&A performance. Krishnan et al. (1997), in a study of domestic acquisitions, found organizational cultural differences to be positively related to accounting-based measures of post-acquisition performance. This is consistent with a study conducted by Zollo (2002), who found that organizational cultural differences were signicantly and positively associated with accounting returns of the combined organization, measured over a three year period. In a similar vein, Morosini, Shane and Singh (1998), in a survey of cross-border acquisitions, found that national cultural differences enhanced post-acquisition

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Table 1. Studies Examining the Impact of Cultural Differences on Accounting-Based Measures.


Author(s) and Year Sample Cultural Dimension Performance Measure Impact of Cultural Differencesa n.s. Moderator(s) Identiedb

Anand, Capron and Mitchell (2003) Barkema, Bell and Pennings (1996) B uhner (1991) Datta (1991)

Mixed

Domestic vs. cross-border Hofstede index Domestic vs. cross-border Differences in management style Management style incompatibility Dissimilarities in functional backgrounds between top management teams Management style dissimilarity Domestic vs. cross-border Corporate cultural differences

Performance index Return on equity Protability Performance index Performance index

Crossborder Mixed Domestic

Pos.c

Neg. Neg.

Owner control /

Datta, Grant and Rajagopalan (1991) Krishnan, Miller and Judge (1997)

Domestic

Neg.

Domestic

Return on assets

Pos.

Degree of target autonomy removal /

Larsson and Finkelstein (1999)

Mixed

Synergy realization

n.s.

Integration leveld Employee resistanced /

n.s. Synergy realization n.s.f

Larsson and Risberg (1998)

Domestice

Lubatkin, Calori, Very and Veiga (1998) Morosini, Shane and Singh (1998) Schoenberg (1996)

Crossbordere Mixed

Pos.f Domestic vs. cross-border Growth in sales n.s. /

Crossborder Crossborder

Hofstede index Differences in management style

Growth in sales Performance index

Pos.

Neg.

Industry

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Table 1. (Continued )
Author(s) and Year Sample Cultural Dimension Performance Measure Impact of Cultural Differencesa Neg.g Moderator(s) Identiedb

Schoenberg (2004)

Crossborder

Differences in management style

Performance index

Cultural measures Integration Approach Trust

Stahl, Kremershof and Larsson (2004) Very, Lubatkin and Calori (1996) Very, Lubatkin, Calori and Veiga (1997)

Mixed

Organizational cultural differences Domestic vs. cross-border Cultural incompatibility

Mixed

Sales growth and realized prots Performance index Performance index

Neg.

n.s.

Nationality of target Degree of target autonomy removal Nationality of Target Degree of target autonomy removal /

Mixed

Neg.

Weber (1996)

Domestic

Corporate cultural differences Corporate cultural differences Corporate cultural differences

Return on assets

n.s.

Weber and Pliskin (1996) Zollo (2002)

Domestic

Performance index Performance index

Neg.

Mixed

Pos.

Notes:

Neg. = negative and statistically signicant; n.s. = non-signicant; Pos. = positive and statistically signicant; b / = no moderator identied; c Based on data of acquisitions only (joint-ventures were excluded); data was provided by rst author on request; d Mediated effect (see text); e Results separately reported for sub-samples; f No signicance levels reported, but differences were considered meaningful by authors; g Differences in attitude towards risk were negatively related to performance; differences in other dimensions of management style were unrelated to performance.

performance by providing access to the targets or acquirers diverse set of routines and capabilities. Other studies found cultural differences to be unrelated to accounting-based performance measures, but found evidence of mediating or moderating effects. For

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example, Weber (1996), in a study of U.S. M&A in banking and manufacturing, observed a moderating effect of autonomy removal on the relationship between cultural differences and target rms nancial performance. The same study found a positive effect of autonomy removal on nancial performance but a negative effect on commitment, suggesting that related mergers with higher levels of autonomy removal outperform related mergers with lower autonomy removal in spite of the associated human resource problems (pp. 11971198). Other studies suggest that integration process variables such as the level of integration or the use of social integration mechanisms may mediate the effects of cultural differences on M&A performance. For example, Larsson and Finkelstein (1999) found that the effects of organizational cultural differences on synergy realization were mediated by the level of organizational integration and employee resistance, suggesting that cultural differences affect M&A performance primarily through the process of socio-cultural integration.

Impact of Cultural Differences on Stock Market-Based Performance Measures As in the review of studies of accounting-based performance measures, no clear pattern of effects emerged from the review of studies that examined the impact of cultural differences on stock market performance. Table 2 summarizes the results of the 13 studies identied through the literature search. Only two of them found evidence of a negative impact of cultural differences on stock market returns. Datta and Puia (1995) found acquiring rms cumulative excess returns to be negatively associated with national cultural distance in a sample of cross-border acquisitions. Chatterjee, Lubatkin, Schweiger and Weber (1992), in a study of domestic acquisitions, observed a negative relationship between organizational cultural differences and acquiring rms cumulative abnormal returns. Interestingly, acquirers multiculturalism (i.e. the degree to which the acquirer tolerates the acquired rms culture) was positively related to abnormal returns, suggesting that the degree of cultural tolerance exhibited by the acquirer may be more important in determining the success of an acquisition than preacquisition cultural differences. In direct contradiction to the cultural distance hypothesis, six studies found a positive relationship between cultural differences and stock market performance. For example, in a study by Harris and Ravenscraft (1991), target rms cumulative abnormal returns were higher in cross-border acquisitions than in domestic ones, suggesting that national cultural differences do not always have a negative impact on M&A performance. This is consistent with Swenson (1993), Wansley, Lane

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Table 2. Studies Examining the Impact of Cultural Differences on Stock Market-Based Measures.
Author(s) and Year Sample Cultural Dimension Performance Measure Impact of Cultural Differencesa n.s. Moderator(s) Identiedb

Bessler and Murtagh (2002) B uhner (1991)

Mixed

Mixed

Chatterjee, Lubatkin, Schweiger and Weber (1992) Datta and Puia (1995) Dewenter (1995)

Domestic

Domestic vs. cross-border Domestic vs. cross-border Corporate cultural differences

Cumulative abnormal returns Cumulative abnormal returns Cumulative abnormal returns

Industry

Pos.

Neg.

Owner control Acquisition experience /

Cross-border

Hofstede index Domestic vs. cross-border Domestic vs. cross-border Domestic vs. cross-border

Mixed

Eddy and Seifert (1984) Harris and Ravenscraft (1991)

Mixed

Mixed

Cumulative excess returns Cumulative abnormal returns Stock prices and dividends Average bid premiums

Neg.

n.s.

n.s.c

Hostile target maneuvering Rival bidders /

Pos.

Markides and Ittner (1994) Markides and Oyon (1998) Olie and Verwaal (2004) Swenson (1993)

Cross-border

Hofstede index Masculinity

Cross-border

Cross-border

Hofstede index Domestic vs. cross-border

Mixed

Cumulative abnormal returns Cumulative Abnormal returns Cumulative abnormal returns Cumulative abnormal returns

n.s.

Industry Strength of acquirers home currency relative to the dollar /

n.s.

Pos.

Host country experience Target growth rate Targets price-earnings ratio Likelihood of competition

Pos.

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Table 2. (Coninued )
Author(s) and Year Sample Cultural Dimension Performance Measure Impact of Cultural Differencesa Pos. Moderator(s) Identiedb

Wansley, Lane and Yang (1983) Zollo (2002)

Mixed

Mixed

Domestic vs. cross-border Corporate cultural differences

Cumulative abnormal returns Cumulative abnormal returns

Pos.

Time of measurement

Notes:

Neg. = negative and statistically signicant; n.s. = non-signicant; Pos. = positive and statistically signicant; b / = no moderator identied; c The original study reported a nonsignicant effect based on estimated beta coefcients for a market model; however, based on the reported mean differences, a negative and signicant correlational effect size was calculated.

and Yang (1983), and Olie and Verwaal (2004), whose ndings suggest that crossborder acquisitions may generate higher returns than domestic ones. However, several studies (e.g. Dewenter, 1995; Eddy & Seifert, 1984; Markides & Ittner, 1994) found acquirers stock market performance to be unrelated to national cultural differences, thus making it impossible to draw any rm conclusion about the relationship between cultural differences and stock market returns. In interpreting these ndings, it is important to note that seven of the thirteen studies that examined the impact of cultural differences on stock market performance used a dichotomous measure of domestic versus cross-border M&A as a proxy for national cultural differences. In these studies, the effects of national cultural differences are confounded with the effects of other variables on which international M&A differ from domestic ones. Rather than assuming a causal effect of cultural differences on stock market returns, a more likely explanation is that the investment communities evaluate cross-border M&A differently (in some instances, more favorably) than domestic deals, e.g. because they open up new foreign market opportunities, provide greater economies of scale, and so forth.

Impact of Cultural Differences on Socio-Cultural Integration Outcomes Table 3 summarizes the results of 14 studies that examined the relationship between cultural differences and socio-cultural integration outcome variables, such as employee stress, commitment, and voluntary turnover. Only one of them (Krishnan et al., 1997) found unambiguous evidence of a positive relationship between cultural differences, measured in terms of dissimilarities in functional backgrounds

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Table 3. Studies Examining the Impact of Cultural Differences on Socio-Cultural Integration Outcomes.
Author(s) and Year Sample Cultural Dimension Performance Measure Impact of Cultural Differencesa Pos. Moderator(s) Identiedb

Krishnan, Miller and Judge (1997)

Domestic

Krug and Hegarty (1997) Krug and Hegarty (2001) Krug and Nigh (1998)

Mixed Mixed Cross-Border

Dissimilarities in functional backgrounds between top management teams Domestic vs. cross-border Domestic vs. cross-border Hofstede Index

Top management turnover

Top management turnover Top management turnover Top management turnover

Neg. Neg.c Neg.

Combination year Relative standing of target executives International and country-specic acquisition experience /

Larsson and Finkelstein (1999)

Mixed

Larsson and Lubatkin (2001) Larsson and Risberg (1998)

Mixed Domesticd

Management style dissimilarity Domestic vs. Cross-border Domestic vs. cross-border Corporate cultural differences

Employee resistance

Neg.

Neg. Degree of acculturation Degree of acculturation Employee resistance Degree of acculturation Employee resistance Top management turnover Top management turnover Trust, job satisfaction, commitment, acceptance of change, intention to stay, willingness to cooperate, Job performance, and open communication n.s. Neg.e Nationality of acquirer /

Cross-borderd

Neg.e Pos.e Neg.e Neg. Combination year industry /

Lubatkin, Schweiger and Weber (1999) Schoenberg (2004)

Domestic

Cross-border

Stahl, Kremershof and Larsson (2004)

Mixed

Corporate cultural differences Differences in management style Organizational cultural differences

Neg.c

Neg.

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Table 3. (Continued )
Author(s) and Year Sample Cultural Dimension Performance Measure Impact of Cultural Differencesa Neg.g Moderator(s) Identiedb

Van Oudenhoven and van der Zwee (2002) Very, Lubatkin and Calori (1996) Weber (1996)

Cross-border

Mixed Domestic

National and corporate cultural differences Domestic vs. cross-border Corporate cultural differences

Cooperation success

Country-specic acquisition experience Attractiveness of acquirers culture /

Acculturative stress Effectiveness of integration process Top management commitment Top management commitment, cooperation, stress, and negative attitudes toward organization

n.s. Neg.

Neg. Neg. Degree of target autonomy removal

Weber, Shenkar and Raveh (1996)

Domesticd

Corporate cultural differences

Cross-borderd

Corporate cultural differences Hofstede dimensionsf

Pos.

Pos.

Notes:

Neg. = negative and statistically signicant; n.s. = non-signicant; Pos. = positive and statistically signicant; b / = no moderator identied; c Data provided by the author(s) on request; d Results separately reported for sub-samples of study; e No signicance levels reported, but differences were considered meaningful by authors; f The four Hofstede dimensions were analyzed separately; g Based on data of acquisitions only (joint-ventures and strategic alliances were excluded); data was provided by rst author on request.

between the top management teams of the two companies, and socio-cultural integration outcomes (in this case, top management turnover). Weber, Shenkar and Raveh (1996) found national cultural differences to be positively associated with various aspects of the socio-cultural integration process in a sample of crossborder M&A, but found organizational cultural differences to be negatively related to socio-cultural integration outcomes in a sample of domestic M&A. The same pattern emerged in a case survey conducted by Larsson and Risberg (1998). Largely consistent with these ndings, Very et al. (1996), in a study of acculturative stress in European cross-border M&A, observed that national cultural differences elicited perceptions of attraction rather than stress, depending on the nationalities of the buying and acquiring rms. As indicated by Table 3, the bulk of empirical studies found a negative relationship between cultural differences and socio-cultural integration outcomes.

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For example, Weber (1996), in a study of U.S. acquisitions, found that differences in corporate culture were negatively associated with target rm managers level of commitment and the perceived effectiveness of the integration process. Largely consistent with Weber (1996), research conducted by Larsson and his colleagues suggest that differences in organizational culture lead to employee resistance and poor acculturation outcomes, and may thus create obstacles to synergy realization (Larsson & Finkelstein, 1999; Larsson & Risberg, 1998). A sizable number of studies have documented a negative effect of cultural differences on top management turnover. Lubatkin, Schweiger and Weber (1999) found that organizational cultural differences were associated with higher top management turnover in the rst year after acquisition. Krug and his colleagues observed a similar effect in both domestic and cross-border acquisitions (Krug & Hegarty, 1997, 2001; Krug & Nigh, 1998). In general, executives were more likely to depart when their rm was acquired by a foreign rm, as opposed to a domestic rm. The negative impact of cultural differences on turnover was less pronounced in the short-term when the acquirer had international acquisition experience, and it was less pronounced in the long-term when the acquirers acquisition experience was in the targets home country (Krug & Nigh, 1998). However, cultural distance was only one of several factors that affected turnover in these studies. For example, executives were more likely to stay when they were offered challenging positions with greater status and when they viewed the long-term effects of the combination to be positive (Krug & Hegarty, 2001). Interestingly, the accumulated research evidence suggests that in cross-border M&A, cultural differences may have a positive effect on aspects of the sociocultural integration process such as the cultural sensitivity and tolerance exhibited by the acquiring rm managers (Larsson & Risberg, 1998; Very et al., 1996; Weber et al., 1996). In contrast, (organizational) cultural differences were generally found to have a negative impact in domestic settings. The only exception is the Krishnan et al. (1997) study, which used a cultural distance measure that is incompatible with the ones used in other studies, namely dissimilarities in functional backgrounds between top managers. These ndings support the conclusion that national cultural differences are more salient than organizational cultural differences, thereby increasing managers awareness of the signicance of cultural factors in the integration process and possibly leading to more culturally sensitive integration management (Larsson & Risberg, 1998; Schweiger & Goulet, 2000; Teerikangas & Very, 2003). In summary, the foregoing research review suggests that cultural differences are more closely associated with socio-cultural integration outcomes than nancial performance measures. However, it is important to note that the studies included in the literature review differ widely in terms of sample characteristics, geographic

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regions covered, methodologies used, dimensions of cultural differences examined, and degree of control for potential moderators, thereby making it difcult to draw any rm conclusion about the impact of cultural differences on M&A outcomes.

IMPACT OF CULTURAL DIFFERENCES ON MERGER AND ACQUISITION PERFORMANCE TENTATIVE EXPLANATIONS AND AN INTEGRATIVE MODEL
Several possible explanations for the lack of consensus that emerged from previous research on the performance impact of cultural differences in M&A have been offered (e.g. Cartwright, 1997; Gertsen et al., 1998; Schoenberg, 2000; Schweiger & Goulet, 2000), and sources of complexity underlying the culture-performance relationship in M&A have been discussed (Teerikangas & Very, 2003). Building on and extending this research, we will offer several explanations for the anomalies observed in previous research on the performance impact of cultural differences in M&A and develop a framework that synthesizes our current understanding of the role of culture in M&A.

The Impact of Cultural Differences Depends on the Outcome Variable Examined M&A performance can be assessed in various ways. While the majority of existing post-acquisition performance research uses stock market-based measures, researchers have also relied on accounting measures to evaluate post-acquisition performance (see Datta et al., 1992; King et al., 2004 for meta-analyses). Recently, M&A researchers have called for a more inclusive denition of M&A success that also encompasses non-nancial variables in order to overcome some of the problems associated with accounting- and stock market-based measures, to facilitate cumulating research across disciplines, and to bring the dependent variable of interest closer to the phenomenon under investigation (Larsson & Finkelstein, 1999; Schweiger & Walsh, 1990). For the purpose of this review, we expanded the denition of M&A success to include socio-cultural integration outcome measures. They capture the degree of conict and strain at the sociocultural level and represent an often neglected, but critical indicator of M&A success and failure from the perspective of the employees and the organization as a whole. Accounting-based performance measures, stock market returns, and sociocultural integration outcome measures represent very different dimensions of

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M&A success. How the investment communities react to the announcement of a merger or an acquisition may differ signicantly from the reactions of employees or customers if for no other reason than the interests of these constituencies are different, and sometimes at odds. Also, these measures vary in terms of unit of analysis (individuals or groups versus the organization), the objectivity and reliability of measurement (self-report measures or objective data), and time of measurement (assessed shortly or some time after the announcement). Thus, they may share little common variance. Of the three categories of M&A outcome variables considered in the present research review, socio-cultural integration outcomes were the ones most strongly and consistently related to cultural differences. In contrast, accountingand stock market-based measures of post-acquisition performance showed no clear pattern of correlations with cultural differences. This nding is not surprising, as socio-cultural integration outcomes are much closer to the phenomenon under investigation than nancial performance measures.

Cultural Issues Cannot be Viewed in Isolation from Other Variables M&A performance may be subject to many other inuences aside from those that arise from cultural differences. Variables that potentially moderate the relationship between cultural differences and M&A performance, and that must be controlled for in studies of the performance impact of cultural differences in M&A, include the degree of relatedness and the integration level chosen (e.g. Datta, 1991; Larsson & Lubatkin, 2001), differences in power and size (e.g. Larsson & Finkelstein, 1999; Schoenberg, 1996), the degree of retained autonomy on the part of the acquired rm (e.g. Datta & Grant, 1990; Haspeslagh & Jemison, 1991), the mode of takeover (e.g. Hambrick & Cannella, 1993; Stahl, Chua & Pablo, 2003), prior acquisition experience of the acquirer (e.g. Finkelstein & Haleblian, 2002; Singh & Zollo, 2004), and the interventions chosen to manage cultural differences (e.g. Cartwright & Cooper, 1996; Stahl, Pucik, Evans & Mendenhall, 2004). Based on the present research review, the single most important factor inuencing the relationship between cultural differences and M&A performance is the degree of relatedness between the acquiring rm and the acquired rm, which, in turn, determines the level of integration, the extent of inter-rm contact, and the degree of retained autonomy and change in the acquired rm (Pitkethly, Faulkner & Child, 2003). M&A can be part of a strategy of related diversication in which the acquired business is expected to provide new resources, product lines, and managerial expertise, or foster growth through unrelated diversication with no intention of achieving synergies (Chatterjee et al., 1992; Haspeslagh & Jemison, 1991; Larsson & Finkelstein, 1999). While more closely related M&A

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usually require a higher degree of operational integration, integration efforts in unrelated M&A tend to be minimal. Cultural differences are unlikely to be as critical an issue for M&A that require low levels of integration due to minimal interdependencies between the acquiring and target rms businesses (Javidan & House, 2002; Larsson & Lubatkin, 2001).

Shift in Focus from the Initial Conditioning Factors to the Integration Process With a few notable exceptions, the theoretical models and empirical studies reviewed in this chapter have taken a rather static approach to understanding the role of culture in M&A. In focusing on either pre-acquisition cultural differences or the situation at the time of the takeover, these models and studies essentially treat integration as a black box. In contrast, relatively little attention has been paid to the dynamics of the integration process and the potentially critical role that the acquirers integration decisions and actions play in determining the success of an M&A. A process perspective on M&A (Birkinshaw, Bresman & H akanson, 2000; Haspeslagh & Jemison, 1991; Jemison & Sitkin, 1986) suggests that the extent to which projected synergies are realized in an M&A depends on the ability of the acquirer to manage the integration process in an effective manner. One of the implications of this perspective is that the strategic, nancial and organizational conditioning factors at the time of the merger or acquisition including cultural differences can only predict the long-term success if integration process variables are taken into consideration. While factors such as buyer strategy, acquisition premium paid, or organizational t determine the value creation potential of an M&A, the acquirers integration decisions and actions determine the extent to which that potential is realized (Morosini, 1998; Stahl, Mendenhall, Pablo & Javidan, 2005). Future research on the performance impact of cultural differences in M&A and management practice as well would benet from opening up the black box and paying greater attention to the integration processes and management actions that affect M&A success and failure.

Culture as a Multi-Level Construct and Emergent Process The use of non-traditional concepts of culture and multiple measures of cultural differences has consistently been encouraged by M&A scholars (e.g. Gertsen et al., 1998; Teerikangas & Very, 2003; Vaara, 2003) to improve the understanding of

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how various dimensions and levels of culture interact in inuencing the integration process in M&A. Despite the call for a more sophisticated conceptualization of culture and a more ne-grained analysis of cultural differences, the bulk of empirical research relies on a rather simplistic and one-dimensional approach to understanding the performance implications of cultural differences in M&A. Practically all of the studies reviewed in this chapter focused on organizational or national cultural differences (or sometimes both), but few studies looked at other dimensions of cultural differences. This is despite evidence that differences in professional, functional, and industry cultures play a critical role in the M&A process (David & Singh, 1994; Schweiger & Goulet, 2000). The majority of existing M&A integration research has adopted the notion of a monolithic and stable culture, implicitly assuming that all members of an organization share the same cultural orientation and that this orientation is relatively stable over time. M&A researchers have recently challenged both of these assumptions (e.g. Gertsen et al., 1998; Kleppest, 2005; Schrey ogg, 2005; Vaara, 2002), arguing instead that culture is an essentially dynamic and emergent phenomenon that comes into existence in relation to and in contrast with another culture, and that each organization consists of numerous individuals with distinct self-identities that are socially and contextually produced. A more sophisticated understanding of culture in research on the performance impact of cultural differences in M&A would require researchers to focus on multiple levels of analysis, pay attention to the interplay between different culture levels, acknowledge the existence of subcultures within merging organizations, and conceptualize culture as a dynamic and emergent phenomenon.

Towards an Integrative Framework The model depicted in Fig. 1 synthesizes theoretical perspectives and empirical ndings on the role of culture in M&A. It accounts for some of the complexity underlying the culture-performance relationship in M&A and can guide future research by delineating the main mechanisms through which cultural differences may affect M&A performance. Although it is rooted in a predominantly functionalist and objectivist understanding of culture as a relatively stable system of norms, values, and patterns of behavior, it recognizes the existence of multiple layers or dimensions of culture and captures some of the dynamics of the integration process. The model builds on a conceptual split between the sub-processes of task integration (or value creation), measured in terms of transfers of capabilities and resource sharing between the acquiring and the acquired rm (Birkinshaw et al., 2000); and socio-cultural integration (or human integration), which involves

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Fig. 1. Framework for Studying the Role of Culture in Mergers and Acquisitions. Note: Dotted arrows indicate moderating effects.

generating satisfaction, commitment and a shared identity among the employees from both companies (Birkinshaw et al., 2000; Shrivastava, 1986). Proceeding from left to right, it proposes that cultural differences affect M&A performance through their impact on task integration and socio-cultural integration. Previous research has shown that effective management of these integration sub-processes is critical in determining the extent to which envisaged synergies can be reaped (Haspeslagh & Jemison, 1991; Hitt et al., 2001; Morosini, 1998). To the extent that information about the post-acquisition nancial performance, as reected in accounting measures such as sales growth and return on assets, is assimilated by the market, the sub-processes of task integration and socio-cultural integration may also affect stock market returns (Datta et al., 1992). Although task integration and socio-cultural integration are conceptually distinct, they are not independent of one another. Aspects of socio-cultural integration such as employee commitment, trust, and shared identity facilitate the transfer of strategic capabilities and resource sharing (Birkinshaw et al., 2000). Successful task integration, in turn, is likely to enhance employee satisfaction, commitment, and the quality of the interpersonal relationships between the

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members of the combining organizations (Haspeslagh & Jemison, 1991; Schweiger & Goulet, 2000). At the same time, it is possible for task integration and socio-cultural integration to diverge, for example, when synergies are realized at the expense of the employees (Cartwright & Cooper, 1996; Marks & Mirvis, 2001). The M&A integration process is subject to several other factors aside from those that arise from cultural differences. The model depicted in Fig. 1 proposes that the sub-processes of task integration and socio-cultural integration are affected by a set of conditioning factors, particularly ones related to the nature of the relationship between the acquirer and the target, as well as integration process variables that are directly related to the acquirers integration decisions and actions. Research evidence indicates that factors such as prior acquisition experience of the acquirer (Finkelstein & Haleblian, 2002; Singh & Zollo, 2004), the mode of takeover or social climate surrounding the acquisition (Hambrick & Cannella, 1993; Hitt et al., 2001), the pattern of dominance between the acquiring and the acquired rm (Jemison & Sitkin, 1986; Pablo, 1994), the socialization mechanisms used by the acquirer (Birkinshaw et al., 2000; Larsson & Lubatkin, 2001), and the quality and quantity of communication (Schweiger & DeNisi, 1991; Stahl & Sitkin, 2005) are all likely to affect the extent to which synergies are realized and a shared identity is established in M&A. In addition to the proposed direct effects on task integration and socio-cultural integration, the conditioning factors and integration process variables proposed by the model constitute potential moderators of the relationship between cultural differences and integration outcomes. Factors such as the degree of relatedness between the acquiring and the acquired rm, differences in power and size, and the mode of takeover or social climate surrounding an acquisition are likely to moderate the effects of cultural differences on task and socio-cultural integration outcomes. For example, there is evidence to suggest that the potentially negative effects of cultural differences on trust building and the creation of a shared identity are augmented by hostile takeover tactics and imposition of control by the acquirer (Angwin, 2001; Datta & Grant, 1990; Stahl, Chua & Pablo, 2003). Interestingly, the theoretical perspectives and empirical ndings reviewed in this chapter suggest that cultural differences, if properly understood and managed, can be an asset rather than a liability in M&A, and that cultural differences may affect the sub-processes of task integration and socio-cultural integration in different ways. National cultural differences, which are more salient than organizational cultural differences, may increase the awareness of the signicance of cultural factors in the integration process and lead to more culturally sensitive integration management (e.g. greater use of social integration mechanisms, lower levels of imposed control, etc.). In addition, national cultural differences may enhance the

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combination potential and boost performance by providing access to the targets or acquirers diverse set of practices and capabilities (Morosini et al., 1998). For example, Olie and Verwaal (2004) found that acquisitions in unfamiliar markets can trigger new solutions, foster innovation and enhance the development of technological skills. Thus, cultural differences can be a source of value creation and learning in M&A, but they can also create obstacles to reaping projected synergies by exacerbating social integration problems and diminishing the rms capacity to absorb capabilities from the other party (Stahl, Bj orkman & Vaara, 2004).

CONCLUSION
This chapter provided a review of theoretical perspectives and empirical research on the role of culture in M&A, with a particular focus on the performance implications of cultural differences in M&A. Consistent with the cultural distance hypothesis and extant cultural t and acculturation models, empirical evidence indicates that national and organizational cultural differences are often associated with negative outcomes at the socio-cultural level, such as increased top management turnover, reduced employee commitment, and acculturative stress. However, the impact of cultural differences on post-acquisition nancial performance is less clear. While some studies found cultural differences to be negatively associated with accounting- or stock market-based performance measures, others observed a positive relationship or found cultural differences to be unrelated to post-acquisition performance. These ndings lead us to conclude that the relationship between cultural differences and M&A outcomes is more complex than previously thought. Whether cultural differences have a positive or a negative impact on M&A performance, or any performance impact at all, depends on the performance measures examined and is also likely to depend on the nature and extent of cultural differences, the integration approach taken, the interventions chosen to manage cultural differences, and a variety of other factors. Rather than asking if cultural differences have a performance impact in M&A, future research endeavors should focus on how cultural differences affect the integration process, and what other factors facilitate or constrain successful socio-cultural and task integration in M&A.

ACKNOWLEDGMENTS
We extend our gratitude to Harry Barkema, Ingmar Bj orkman, Chei Hwee Chua, Olivier Irrmann, Philip Goulet, Eero Vaara and Yaakov Weber for their

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helpful comments on earlier drafts of this paper. We would also like to thank Harry Barkema, Laurence Capron, Jeffrey Krug, Constantinos Markides, Richard Schoenberg, and Maurizio Zollo for providing us with unpublished data for inclusion in the research review.

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APPENDIX
Theoretical Perspectives on the Role of Culture in Mergers and Acquisitions

Author(s)

Basic Assumptions

Proposed Impact of Cultural Differences In traditional combinations differences in organizational culture are accepted by the target as long as employee autonomy is increased. Diminishing autonomy may result in strong employee resistance. Cultural differences in collaborative combinations are supposed to lead to integration problems no matter what the direction of cultural change is. The greater the dissimilarity between cultural types, the longer the integration period. Post-acquisition cultural risk varies depending on several contingencies, e.g. divisions and functions of the target rm. Post-acquisition regimes imposed on the target by the acquiring rm have a signicant inuence on integration outcomes as perceptions of injustice (relative deprivation) can easily lead to employee stress and resistance. Cultural differences between combining organizations strengthen the forces of cultural differentiation, which tend to resist the post-combination integration forces. The resulting acculturative tension can cause cross-cultural conicts.

Proposed Moderators

Cartwright and Cooper (1996)

The attractiveness and acceptability of a combination partners culture is dependent on whether that culture is perceived as increasing or reducing employee participation and autonomy. The success of traditional combinations depends on accepted assimilation; that of collaborative combinations (e.g. mergers of equals) on smooth integration.

Direction of cultural change Power differential

David and Singh (1994)

Strategic, legal, and cultural issues can be integrated in a multi-level system of sources and loci of cultural differences to determine the degree of acquisition cultural risk. Cultural distance can originate from differences in organisational, professional, or national culture.

External conditions (e.g. legal systems) Integration level Integration mode Post-acquisition regime of acquirer Cultural risk of target rm operations

Elsass and Veiga (1994)

Organizational acculturation can be described as dynamic interaction between the opposing forces of cultural differentiation (the desire of groups to maintain their cultural identity), and organizational integration (the organizational need for cultural groups to work together).

Degree of acculturative tension

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Author(s) Basic Assumptions

GUNTER K. STAHL AND ANDREAS VOIGT


Proposed Impact of Cultural Differences Cultural differences between merging organizations complicate communication, decision-making, and the formulation of a joint strategic intent. Country specic external conditions make external adaption more difcult. To overcome these difculties organizational alignment must be reached by successful integration management. Cultural differences reinforce the creation of ingroup vs. outgroup bias and strengthen the claim for distinction in both organizations. Consequently, the notion of being culturally different is stressed when communicating with each other as the need to identify differences is an essential part of the dynamic process of identication and sense-making. Images of culture clashes may be used to maintain and legitimize organizational identities, which can lead to serious integration problems. Cultural differences reinforce all barriers to acculturation: Initial dilution as less meanings will be shared by members of the combined organization; Lack of joint socialisation mechanisms; Separate cultural maintenance mechanisms as the own culture is gloried by both combination partners. Proposed Moderators

Javidan and House (2002)

National cultural differences affect the post-merger rms strategic intent and organizational alignment in cross-border mergers.

Country specic external conditions Integration management

Kleppest (1998)

Organizational culture is seen as a process which is shaped by the highly contextual creation of (narrated) meaning. In M&A the need of the combined organizations for a (re)negotiation of meaning, identity, and relations increases and descriptions of the situation at hand are frequently exchanged to renegotiate their meaning and reveal implications for organizational identities and inter-organizational relationships.

Inter-organizational communication

Larsson (1990)

Acculturation, dened as the development of jointly shared meanings fostering co-operation between joining rms, is a key process in M&A. The development of productive joint organisational cultures in M&A is complicated by barriers to constructive cultural cooperation.

Management of acculturation barriers

Impact of Cultural Differences on Merger and Acquisition Performance


Author(s) Basic Assumptions Proposed Impact of Cultural Differences The degree of cultural differences determines whether these are benecial or detrimental. Two identical organizational cultures can be no better than the sum of its parts while too much distinction in underlying values and ways of approaching work is unhealthy. A medium degree of cultural differences is benecial as it prompts positive debate about what is best for the post-combination organization. When the integration level is high cultural differences are considered to be an obstacle. Perceptions of cultural differences create a strong desire to preserve its own culture in the target organization, which makes the acquirers culture less attractive. The resulting incongruence of preferred acculturation modes leads to acculturative stress and puts successful M&A implementation at risk.

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Proposed Moderators

Marks and Mirvis (1998)

The extent of post-combination change taking place in the acquiring and acquired rms dene different integration types.

Degree of cultural differences

Nahavandi and Malekzadeh (1988)

Both acquired and acquiring rm choose preferred modes of acculturation which have to be congruent for successful integration. The acquired rms preferred mode of acculturation is determined by the desire to preserve its own cultural practices and the attractiveness of the acquirer. The acquiring rms preferred mode of acculturation is determined by its multiculturalism and the degree of relatedness between the rms. M&A integration approaches depend on the level of integration, the degree of cultural exchange, the extent to which the own cultural identity is valued and the other rms culture is regarded as attractive, and external conditions. The symmetry of power between combination partners plays a major role in predicting combination outcomes.

Integration level Relatedness Multiculturalism of acquirer Targets desire to preserve own culture Attractiveness of acquirer

Olie (1990)

As long as the acquiring organization is able to exert asymmetric power to impose its culture on the target, cultural differences will not endanger M&A success. Serious integration problems are expected in mergers of equals due to power symmetry and the need to create a coherent third culture.

Integration level Degree of cultural exchange Strength of cultural identities Attractiveness of combination partners External conditions Power differential

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Author(s) Basic Assumptions

GUNTER K. STAHL AND ANDREAS VOIGT


Proposed Impact of Cultural Differences Given two different organizational cultures, whether the M&A will be successful depends on the quality of the relationship between the parties and the acquired rms chance to participate in selecting the acculturation approach. Tension is created when cultural differences are combined with power imbalances. Cultural differences increase the degree of ambiguity surrounding an acquisition as people of different backgrounds and social identities are brought together. Cultural confusion is created due to problems of social interaction and communication which in turn drives organizational hypocrisy when integration rhetoric is only loosely coupled with actions. Cultural confusion and ambiguity facilitate politicization of signicant integration issues. Proposed Moderators

Sales and Mirvis (1984)

Acculturation form and type depend on the power differential between combining rms, the nature of relations between them, and whether the acquired rm is allowed to keep its own cultural identity.

Nature of relations between combination partners Power differential Degree of target autonomy removal

Vaara (2003)

Post-acquisition decision-making is a contextual process which is characterized by uncertainty and ambiguity while being charged with political tension. Different social identities of decision-makers are created through the responsibility for the acquisition and previous organizational and cultural backgrounds. These distinct social identities lead to different frames for interpreting integration issues.

Integration management