IMPACT OF CULTURAL DIFFERENCES
ON MERGER AND ACQUISITION
PERFORMANCE: A CRITICAL
RESEARCH REVIEW AND AN
INTEGRATIVE MODEL
Günter 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 benefits, 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 findings 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, 51–82
Copyright © 2005 by Elsevier Ltd.
All rights of reproduction in any form reserved
ISSN: 1479-361X/doi:10.1016/S1479-361X(04)04003-7
51
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GÜNTER K. STAHL AND ANDREAS VOIGT
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
difficulties, 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 financial and strategic factors (cited in Cartwright & Cooper, 1996, p. 28).
Problems may be exacerbated in international settings. Cross-border M&A are
difficult 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 conflicts 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 conflicts 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
Impact of Cultural Differences on Merger and Acquisition Performance
53
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 findings 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
findings 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 fit models,
acculturation models, and models adopting a social constructivist perspective on
culture. Each of them is discussed below.
The Cultural Fit Perspective
Cultural fit 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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GÜNTER K. STAHL AND ANDREAS VOIGT
1994; Javidan & House, 2002; Morosini & Singh, 1994). Cultural fit 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 fit model is Cartwright and Cooper’s
(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 firms 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 other’s 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 firm 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 fit models such as the one proposed by
Cartwright and Cooper (1996) is that they illustrate that cultural differences can
pose significant barriers to achieving integration benefits, 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 defined 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) define 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
Impact of Cultural Differences on Merger and Acquisition Performance
55
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 Lubatkin’s (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 Malekzadeh’s (1988)
model of acculturative stress proposes that the degree of congruence between
the acquiring and acquired firms’ preferred modes of acculturation will affect
the amount of stress and conflict experienced during the acculturation process.
According to this model, the acquired firm’s 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 acquirer’s culture.
The acquiring firm’s preferred acculturation mode is largely determined by its
diversification 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 acquirer’s diversification 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 firm 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 firm desires to retain its own cultural identity.
The Social Constructivist Perspective
While the extant cultural fit 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. Kleppestø, 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, Søderberg & Torp,
1998).
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GÜNTER K. STAHL AND ANDREAS VOIGT
Kleppestø (1993) defines culture as “constantly ongoing attempt of the collective
to define 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 Hofstede’s (1980) widely cited
definition of culture as “collective mental programming.” According to Kleppestø
(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 (Kleppestø, 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 fit perspective, an acculturation perspective, or a social
constructivist perspective. Cultural fit 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 fit 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 fit, 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 firm, and the interventions chosen to manage cultural
differences.
Impact of Cultural Differences on Merger and Acquisition Performance
57
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 identified 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 identified 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 reflect 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 reflect
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 firm is affected (Datta et al., 1992).
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GÜNTER K. STAHL AND ANDREAS VOIGT
Studies examining socio-cultural integration outcomes, such as employee
satisfaction, voluntary turnover, and acculturative stress. These variables capture
the degree of conflict 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 findings 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 identified 18 studies that examined the impact of cultural differences on
accounting-based measures of post-acquisition performance. Table 1 summarizes
the key findings 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 firm 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 significantly 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
Impact of Cultural Differences on Merger and Acquisition Performance
59
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
Anand, Capron
and Mitchell
(2003)
Barkema, Bell
and Pennings
(1996)
Bühner (1991)
Mixed
Domestic vs.
cross-border
Performance
index
n.s.
/
Crossborder
Hofstede
index
Return on
equity
Pos.c
/
Mixed
Profitability
Neg.
Datta (1991)
Domestic
Performance
index
Neg.
Datta, Grant and
Rajagopalan
(1991)
Domestic
Domestic vs.
cross-border
Differences in
management
style
Management
style incompatibility
Performance
index
Neg.
Krishnan, Miller
and Judge
(1997)
Domestic
Return on
assets
Pos.
Larsson and
Finkelstein
(1999)
Mixed
Dissimilarities
in functional
backgrounds
between top
management
teams
Management
style
dissimilarity
Domestic vs.
cross-border
Corporate
cultural
differences
Synergy
realization
n.s.
Integration
leveld
n.s.
Employee
resistanced
/
Larsson and
Risberg
(1998)
Lubatkin,
Calori, Very
and Veiga
(1998)
Morosini, Shane
and Singh
(1998)
Schoenberg
(1996)
Domestice
Crossbordere
Mixed
Synergy
realization
n.s.f
Moderator(s)
Identifiedb
Owner
control
/
Degree of
target
autonomy
removal
/
Pos.f
Domestic vs.
cross-border
Growth in
sales
n.s.
/
Crossborder
Hofstede
index
Growth in
sales
Pos.
/
Crossborder
Differences in
management
style
Performance
index
Neg.
Industry
60
GÜNTER K. STAHL AND ANDREAS VOIGT
Table 1. (Continued )
Author(s) and
Year
Sample
Cultural
Dimension
Performance
Measure
Impact of
Cultural
Differencesa
Moderator(s)
Identifiedb
Schoenberg
(2004)
Crossborder
Differences in
management
style
Performance
index
Neg.g
Cultural
measures
Stahl,
Kremershof
and Larsson
(2004)
Very, Lubatkin
and Calori
(1996)
Very, Lubatkin,
Calori and
Veiga (1997)
Mixed
Organizational
cultural
differences
Mixed
Integration
Approach
Trust
Neg.
Domestic vs.
cross-border
Sales
growth and
realized
profits
Performance
index
n.s.
Nationality
of target
Mixed
Cultural incompatibility
Performance
index
Neg.
Weber (1996)
Domestic
Corporate
cultural
differences
Return on
assets
n.s.
Weber and
Pliskin (1996)
Domestic
Performance
index
Neg.
Zollo (2002)
Mixed
Corporate
cultural
differences
Corporate
cultural
differences
Degree of
target
autonomy
removal
Nationality
of Target
Degree of
target
autonomy
removal
/
Performance
index
Pos.
/
Notes:
Neg. = negative and statistically significant; n.s. = non-significant; Pos. = positive and
statistically significant; b / = no moderator identified; c Based on data of acquisitions only
(joint-ventures were excluded); data was provided by first author on request; d Mediated effect
(see text); e Results separately reported for sub-samples; f No significance 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.
a
performance by providing access to the target’s or acquirer’s 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
Impact of Cultural Differences on Merger and Acquisition Performance
61
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 firms’ financial performance. The same study found
a positive effect of autonomy removal on financial 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. 1197–1198). 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 identified 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 firms’ 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 firms’ cumulative abnormal
returns. Interestingly, acquirer’s multiculturalism (i.e. the degree to which the
acquirer tolerates the acquired firm’s 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 firms’ 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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GÜNTER K. STAHL AND ANDREAS VOIGT
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
Moderator(s)
Identifiedb
Bessler and
Murtagh
(2002)
Bühner (1991)
Mixed
Domestic
vs.
cross-border
Domestic
vs.
cross-border
Corporate
cultural
differences
Cumulative
abnormal
returns
Cumulative
abnormal
returns
Cumulative
abnormal
returns
n.s.
Industry
Pos.
Neg.
Owner control
Acquisition
experience
/
Cross-border
Hofstede
index
Neg.
/
Dewenter (1995)
Mixed
Eddy and Seifert
(1984)
Mixed
Harris and
Ravenscraft
(1991)
Mixed
Domestic
vs.
cross-border
Domestic
vs.
cross-border
Domestic
vs.
cross-border
Cumulative
excess
returns
Cumulative
abnormal
returns
Stock prices
and
dividends
Average bid
premiums
Markides and
Ittner (1994)
Cross-border
Hofstede
index
n.s.
Markides and
Oyon (1998)
Cross-border
Masculinity
Olie and
Verwaal
(2004)
Swenson (1993)
Cross-border
Hofstede
index
Mixed
Domestic
vs.
cross-border
Cumulative
abnormal
returns
Cumulative
Abnormal
returns
Cumulative
abnormal
returns
Cumulative
abnormal
returns
Chatterjee,
Lubatkin,
Schweiger
and Weber
(1992)
Datta and Puia
(1995)
Mixed
Domestic
n.s.
n.s.c
Pos.
n.s.
Hostile target
maneuvering
Rival bidders
/
Industry
Strength of
acquirer’s home
currency relative
to the dollar
/
/
Pos.
Host country
experience
Pos.
Target growth
rate
Target’s
price-earnings
ratio
Likelihood of
competition
Impact of Cultural Differences on Merger and Acquisition Performance
63
Table 2. (Coninued )
Author(s) and
Year
Sample
Cultural
Dimension
Performance
Measure
Impact of
Cultural
Differencesa
Wansley, Lane
and Yang
(1983)
Zollo (2002)
Mixed
Domestic
vs.
cross-border
Corporate
cultural
differences
Cumulative
abnormal
returns
Cumulative
abnormal
returns
Pos.
Notes:
Mixed
Pos.
Moderator(s)
Identifiedb
/
Time of
measurement
Neg. = negative and statistically significant; n.s. = non-significant; Pos. = positive and
statistically significant; b / = no moderator identified; c The original study reported a nonsignificant effect based on estimated beta coefficients for a market model; however, based on
the reported mean differences, a negative and significant correlational effect size was calculated.
a
and Yang (1983), and Olie and Verwaal (2004), whose findings 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 firm conclusion about
the relationship between cultural differences and stock market returns.
In interpreting these findings, 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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GÜNTER K. STAHL AND ANDREAS VOIGT
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
Krishnan, Miller
and Judge
(1997)
Domestic
Top management
turnover
Pos.
Krug and Hegarty
(1997)
Krug and Hegarty
(2001)
Krug and Nigh
(1998)
Mixed
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
Neg.
Larsson and
Finkelstein
(1999)
Mixed
Management
style
dissimilarity
Domestic vs.
Cross-border
Domestic vs.
cross-border
Corporate
cultural
differences
Employee
resistance
Neg.
Larsson and
Lubatkin (2001)
Larsson and
Risberg (1998)
Mixed
Cross-Border
Mixed
Domesticd
Cross-borderd
Lubatkin,
Schweiger and
Weber (1999)
Schoenberg (2004)
Domestic
Stahl, Kremershof
and Larsson
(2004)
Mixed
Cross-border
Corporate
cultural
differences
Differences in
management
style
Organizational
cultural
differences
Neg.
Moderator(s)
Identifiedb
/
Combination year
c
Neg.
Relative standing
of target executives
International and
country-specific
acquisition
experience
/
Neg.
Degree of
acculturation
Degree of
acculturation
Employee
resistance
Degree of
acculturation
Employee
resistance
Top management
turnover
n.s.
Neg.e
Nationality of
acquirer
/
Neg.e
Pos.e
Neg.e
Neg.
Combination year
industry
Top management
turnover
Neg.c
/
Trust, job
satisfaction,
commitment,
acceptance of
change, intention to
stay, willingness to
cooperate, Job
performance, and
open
communication
Neg.
/
Impact of Cultural Differences on Merger and Acquisition Performance
65
Table 3. (Continued )
Author(s) and Year
Sample
Cultural
Dimension
Performance
Measure
Impact of
Cultural
Differencesa
Moderator(s)
Identifiedb
Van Oudenhoven
and van der
Zwee (2002)
Cross-border
Cooperation
success
Neg.g
Country-specific
acquisition
experience
Very, Lubatkin and
Calori (1996)
Weber (1996)
Mixed
National and
corporate
cultural
differences
Domestic vs.
cross-border
Corporate
cultural
differences
Acculturative stress
n.s.
Effectiveness of
integration process
Neg.
Attractiveness of
acquirer’s culture
/
Top management
commitment
Top management
commitment,
cooperation, stress,
and negative
attitudes toward
organization
Neg.
Weber, Shenkar
and Raveh
(1996)
Notes:
Domestic
Domesticd
Corporate
cultural
differences
Cross-borderd
Corporate
cultural
differences
Hofstede
dimensionsf
Neg.
Degree of target
autonomy removal
Pos.
Pos.
Neg. = negative and statistically significant; n.s. = non-significant; Pos. = positive and
statistically significant; b / = no moderator identified; c Data provided by the author(s) on
request; d Results separately reported for sub-samples of study; e No significance 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 first author on request.
a
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 findings, 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 firms.
As indicated by Table 3, the bulk of empirical studies found a negative
relationship between cultural differences and socio-cultural integration outcomes.
66
GÜNTER K. STAHL AND ANDREAS VOIGT
For example, Weber (1996), in a study of U.S. acquisitions, found that differences
in corporate culture were negatively associated with target firm 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 first 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 firm was acquired by a foreign firm, as opposed to a domestic
firm. 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 acquirer’s acquisition experience
was in the target’s 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 firm 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 findings support the conclusion that national cultural
differences are more salient than organizational cultural differences, thereby
increasing managers’ awareness of the significance 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 financial
performance measures. However, it is important to note that the studies included
in the literature review differ widely in terms of sample characteristics, geographic
Impact of Cultural Differences on Merger and Acquisition Performance
67
regions covered, methodologies used, dimensions of cultural differences examined,
and degree of control for potential moderators, thereby making it difficult to draw
any firm 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 definition of M&A success
that also encompasses non-financial 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 definition of M&A success to include socio-cultural integration
outcome measures. They capture the degree of conflict 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
68
GÜNTER K. STAHL AND ANDREAS VOIGT
M&A success. How the investment communities react to the announcement of a
merger or an acquisition may differ significantly 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 finding is not surprising, as
socio-cultural integration outcomes are much closer to the phenomenon under
investigation than financial performance measures.
Cultural Issues Cannot be Viewed in Isolation from Other Variables
M&A performance may be subject to many other influences 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 firm (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
influencing the relationship between cultural differences and M&A performance
is the degree of relatedness between the acquiring firm and the acquired firm,
which, in turn, determines the level of integration, the extent of inter-firm contact,
and the degree of retained autonomy and change in the acquired firm (Pitkethly,
Faulkner & Child, 2003). M&A can be part of a strategy of related diversification
in which the acquired business is expected to provide new resources, product
lines, and managerial expertise, or foster growth through unrelated diversification
with no intention of achieving synergies (Chatterjee et al., 1992; Haspeslagh &
Jemison, 1991; Larsson & Finkelstein, 1999). While more closely related M&A
Impact of Cultural Differences on Merger and Acquisition Performance
69
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 firms’ 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 acquirer’s integration decisions and actions play in determining the success
of an M&A.
A “process perspective” on M&A (Birkinshaw, Bresman & Håkanson, 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, financial 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 fit determine the value creation potential of an
M&A, the acquirer’s 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 benefit 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
70
GÜNTER K. STAHL AND ANDREAS VOIGT
how various dimensions and levels of culture interact in influencing the integration
process in M&A. Despite the call for a more sophisticated conceptualization
of culture and a more fine-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; Kleppestø, 2005; Schreyögg,
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
findings 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 firm (Birkinshaw
et al., 2000); and socio-cultural integration (or human integration), which involves
Impact of Cultural Differences on Merger and Acquisition Performance
71
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 financial performance, as reflected 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
72
GÜNTER K. STAHL AND ANDREAS VOIGT
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 acquirer’s 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 firm
(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 firm, 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 findings 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 significance 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
Impact of Cultural Differences on Merger and Acquisition Performance
73
combination potential and boost performance by providing access to the target’s
or acquirer’s 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 firms’ capacity
to absorb capabilities from the other party (Stahl, Björkman & 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 fit 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 financial
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 findings 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 Björkman, Chei Hwee
Chua, Olivier Irrmann, Philip Goulet, Eero Vaara and Yaakov Weber for their
74
GÜNTER K. STAHL AND ANDREAS VOIGT
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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Impact of Cultural Differences on Merger and Acquisition Performance
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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
Proposed Moderators
Cartwright and
Cooper (1996)
The attractiveness and
acceptability of a
combination partner’s 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.
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.
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.
Post-acquisition cultural risk
varies depending on several
contingencies, e.g. divisions
and functions of the target
firm. Post-acquisition regimes
imposed on the target by the
acquiring firm have a
significant influence on
integration outcomes as
perceptions of injustice
(relative deprivation) can
easily lead to employee stress
and resistance.
External conditions
(e.g. legal systems)
Integration level
Integration mode
Post-acquisition
regime of acquirer
Cultural risk of target
firm 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).
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 conflicts.
Degree of acculturative
tension
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GÜNTER K. STAHL AND ANDREAS VOIGT
Author(s)
Basic Assumptions
Proposed Impact of Cultural
Differences
Proposed Moderators
Javidan and House
(2002)
National cultural differences
affect the post-merger firm’s
strategic intent and
organizational alignment in
cross-border mergers.
Cultural differences between
merging organizations
complicate communication,
decision-making, and the
formulation of a joint strategic
intent.
Country specific external
conditions make external
adaption more difficult.
To overcome these difficulties
organizational alignment must
be reached by successful
integration management.
Country specific
external conditions
Integration
management
Kleppestø (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.
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 identification and
sense-making.
Images of culture clashes may
be used to maintain and
legitimize organizational
identities, which can lead to
serious integration problems.
Inter-organizational
communication
Larsson (1990)
Acculturation, defined as the
development of jointly shared
meanings fostering
co-operation between joining
firms, 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.
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 glorified by both
combination partners.
Management of
acculturation barriers
Impact of Cultural Differences on Merger and Acquisition Performance
81
Author(s)
Basic Assumptions
Proposed Impact of Cultural
Differences
Proposed Moderators
Marks and Mirvis
(1998)
The extent of
post-combination change
taking place in the acquiring
and acquired firms define
different integration types.
The degree of cultural
differences determines
whether these are beneficial 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 beneficial as it
prompts positive debate about
what is best for the
post-combination
organization.
Degree of cultural
differences
Nahavandi and
Malekzadeh
(1988)
Both acquired and acquiring
firm choose preferred modes
of acculturation which have
to be congruent for successful
integration.
The acquired firm’s preferred
mode of acculturation is
determined by the desire to
preserve its own cultural
practices and the
attractiveness of the acquirer.
The acquiring firm’s
preferred mode of
acculturation is determined
by its multiculturalism and
the degree of relatedness
between the firms.
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
acquirer’s culture less
attractive.
The resulting incongruence of
preferred acculturation modes
leads to acculturative stress
and puts successful M&A
implementation at risk.
Integration level
Relatedness
Multiculturalism of
acquirer
Target’s desire to
preserve own culture
Attractiveness of
acquirer
Olie (1990)
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 firm’s culture is
regarded as attractive, and
external conditions.
The “symmetry” of power
between combination
partners plays a major role in
predicting combination
outcomes.
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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GÜNTER K. STAHL AND ANDREAS VOIGT
Author(s)
Basic Assumptions
Proposed Impact of Cultural
Differences
Proposed Moderators
Sales and Mirvis
(1984)
Acculturation form and type
depend on the power
differential between
combining firms, the nature
of relations between them,
and whether the acquired firm
is allowed to keep its own
cultural identity.
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 firm’s chance to
participate in selecting the
acculturation approach.
Tension is created when
cultural differences are
combined with power
imbalances.
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.
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 significant
integration issues.
Integration
management