Mars–Venus marriages: Culture and cross-border M&A

Abstract

We explore factors affecting the long-term performance of cross-border M&A, with a special focus on cultural distance between the countries of the two firms. Using a sample of over 400 cross-border acquisitions in the period 1991-2000, we find that contrary to general perception, cross-border acquisitions perform better in the long-run i f the acquirer and the target come from countries that are culturally more disparate. We use the Hofstede measure of cultural dimensions to define cultural distance and also examine alternative measures such as language, religion and legal origin to capture cultural differences. The positive effect of cultural distance persists after controlling for several deal-specific variables and country-level fixed effects, and is robust to alternative specifications and horizons of long-term performance. Divergence (convergence) in degree of individualism and hierarchy in power structures (attitudes towards uncertainty) beneficially impacts post-acquisition performance. Among deal characteristics, cash and friendly acquisitions tend to perform better in the long-run. There is also some evidence of synergies when acquirers from stronger corporate governance regimes acquire targets from weaker regimes.

How Does National Culture Impact Internalization Benefits in Cross-Border Mergers and Acquisitions?

“…Possible reasons are increased acquisition costs due to manager resistance, trust issues, and post-acquisition integration challenges (Datta and Puia, 1995). On the other hand, researchers also find a positive relation between bidder firm wealth effects and CD, after controlling for other factors (Morosini, Shane, and Singh, 1998;Chakrabarti, Gupta-Mukherjee, and Jayaraman, 2009). A possible explanation for this finding is that cross-border M&As facilitate the transfer of valuable new routines and repertoires between culturally diverse countries (Morosini, Shane, and Singh, 1998).…”

“…In support of this positive relationship, researchers suggest that cross-border M&As provide access to valuable new routines and repertoires (Morosini, Shane, and Singh, 1998) and face less integration difficulties when the target firm remains autonomous. Further, Chakrabarti, Gupta-Mukherjee, and Jayaraman (2009) suggest that acquirers may scrutinize deals involving targets from culturally distant countries more carefully and conduct better due diligence than in mergers involving culturally similar target countries. All in all, the previous evidence suggests there is some debate on the influence of CD on bidder post-merger performance.…”

The Roles of Chinese CEOs in Managing Individualistic Cultures in Cross‐border Mergers and Acquisitions

“…However, how cultural distance affects CBMA wealth creation is not clear (Chakrabarti et al, 2009;Ghemawat, 2001;Hennart and Larimo, 1998;Kogut and Singh, 1988;Reus and Lamont, 2009;Shimizu et al, 2004;Stahl and Voigt, 2008). One major metaanalysis suggests that the relationship between cultural distance and post-acquisition performance may not exist (Stahl and Voigt, 2008).…”

Attributional tendencies in cultural explanations of M&A performance

“…One of the key debates in research on mergers and acquisitions (M&A) focuses on the role of cultural differences. Scholars have examined the impact of organizational cultural differences on M&A performance (Chatterjee et al, 1992;Stahl, Mendenhall, and Weber, 2005;Stahl and Voigt, 2008) and, in international settings, the impact of national cultural differences (Calori, Lubatkin, and Very, 1994;Chakrabarti, Gupta-Mukherjee, and Jayaraman, 2009;Morosini, Shane, and Singh, 1998;Reus and Lamont, 2009;Weber, Shenkar, and Raveh, 1996). Most of this research tells the same story; cultural differences tend to have a negative impact on performance.…”