Cultural Differences

Empirical results are inconclusive

In analysing cultural differences, researchers have yielded contradictory findings: some of them demonstrated the transformation of cultural differences into synergies leading to better performance, while others outlined the discrepancies derived from cultural differences and their detrimental effects on M&A outcomes.

Stahl and Voigt (2005) put forward several explanations for these differing conclusions. Two of the main reasons are the following: first, they stress that the impact of cultural differences depends on the chosen measure of M&A success. In the past, researchers have assessed performance in various ways that represent different dimensions of success, including market-based measures, accounting

They create a model where post-merger cultural integration can happen in four different ways: assimilation, where the acquired group willingly adopts the identity and culture of the other; integration, where the two firms are integrated structurally, but less so culturally and neither tries to dominate the other, which can happen without conflicts only if the acquire accepts to allow such autonomy; separation, where the acquired group refuses to adopt the other firm’s culture altogether, and each will function independently if the acquire allows it; and deculturation, where the members of the acquired firm do not value their culture but do not want to adopt that of another, which creates confusion and loss of identity. The authors suggest that the adopted integration strategies from both sides should be compatible. This will depend on the companies’ willingness to preserve their own culture, and their perception of the attractiveness of the other culture. Therefore, the impact of cultural differences can be lessened depending on the perceptions of the relative attractiveness of the new culture and by the chosen form of integration

Employees cannot be forced to cooperate or to change their business behaviour. If they do not have incentives to do so, their attitudes can create major obstacles to achieving integration benefits. Dagnino and Pisano (2008) find empirical evidence that integration issues between the two group members, their conflicting individual objectives, and national and corporate cultures make the exchange of knowledge becomes more difficult and therefore are the cause of most M&A failures.

Flynn (2005) describes a psychological process in mergers whereby employees can adopt three forms of identity orientations: personal, relation, and collective. Employees expressing personal identity will abandon identification to the former company, though without adopting that of the new firm; employees adopting relational identity will maintain allegiance to the former company; and collective identity is expressed by a willingness to adopt the new organization and strive for its success. The author stresses that only the third identity allows a fruitful collaboration, whereas the two others are characterized by staff pursuing their self-interest and therefore absence of information sharing, non-attendance to meetings, and rumour