Jumping from Springboard? The Role of Marginal Cultural Distance in Cross-Border M&A Deal Completion

Abstract

This article extends understanding of the cultural experience of a fi rm in a host culture as a mechanism to reduce cultural distances. Integrating organizational learning theory with cultural friction perspective, this study proposes that cultural experience of a focal fi rm is a unique, fi rm-specifi c advantage. Time spent in a particular culture causes cultural friction that diminishes the cultural differences for the focal fi rm at the margin, which we term marginal cultural distance (MCD). Emphasizing the importance of learning from cross-border acquisitions for fi rms from emerging markets, we propose that compared to country-level cultural distance scores, MCD is a better predictor of the likelihood of cross-border deal completion.

Formal international contracts in the presence of cultural distance: An empirical analysis of biopharmaceutical alliances

“…However, national culture is not a homogeneous attribute, and even within a same country, cultural values may fluctuate, such that cultural distance could be lower in the presence of high intracultural variation (Beugelsdijk, Maseland, Onrust, van Hoorn, & Slangen, ). Furthermore, cultural distance could be reduced by managers' cultural experience (e.g., in partner selection, negotiations, and previous alliances) (Popli & Kumar, ). Future studies could consider using other measures of cultural distance.…”

Kraft's acquisition of Cadbury: Was it an amicable transatlantic merger or a hostile takeover?

“…At the same time, cross‐border M&As are on the rise, and their value surpassed $4.28 trillion in 2015 (Teagarden, , p. 145). As stated earlier, cross‐border M&As are important in global business and are pursued to seek internationalization, corporate expansion, and other operational efficiencies (see Brooks, Zeng, & Zeng, ; Caiazza, Shimizu, & Yoshikawa, ; Caiazza, Very, & Ferrara, ; Chari & Shaikh, ; Popli & Kumar, ; Rottig, ). In simple terms, “ organizational justice ” and in‐house corporate support are needed for successful M&As (Bebenroth & Thiele, , p. 227).…”

Partial or total integration in a cross‐border merger? Building a Nordic bank culture

“…Culture represents an important element of the merger and acquisition process, and its full strength is seen when two divergent cultures are forced to become one (Lodorfos & Boateng, ). Most culture‐focused studies in international M&A have dealt with cultural distance (Bauer et al, ; Popli & Kumar, ; Stahl & Voigt, ), which measures the differences between different cultural groups and is said to increase difficulty in communications and establishing mutual trust (Li, Li, & Wang, ). Cultural distance can occur due to differing backgrounds and professions, with the employees coming from different organizations with their own culture and ways of working, not necessarily in harmony with one another or with the culture of the entire project (Wiewiora, Trigunarsyah, Murphy, & Coffey, ).…”

“…Hitt et al () claim that M&A represents a popular strategy used by firms for many years, but the success of this strategy has been limited due to cultural distance (Popli & Kumar, ; Uhlenbruck, ) and problems related to postacquisition (Clark & Mills, ). Although there has been much research on M&As, Bauer et al () and Stahl and Voigt () argue that there is a lack of understanding about cultural impacts on mergers and how different integration actions and approaches take place in the international merger.…”