The Impact of Organizational and National Cultural Differences on Social Conflict and Knowledge Transfer in International Acquisitions

Abstract

The purpose of this paper is to elucidate the effects of organizational and national cultural differences on international acquisitions. We argue that cultural differences prompt social identity building that leads to ‘us versus them’ thinking and thereby creates the potential for social conflict. We also maintain that the same cultural differences can contribute to learning in terms of knowledge transfer. We develop a structural equation model to test these hypothesized effects on a sample of related international acquisitions. Our analysis shows that cultural differences at the organizational level are positively associated with social conflict, but that national cultural differences can decrease social conflict. Furthermore, both organizational and national cultural differences are positively associated with knowledge transfer. This analysis shows the importance of disentangling the various effects that cultural differences have on international acquisitions. It also suggests that national cultural differences are less of a problem in international acquisitions than is usually assumed.

Cultural influences and the mediating role of socio-cultural integration processes on the performance of cross-border mergers and acquisitions

“…However, empirical research has not been conclusive in demonstrating the direction of the impact of these differences on M&A dynamics (Teerikangas and Very 2006;Stahl and Voigt 2008;Vaara et al 2010). Consequently, the purpose of this study has been to provide a more comprehensive explanation of cross-border M&A outcomes.…”

“…Related M&As require higher levels of integration of cultural differences and thus often create obstacles to integration benefits by increasing sociocultural problems in the post-merger integration phase (Stahl and Voigt 2008). In order to avoid top management bias data were collected from a wider range of representatives from different organizational levels and departments (see Vaara et al 2010). This included project team leaders and members, engineers, software developers, financial controllers, chief executive officers (CEOs), directors, etc.…”

“…Future research should go beyond static analyses of cultural differences and focus on the multifaceted nature of organizational and national cultures and the processes through which cultural factors impact M&A outcomes (Vaara, Sarala, Stahl, and Bjorkman 2010). Accordingly, greater attention should be directed towards the role of possible mediating variables Voigt 2005, 2008;Vaara et al 2010).…”

National Cultural Distance and International Acquisition Performance

“…Reference [8] conceptualizes knowledge transfer as the beneficial use of capabilities, skills and knowledge from one organisation in another. Differences in national culture can be related to the "differences in the forms of knowledge that may be useful for the other party" [4]. So when cultural distance is retained, international acquisitions provide access to potentially valuable repository of capabilities such as resources, functional or management skills, [8].…”

“…Whilst numerous factors are attributed to these failures, reference [3] states that the existence of national cultural distance has often been cited as a major reason for these outcomes. Consequently, an "us versus them mentality" arises, creating the potential for social conflict" [4]. Therefore, if differences between national cultures are among the main reasons for problems in international acquisitions, the main question that arises is what can be done to deal with these problems.…”