Reconceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions |
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Institution: | 1. Indian Institute of Management, Prabandh Shikhar, Rau Pithampur Road, Indore, MP 453556, India;2. Department of Management and Global Business, Rutgers Business School - Newark and New Brunswick, 1 Washington Park, Newark, NJ 07102, United States |
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Abstract: | Cultural distance is one of the most widely used distance construct in international business. However, scholars have long questioned the notion that cultural distance has a homogenous impact on organizational actions and performance. We redress this by examining how the relationship between cultural differences and deal abandonment in cross-border acquisitions is contingent on firm-level cultural experience reserve and industry affiliation. Drawing on the organizational learning theory and cultural friction perspective, we first propose that the cultural experience reserve of a focal firm mitigates the positive impact of cultural differences on cross-border deal abandonment. We then hypothesize that the firm's industry context affects the uncertainties associated with cultural differences. Our findings based on a sample of 197 Indian services sector firms support our theoretical predictions. |
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Keywords: | Organizational learning Cross-border M&A Cultural friction Cultural experience reserve Deal abandonment |
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