Is cultural distance a bane or a boon for cross-border acquisition performance?

Literature has offered diverse explanations of the relationship between cultural distance and acquisition performance, pointing to both positive and negative effects. In this paper, we build on these findings and attempt to reconcile the conflicting research streams. We suggest that the effect of cultural distance on cross-border acquisition performance depends on the level of acquisition experience of the acquirer. More internationally experienced acquirers are more likely to be aware of cross-border acquisition pitfalls and are more skilled at resolving acquisition related conflicts; this allows the acquirer to benefit from cultural differences, ultimately leading to higher acquisition performance. Performance of culturally distant cross-border acquisitions launched by inexperienced acquirers is lower because such acquirers are unlikely to have a culturally sensitive anti-conflict action plan, which affects the ability of the acquirer to benefit fully from cultural distances. Albeit we stipulate that experience with domestic acquisitions affects positively the relation between cultural distance and acquisition performance, we do not find support. We empirically test our model with a comprehensive database of 1223 cross-border acquisitions launched during the 2009–2010 period.     

Board experience and value creation in cross-border acquisitions: The role of acquirer and target country institutions

Our study investigates the effects of board acquisition experience on value creation in cross-border acquisitions and the dependence of this relationship on acquirer and target country institutions. We draw on cross-border acquisition research and institution-based corporate governance research to argue that the effect of board acquisition experience depends on the institutional characteristics of the acquirer and target countries and on cultural differences between these two countries. Based on 1775 cross-border acquisitions of U.S. and European acquirers, we show a positive effect of board acquisition experience on the announcement returns of cross-border acquisitions, which is even stronger when the target country’s takeover regulations are less friendly and when the target and acquirer countries are culturally more distant.     

National cultural distance and initial foreign acquisition performance: The moderating effect of integration

This paper examines the effect of national cultural distance on the performance of foreign acquisitions. While some studies have argued that this effect should be negative and others that it should be positive, we argue that this depends on the level of post-acquisition integration. We hypothesize that large differences in national culture reduce foreign acquisition performance if the acquired unit is tightly integrated into the acquirer, but that they enhance acquisition performance if post-acquisition integration is limited. Analyzing a sample of 102 cross-border acquisitions by Dutch firms in 30 countries, we find strong empirical support for this hypothesis.     

National economic disparity and cross-border acquisition resolution

This paper explores the effects of national economic disparity on the completion or abandonment of cross-border acquisitions by combining behavioral perspectives of risky decision making and theories of organizational learning. Using a sample of 2445 cross-border acquisitions announced between 1985 and 2008, we show that an acquisition is less likely to be completed when the acquirer is from a more developed country vis-a-vis the target than when the acquirer is from a less developed country. Furthermore, the higher the economic development level of the acquirer’s country relative to that of the target, the less likely the deal is to be completed. We also find that the time elapsed between the acquisition announcement and completion dates is shorter as the economic development level of the acquirer’s country relative to that of the target is higher.     

Out of Africa: The role of institutional distance and host-home colonial tie in South African Firms’ post-acquisition performance in developed economies

The colonial ties and institutional distance affect the cross-border acquisition performance of internationalizing South African firms who acquire targets in developed economies. Along with these main effects, this paper examines the moderating effect of the colonial tie on the effects of institutional distance on post-acquisition long-term operating performance. Using data on South African acquisitions in developed economies, this study finds that the colonial tie has a negative impact on the long-term operating performance of South African acquirers. Yet, the colonial tie also moderates the effects of institutional distance. This work contributes to the discussion on host-home country institutional distance and its impact on post-acquisition long-term operating performance and how colonial past can influence the performance of acquirers from South Africa and other such countries with colonial history.     

Managers as the bridge: How cultural friction influences the integration of cross-border mergers and acquisitions

Going beyond cultural distance, the present study adopts a more contextualized view of cultural friction to account for the “actual cultural contacts” in cross-border mergers and acquisitions (CBMAs), and meanwhile builds a case-based measure of cultural friction to quantitatively capture the country- and deal-level cultural differences between the acquirer and the target in each CBMA. Differing from the existing research that takes the influence of cultural differences on CBMA performance for granted, we highlight the importance of managers from the acquiring firm by theorizing that cultural friction between the acquirer and the target can shape acquiring managers' choice of managerial practices to complete the managerial tasks during integration, leading to different performance. In particular, we postulate a curvilinear relationship between the cultural friction and CBMA performance. By incorporating regulatory focus theory into our analytical framework, we further hypothesize how this curve is shaped by managers’ regulatory focus, a key motivational trait at the firm management level. Using a sample of 304 completed CBMAs conducted by Chinese listed firms, our empirical results verify the U-shaped relationship between cultural friction and the CBMA integration performance, and suggest that this relationship is flattened by acquiring managers’ prevention focus.     

Impact of the Financial Crisis on Banking Acquisitions: A Look at Shareholder Wealth

This paper examines the influence of the 2007–08 financial crisis on value creation for acquirer’s shareholders in the banking industry using a sample of 883 deals over 2004–12. Applying an exploratory and top-down approach, banking acquisitions are considered at the global level, narrowing the analysis step by step to consider domestic versus cross-border acquisitions. Then cross-border deals are split based on the economic development of the acquirer and target countries. It is observed that only acquisitions involving emerging-economy acquirers and developed-economy targets generate positive and significant returns to shareholders after the crisis. Major changes in the global acquisition landscape are also observed since 2007, with emerging-economy banks increasing their acquisition activity, both nationally and internationally.     

Evaluating the foreign ownership wage premium using a difference-in-differences matching approach

This paper seeks to identify the causal effect of foreign acquisitions on wages of skilled and unskilled workers, using difference-in-differences propensity score matching estimators. Our results suggest that there is substantial heterogeneity in the post-acquisition wage effect depending on the nationality of the foreign acquirer and the skill group of workers. We find sizable post acquisition wage effects on skilled and unskilled wages following an acquisition by a US firm. No such impacts result from acquisitions by EU multinationals. Also we discern some positive wage effects for unskilled workers resulting from acquisitions by multinationals from the rest of the world.     

In CEOs we trust: When religion matters in cross-border acquisitions. The case of a multifaith country

This paper examines the emergence of trust by multifaith target-firm personnel in foreign acquirer CEOs during early post-acquisition integration, a decisive period for acquisition success, yet considerably under-researched. Combining self-categorization and similarity-attraction theories, we argue that religious similarity with the foreign acquirer’s CEO represents shared values to the personnel, from which trust in the CEO arises. Further, we scrutinize the moderating effects of the personnel’s religiosity and prior alliance success between the acquirer and target firm. We test our model using field-experimental data from 411 multifaith Malaysian personnel. The findings show that personnel-leader trust occurs more readily with religious similarity than religious dissimilarity, and that the personnel’s religiosity strengthens this relationship. However, a successful prior alliance does not weaken the religious similarity–trust relationship. Our research encourages acquisition managers to consider religion, a factor beyond the traditional acquisition playbook, as a trust antecedent during early post-acquisition integration.     

Cross-border acquisition in services: Comparing ownership choice of developed and emerging economy MNEs in India

Despite rapid increase in cross-border acquisitions (CBAs), prior research has not examined ownership choice of foreign MNEs investing in the services sector in emerging economies. Drawing on multiple strands of literature, we posit acquirer's ownership choice (partial versus full acquisition) to be influenced by type of service offering (soft versus hard), institutional distance between acquirer and target nation, and acquirer's country-of-origin (emerging versus developed economy). Empirical analysis of 385 CBAs undertaken in India over an 11-year period provides evidence that services, in particular soft services, and high institutional distance increases the likelihood of full acquisition by emerging economy acquirers. However, acquirers from developed economies show preference for partial acquisition under similar circumstances.     

Business group affiliation and post-acquisition performance: An extended resource-based view

Prior research on post-acquisition performance suggests positive, negative, or no wealth creation for the acquiring firms. Grounding our arguments on the extended resource-based view, the current article proposes that business group–affiliated firms leverage their affiliation advantages to attain superior long-term acquisition performance, relative to standalone firms, especially in emerging economies such as India. Additionally, we hypothesize that both within-group heterogeneity, manifested as prior group experience, group diversification, and intra-group variation in the form of horizontal ties through boards of directors, also affect the long-term post-acquisition performance of affiliated firms. The findings, obtained with a buy-and-hold abnormal returns method applied to a sample of 468 majority stake mergers and acquisitions, both domestic and cross-border, by Indian firms during 2005–2013, provide robust support for the theoretical arguments.     

Institutional,cultural and industry related determinants of ownership choices in emerging market FDI acquisitions

In this study, we tackle a relatively un-researched question: What explains partial FDI acquisitions? The choice between full, majority, and minority ownership is explained on the basis of three locational factors – the differences, or “distances,” between the countries of the acquirer and target firm – operationalized in terms of (i) institutions, (ii) culture, and (iii) sectoral relatedness. The sample comprises 1389 acquisitions in India and China by acquirers from 33 nations over an 11-year period. We find that the likelihood of minority acquisition over majority or full becomes higher when acquisitions involve low institutional distance or high uncertainty avoidance distance. However, the likelihood of minority acquisition over full or majority becomes lower when acquisitions involve industry relatedness. The results add to our understanding of the advantages and disadvantages of partial versus full FDI acquisitions in emerging markets. This study adds to the nascent literature that uses country or location “distance” metrics to show how the multinational firm, being “multiple embedded” (Meyer et al., 2011), can take advantage of the dual location of home and host countries.     

Target reputation transferability,consumer animosity,and cross-border acquisition success: A comparison between China and Taiwan

This study examines the effects of consumer animosity and reputation transferability of local targets on cross-border acquisitions by analyzing host country consumer responses toward the acquisitions of local firms by foreign multinational corporations (MNCs). This work compares two host country markets: the responses of Chinese (high animosity against Japan) and Taiwanese consumers (low animosity against Japan) toward acquisition of a local firm by a Japanese MNC. The findings show that Chinese consumers demonstrate attitudes that are more negative toward the post-acquisition target, and lower intentions to repurchase products of the post-acquisition target than Taiwanese consumers. This work further observes that in a host-country market with low animosity, reputation transfer of a local target is pronounced, whereas, in a host country market with high animosity, consumer animosity will restrain or even exceed reputation transferability. Experiment results reveal consistent support for these hypotheses. Implications and limitations of the findings are also discussed.     

It's no longer mine: the role of brand ownership and advertising in cross-border brand acquisitions

Although cross-border brand acquisitions are increasingly common in the global marketplace, research on how consumers respond to them is limited. Building on social identity and psychological ownership theories, we introduce the concept of brand ownership to the advertising literature, and show its negative effects on consumer reactions to a brand acquisition. Furthermore, we demonstrate that consumers’ disidentification (i.e., an oppositional motivation) with an acquiring country moderates the negative effect of consumers’ brand ownership on consumer attitudes after a brand acquisition. The results reveal that consumers with high levels of brand ownership develop more negative post-acquisition brand attitudes when a brand is acquired by a country with which consumers strongly disidentify (i.e. dissociative vs. out-group). Furthermore, our research introduces the concept of a brand ownership appeal in advertising, and demonstrates that it is an effective advertising strategy in enhancing post-acquisition brand attitudes for consumers with high levels of brand ownership. Important theoretical and managerial advertising implications conclude this research.     

The motives and performance of cross-border acquirers from emerging economies: Comparison between Chinese and Indian firms

During the recent decade, the world has witnessed the rapid growth of MNEs from emerging economies. Their increasing participation in cross-border mergers and acquisitions has raised great attention in the extant literature. This study evaluates the value creation from these cross-border transactions from two representative emerging countries, namely China and India, and determines factors that result in the different performance of these international acquisition activities. Cross-border acquisitions conducted by these countries’ companies indeed lead to significant shareholder wealth creation. Furthermore, Indian shareholders are more likely to benefit from deals in small cultural distance countries, while Chinese investors gain from the cross-border expansion of manufacturing companies. Location also affects the performance of cross-border acquisitions, with acquisitions into developed countries generating higher returns to shareholders. Our sample consists of 203 Indian and 63 Chinese cross-border deals over the period 2000–2010 and our results hold after controlling for various deal-level and firm-level characteristics.     

Effects of board characteristics on post-acquisition performance: A study of cross-border acquisitions by firms in the manufacturing sector

Our study examines how acquiring firm board characteristics influence the performance of cross-border merger and acquisitions (CBMAs). It is based on a sample of 250 large transactions in the manufacturing sector undertaken by U.S. firms in 33 countries between 1991 and 2006. Our findings reveal that acquiring firms having a larger board and outside directors with greater influence exhibit superior post-acquisition shareholder value creation in CBMAs. In addition, our results indicate that acquiring firms with more dominant CEOs perform better in such acquisitions. From the standpoint of firms engaged in CBMAs, our findings suggest that they stand to benefit from having a larger board and influential outside directors who can diligently monitor and advise top management in undertaking CBMAs. Finally, acquiring firms need to recognize that the complexities and challenges generally associated with CBMAs may require dominant CEOs who can provide clear and unambiguous leadership during the pre- and post- acquisition process.     

管理层更替与收购绩效的关系研究——基于多重因素的调节效应

收购后是否应该对被收购企业的原有管理人员进行更换一直存在争议。本研究探讨了在中国情境下,主并企业在收购后对被并企业管理层更替的程度与主并企业的收购绩效之间的关系。实证分析结果证实了收购后的管理层更替与收购绩效之间存在正相关关系,但这种正相关关系受到多重因素的调节作用影响。具体来说：跨区域收购时管理层更替的程度与收购绩效之间的正相关作用要高于同区域收购的时候;收购双方的业务相关程度越高,则收购后管理层更替对收购绩效的积极作用会越低;被并企业与主并企业相比的相对规模越大,则收购后管理层更替的程度与收购绩效之间的正相关程度会越高;收购前被并企业的绩效表现越好,则收购后对其管理层进行更换的程度越高越有利于主并企业的收购绩效。     

Reconceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions

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.     

Cultural differences and synergy realization in cross-border acquisitions: The moderating effect of acquisition process

Research on cross-border acquisitions (CBAs) consistently recognizes the importance of cultural differences, yet it lacks consensus on whether it has a positive or negative impact. While tied to the purpose and consequences of an acquisition, synergy realization has not received much attention in research on culture-performance relationship. Focusing on synergy realization in CBAs and applying a process and conditional perspective, we propose the relationship between national/ organizational culture differences and synergy realization to be moderated by the quality and extent of due diligence and post-acquisition coordination. Drawing from cross-cultural interaction and inter-organizational learning arguments, we further propose idiosyncratic effects of cultural differences in different synergy realization contexts, where we contrast explicit with implicit synergy realization. Our analysis is based on a unique survey on a sample of 103 cross-border acquisitions. The results indicate that both national and organizational culture differences exert a negative impact on the realization of implicit synergies while no impact on the realization of explicit synergies. National culture differences are found to have a stronger negative effect than organizational culture differences on synergy realization. Sufficient culture and human due diligence prior to the acquisition is found to significantly moderate the impact of high cultural differences.     

Foreign vs domestic ownership on debt reduction: An investigation of acquisition targets in Italy and Spain

This paper examines the role of foreign versus domestic ownership in reducing the debt levels of acquired firms in Italy and Spain over the period 2002–2010. Acknowledging that lower debt levels can mitigate the risk of failure and thus enhance the chances for a positive post-acquisition performance and survival, we particularly examine the causal effect of foreign and domestic acquisitions on two firm-level debt measures: gearing and short-term leverage. To estimate causal relationships, we control for selection bias by applying propensity score matching techniques. Our results indicate that foreign acquisition leads to a significant and steady reduction in the debt ratios of the target companies. In contrast, the relationship between domestic acquisition and debt reduction appears to be smaller and statistically less robust.