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.     

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.     

The function-specific microfoundations of dynamic capabilities in cross-border mergers and acquisitions

In mergers and acquisitions, the acquiring firm must combine two firms’ resources and capabilities so that the outcome yields value. In individual firms, the marketing & sales, and R&D functions have typically developed intertwined and complex relationships over time. These multifaceted dependencies may obscure the integration of the firms and their functions. In order to reveal to what extent cross-functional relationships determine the success or failure of an acquisitions, we have made one of the first attempts to study merging firms’ function-specific capabilities, underlying microfoundations, and their cross-functional relationships during the integration process—instead of focusing on acquisition capabilities as such. We use longitudinal data from two cross-border acquisitions between US and Finnish SMEs. Our results indicate that major differences between merging firms’ cross-functional microfoundations—that is, their structures, processes, routines, and skills—might either enforce or erode the seemingly promising synergies at the product and market levels, depending on managerial awareness of their nature.     

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.     

The role of experiential and non-experiential knowledge in cross-border acquisitions: The case of Indian multinational enterprises

This paper investigates the antecedents of the internationalization of emerging economy multinational enterprises (EMNEs) through cross-border acquisitions. Using a panel data set of 1138 cross-border acquisitions made by 515 Indian multinational enterprises (MNEs) during 2000–2013, it examines interactions of in-house resources with experiential and non-experiential knowledge to explore how EMNEs manage and exploit their knowledge base when internationalizing. The results show that Indian multinational enterprises have ‘interface competence’. They combine in-house resources with experiential market and externally sourced technological knowledge for undertaking cross-border acquisitions. The Uppsala model provides insights in analyzing the role of market knowledge and the Global Factory model helps in analyzing the role of technology in cross-border acquisitions by EMNEs.     

Institutional determinants of ownership stake in cross-border acquisitions in Africa: The moderating role of geographic distance

We look at how emerging markets' institutional features affect ownership stake in cross-border acquisitions (CBAs) within Africa. Particularly, we show that the presence of shared colonial history between the home and host country and the extent of fractionalization distance and formal institutional distance influence the acquiring firm's decision regarding its ownership stake in the target. Moreover, we show that geographic distance between the home and host country, by augmenting uncertainty faced by acquiring firms, moderates the relationship between these institutional features and ownership stake. We test our hypotheses in a sample of 341 intra-Africa CBAs from 2001 to 2016. Generally, we find that greater ex ante uncertainty and ex post costs increase ownership stake. Specifically, greater geographic distance strengthens the positive relationship between shared colonial history and ownership stake and reverses the negative relationship between formal institutional distance and ownership stake. As for fractionalization distance, the relationship is more nuanced and needs to be further studied. We contribute to advance research on south–south CBAs in general, particularly within Africa, as well as to extend hostage theory in foreign market entry strategies in and from emerging markets.     

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.     

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.     

Private information,institutional distance,and the failure of cross-border acquisitions: Evidence from the banking sector in Central and Eastern Europe

In this paper, we develop an information theory-based framework about cross-border acquisitions in the financial intermediation industry. We argue that even though “soft” information embedded in customer relationships of local banks can, in principle, help multinational banks (MNBs) overcome informational disadvantage in host countries, the cost of verification of this private information may, paradoxically, make local banks with significant customer relationships unattractive for cross-border acquisition. Further, we propose that the relationship between the amount of customer information embedded in an incumbent bank and the likelihood of its acquisition by a MNB is modified by the institutional distance between the home and host countries of the MNB. Specifically, the strength of the negative relationship increases with institutional distance between home and host countries because the verification cost of private information increases with institutional distance. Our hypotheses find support in the context of Central and Eastern Europe.     

Explaining the trends in the UK cross-border mergers & acquisitions: An analysis of macro-economic factors

Most of the growth in international production over the past decades has been via cross-border mergers and acquisitions (CBM&As). Yet prior studies examining the trajectory of cross-border M&A activities as an entry mode of FDI have focused on industry and firm level factors. Dunning (2009) emphasised the importance of macroeconomic variables which may explain foreign direct investment and called for more research to improve our understanding on the effects of macroeconomic variables. Building on prior studies, this study attempts to investigate the role of macroeconomic influences on CBM&As activities in the UK over the 1987–2006 period. This study finds that GDP, exchange rate, interest rate and share prices have significant impact on the level of outward UK CBM&As. On the other hand, GDP, money supply and share price have statistically significant impact on the UK CBM&As inflows.     

A comparative ownership advantage framework for cross-border M&As: The rise of Chinese and Indian MNEs

MNEs from emerging economies (EE MNEs) have recently undertaken aggressive cross-border mergers and acquisitions (M&As). This phenomenon challenges the current understanding in the international business literature. Integrating the comparative advantage theory with Dunning's OLI paradigm, this article develops a comparative ownership advantage framework characterized by five attributes: (1) national-industrial factor endowments, (2) dynamic learning, (3) value creation, (4) reconfiguration of value chain, and (5) institutional facilitation and constraints. We test five propositions with a dataset of 1526 cross-border M&As by Chinese and Indian MNEs from 2000 to 2008. Preliminary results support the new comparative ownership advantage framework.     

Once upon a time in a foreign market: The role of cultural distance in the economic performance of multilateral non-equity partnerships

As a consequence of globalization and advancements in technology, international collaborations, which bring together partners from different cultural backgrounds, have become increasingly prominent in the business world. While several studies have examined the impact of cultural distance on the performance of such partnerships, they have tended to focus on bilateral relationships, and the results they have produced are conflicting. By building on the resource-based view and distinguishing the differences between the concepts of cultural distance among partners and the cultural distance of partnerships from target markets, the present study provides insights into the role of cultural distance in the performance of multilateral project-based non-equity collaborations. Drawing on a sample of 1183 movies that were released in the U.S. between the years 2000 and 2020, this study demonstrates that while projects co-produced by culturally distant partners have yielded higher revenues, the cultural distance of partnerships from target markets can have a negative impact on economic performance. Furthermore, the results show that partnerships formed with firms that originated in countries that have greater diversity perform better in the target market, and such partnerships manage cultural distance more efficiently.     

The choice between joint ventures and acquisitions in foreign direct investments: The role of partial acquisitions and accrued experience

In order to avoid the liability of foreignness, firms invest in foreign countries pooling their own resources with those of local firms. This combination of assets may take place through joint ventures or acquisitions. When facing the need to choose between these two entry modes, managers find that there are two critical factors that have received little attention in previous research: the existence of different types of acquisitions—full acquisitions, pure partial acquisitions, and shared partial acquisitions—and the role of the experience accrued by the investing firm in carrying out investments through a particular entry mode. Both factors, as well as their managerial implications, are analyzed in this article. © 2004 Wiley Periodicals, Inc.     

Firm-specific intangible assets and subsidiary profitability: The moderating role of distance,ownership strategy and subsidiary experience

How does distance attenuate the value of MNC parent intangible assets on affiliate profitability? Beyond the basic assumption of internalization theory about the positive relationship between parent intangibles and foreign affiliate performance, we test how this relationship, is contingent on ownership strategy, subsidiary experience, and is moderated by the distance between home and host economies, in terms of differences in technological capacity, intellectual property regimes, economic development, language and geography. Based on newly-available accounting data on intangible assets, we test hypotheses on a sample of over 2000 multinationals and 5000 of their overseas affiliates in 45 home and host economies.     

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.     

Reconceptualizing value creation: Exploring the role of goal congruence in the Co-creation process

As companies gradually shift from the exchange view to the resource integration view, the creation of value also shifts from the customer sphere to the joint sphere. As a result, the customer and service provider are responsible for co-creating value through resource integration. However, it raises the question of whether customers are capable of contributing to the co-creation of value. Our study proposes a framework of how goal congruence plays a pivotal role in the resource integration process between all actors in the joint sphere. When the level of goal congruence between customer and service provider actors is high, it stimulates the exchange of valuable resources from all actors, which leads to the actual experience of co-creation resulting in value-in-use and improves service outcomes, i.e., customer satisfaction and loyalty. Data were collected through a field survey from salon-and-spa customers (n = 530) and PLS-SEM was employed to test the hypotheses and further analysis. The results show that goal congruence impacts customer satisfaction and loyalty through value-in-use. Therefore, suggesting service providers to properly socialize their goals will be a good strategy to increase customer capability to co-create value and ultimately enhance customer satisfaction and loyalty.     

The effect of digital signage on shoppers' behavior: The role of the evoked experience

This paper investigates the role of digital signage as experience provider in retail spaces. The findings of a survey-based field experiment demonstrate that digital signage content high on sensory cues evokes affective experience and strengthens customers' experiential processing route. In contrast, digital signage messages high on “features and benefits” information evoke intellectual experience and strengthen customers' deliberative processing route. The affective experience is more strongly associated with the attitude towards the ad and the approach behavior towards the advertiser than the intellectual experience. The effect of an ad high on sensory cues on shoppers' approach to the advertiser is stronger for first-time shoppers, and therefore important in generating loyalty. The findings indicate that the design of brand-related informational cues broadcast over digital in-store monitors affects shoppers' information processing. The cues evoke sensory and affective experiences and trigger deliberative processes that lead to attitude construction and finally elicit approach behavior towards the advertisers.     

Enhancing performance of cross-border mergers and acquisitions in developed markets: The role of business ties and technological innovation capability

This study examines the determinants of performance of cross-border mergers and acquisitions (cross-border M&As) in developed markets initiated by firms from emerging markets. Drawing on social network theory and organizational innovation literature, we hypothesize that business ties of the acquiring firm increase performance of cross-border M&As via enhancing the acquiring firm's technological innovation capability and that environmental turbulence strengthens this mediating model. Moreover, the interplay of cultural distance and technological innovation capability would decrease performance of cross-border M&As. To test the model, we collected data from 186 Chinese firms initiating cross-border M&As in developed markets. As predicted, we found that (1) technological innovation capability of the acquiring firm positively mediates the relationship between business ties and performance of cross-border M&As; (2) environmental turbulence positively moderates the relationship between business ties and technological innovation capability; and (3) cultural distance negatively moderates the relationship between technological innovation capability and performance of cross-border M&As.     

The emotions of top managers and key persons in cross-border M&As: Evidence from a longitudinal case study

Building on prior research on emotions in M&A, this paper analyses the post-M&A emotions of top managers and key persons from the acquired company by examining what triggers emotions during the post-acquisition integration stage, and what the consequences of those emotions are. This study applies cognitive appraisal and affective event theories with empirical evidence based on a longitudinal, single case study of an Indian–Finnish acquisition. The main findings imply that M&As are very emotional for top managers and key persons. Our findings reveal that they experience a wide range of positive and negative emotions triggered by individual and company-level triggers. Interestingly various triggers can have different and opposite appraisal outcomes in the short and long-term. In addition, top managers and key persons are often restricted in the range of behavioural outcomes caused by emotions.