Sociocultural Integration in Mergers and Acquisitions: Unresolved Paradoxes and Directions for Future Research

Despite decades of research, the key factors for success in mergers and acquisitions (M&As) and the reasons why M&As often fail remain poorly understood. While attempts to explain M&A success and failure have traditionally focused on strategic and financial factors, an emergent field of inquiry has been directed at the sociocultural and human resources issues involved in the integration of acquired or merging firms. This research has sought to explain M&A performance and underperformance in terms of the impact that variables such as cultural fit, management style similarity, the pattern of dominance between merging firms, the acquirer's degree of cultural tolerance, and the social climate surrounding a takeover have on the postmerger integration process. In this article, we attempt to take stock of, and synthesize, the findings from research on sociocultural and human resources integration in M&A, to identify conflicting perspectives and unresolved questions as well as several underresearched areas, and then use our analyses to propose an agenda for the next stage of research in this field. © 2013 Wiley Periodicals, Inc.     

Unrecognized,concealed, or forgotten – the case of absent information in risk communication

There are differing and partially incompatible views about what kind of issues should be included into risk discussions and what kinds of risks should be emphasized and dealt with. While the emergence of new risks has been extensively studied, relatively little attention has been paid to the roles that the absence of information can play in risk debates. Potentially relevant information may be downplayed or omitted and less relevant overemphasized when actors with varying interests, knowledge bases, and risk frames interact. Multiple and cumulative environmental and health risks caused by chemicals and other stressors pose particular challenges for risk communication. We identify and discuss different forms of unrecognized, hidden, and forgotten information by using chemical risks as a case. A widely applicable typology of absent information in risk communication is outlined.     

Rationally addicted to drinking and smoking?

When modelling demand for addictive consumption goods, the most widely used framework is the rational addiction model proposed by Becker and Murphy. This paper extends the rational addiction model to include two addictive consumption goods, alcohol and cigarettes, and using aggregate annual time series on sales volumes for the period 1955–1999, estimates the aggregate demand for these goods in Sweden, where OLS estimates are compared to GMM estimates allowing for possible endogeneity of lagged and lead consumption. First, the demand for alcohol and cigarettes are estimated as separate equations and it is found that alcohol demand is quite well described by the rational addiction model while the same is not true for cigarettes. The own-price elasticities are negative, and alcohol demand is more elastic than cigarette demand. The cross-price elasticities are also negative, showing that alcohol and cigarettes are complements. Since consumption of alcohol and cigarettes are probably simultaneous decisions, the demand for these goods is estimated as a system of equations and it is found that alcohol demand is still positively affected by lagged and lead consumption while cigarette demand is not. It is also found that the elasticities obtained are now generally smaller compared to when estimating the equations separately.     

Optimal redistributive taxation with both extensive and intensive responses

We study optimal income taxation when labor supply reacts along the intensive and extensive margins. Individuals are heterogeneous across two unobserved dimensions: their skill and disutility of participation. We develop a new method to analytically derive conditions under which optimal marginal tax rates are non-negative everywhere. It is typically optimal to provide a distinct level of transfer to the non-employed and to workers with negligible earnings. Numerical simulations illustrate these properties for the US. We also apply our method to sign output distortions in other adverse selection frameworks with random participation, namely the monopoly nonlinear pricing and the regulatory monopoly problems.     

Finnish GNP-series 1954/I–1990/IV: Small shock persistance or trend stationarity? Some evidence with variance ratio estimates

The “shock persistance” of Finnish adjusted quarterly real GNP series in logarithms from 1954/QI to 1990/QIV is analyzed using variance ratio estimators. The results indicate that the random walk component of the series is not big. The small sample properties of variance ratio estimators are studied using empirical distribution derived from simulations. The persistence measures calculated via the ARIMA modelling of the lnGNP_t series are biased upwards. The sampling properties show that the simple random walk model is not an alternative model for the lnGNP. A trend stationary alternative, an AR(2) process, gives almost the same “shock persistence” measures as the assumed unit root processes.     

European Community Intercountry Input–Output Relations: Construction Method and Main Results for 1965–85

Eurostat constructs consolidated input–output (IO) tables for the European Community (EC) by means of an aggregation of the domestic and the intra-EC import matrices from the harmonized national IO tables. Intercountry EC IO tables can be constructed by disaggregating the intra-EC imports according to country of origin, with coefficients derived from international trade statistics. These procedures, however, produce inadequate outcomes for several reasons. The most important reason is that the imports are valued in ex-customs prices, instead of the theoretically more appropriate producers' prices. This paper analyzes the nature of these and other data problems, and describes a more extensive and satisfactory method to construct intercountry and consolidated EC IO tables. The empirical results are illustrated by an analysis of the domestic and intercountry intersectoral spillover effects for 1965–85.     

Cognitive ability and scale bias in the contingent valuation method

This study investigates whether or not the scale bias found in contingent valuation (CVM) studies on mortality risk reductions is a result of cognitive constraints among respondents. Scale bias refers to insensitivity and non-near-proportionality of the respondents’ willingness to pay (WTP) to the size of the risk reduction. Two hundred Swedish students participated in an experiment in which their cognitive ability was tested before they took part in a CVM-study asking them about their WTP to reduce bus-mortality risk. The results imply that WTP answers from respondents with a higher cognitive ability are less flawed by scale bias.     

Long-run relationships between labor and capital: Indirect evidence on the elasticity of substitution

This paper proposes an indirect method for making empirical inference on the elasticity of substitution between capital and labor. The idea is that estimates of the elasticity may be retrievable from theory derived behavioral equations, by conducting comparative statics with respect to this parameter. This approach is readily applicable to more realistic models than those which are commonly used to derive estimates of the substitution elasticity. It is demonstrated that the conventional approach does not yield sensible estimates on quarterly Finnish manufacturing data. By applying the indirect method, a long-run empirical relationship is found that is consistent with an elasticity of substitution below one.     

Analyzing operational real options in metal mining investments with a system dynamic model

This article presents a detailed system dynamic (SD) model of a metal mining investment that is usable in ex-ante profitability and operations management analysis. We show how the SD model can be used to analyze the profitability effect of three operational real options: the option to temporarily close production, the option to abandon production, and the option to increase production through cutoff grade change. The SD model allows for intuitive modeling of the multiple interactive real options and arriving at results that are difficult, or impossible, to reach with commonly used spreadsheet software. We also analyze the effect of mining project debt ratio to the project value and show that correctly choosing the debt ratio affects project profitability. The effect on the project value of using three different future metal price scenarios with two different stochastic processes is illustrated to highlight the importance of correct process selection in modeling future metal price paths. A realistic case of a high-cost nickel (Ni) metal mine is used as a basis for the presented numerical illustration of the model.     

System estimates of potential output and the NAIRU

This paper proposes a new approach for estimating potential output and the NAIRU. The methodology models these key unobservable economic variables as latent stochastic trends within a trivariate system of observables comprising information on unemployment, GDP, and inflation. Identification is achieved through the use of a standard version of Okun's law and a Phillips curve. The performance of the procedure is investigated using Swedish quarterly data covering the time period 1970:1–1996:3. First version received: June 1997/final version received: September 1998