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

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  • Dikova, Desislava
  • Rao Sahib, Padma

Abstract

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.

Suggested Citation

  • Dikova, Desislava & Rao Sahib, Padma, 2013. "Is cultural distance a bane or a boon for cross-border acquisition performance?," Journal of World Business, Elsevier, vol. 48(1), pages 77-86.
  • Handle: RePEc:eee:worbus:v:48:y:2013:i:1:p:77-86
    DOI: 10.1016/j.jwb.2012.06.009
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    Cited by:

    1. Reynolds (née Schnurr), Noelia-Sarah & Teerikangas, Satu, 2016. "The international experience in domestic mergers – Are purely domestic M&A a myth?," International Business Review, Elsevier, vol. 25(1), pages 42-50.
    2. repec:spr:manint:v:57:y:2017:i:3:d:10.1007_s11575-016-0287-6 is not listed on IDEAS
    3. Andriosopoulos, Dimitris & Yang, Shuai, 2015. "The impact of institutional investors on mergers and acquisitions in the United Kingdom," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 547-561.
    4. Hitt, Michael A. & Li, Dan & Xu, Kai, 2016. "International strategy: From local to global and beyond," Journal of World Business, Elsevier, vol. 51(1), pages 58-73.
    5. Kedia, Ben L. & Reddy, Rama Krishna, 2016. "Language and cross-border acquisitions: An exploratory study," International Business Review, Elsevier, vol. 25(6), pages 1321-1332.
    6. H Emre Yildiz & Carl F Fey, 2016. "Are the extent and effect of psychic distance perceptions symmetrical in cross-border M&As? Evidence from a two-country study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(7), pages 830-857, September.
    7. Reddy, Kotapati Srinivasa, 2015. "Determinants of Cross-border Mergers and Acquisitions: A Comprehensive Review and Future Direction," MPRA Paper 63969, University Library of Munich, Germany, revised 2015.
    8. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.
    9. Chan, Alex W.H. & Cheung, Hoi Yan, 2016. "Extraversion, individualism and M&A activities," International Business Review, Elsevier, vol. 25(1), pages 356-369.
    10. repec:spr:manint:v:55:y:2015:i:5:d:10.1007_s11575-015-0249-4 is not listed on IDEAS
    11. George O. White & Orhun Guldiken & Thomas A. Hemphill & Wu He & Mehdi Sharifi Khoobdeh, 2016. "Trends in International Strategic Management Research From 2000 to 2013: Text Mining and Bibliometric Analyses," Management International Review, Springer, vol. 56(1), pages 35-65, February.
    12. Michela Matarazzo & Gabriele Barbaresco & Resciniti Riccardo, 2016. "Effects of cultural distance on foreign acquisitions: evidence from italian acquired firms," MERCATI E COMPETITIVITÀ, FrancoAngeli Editore, vol. 2016(3), pages 159-181.
    13. Yanga, Shuying & Kim, Seongcheol, 2017. "Do Cross-border M&As by Chinese Media and Entertainment Firms Create Value? Evidence from US-targeted and Korea-targeted Deals," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168549, International Telecommunications Society (ITS).
    14. repec:eee:jbrese:v:80:y:2017:i:c:p:35-44 is not listed on IDEAS
    15. Desislava Dikova & Keith Brouthers, 2016. "International Establishment Mode Choice: Past, Present and Future," Management International Review, Springer, vol. 56(4), pages 489-530, August.
    16. Fiorenza Belussi & Giulia Rudello & Maria Savarese, 2016. "The Internationalization Of Mnes From And To Brics Countries: The Case Of The Industrial Machinery Industry," "Marco Fanno" Working Papers 0205, Dipartimento di Scienze Economiche "Marco Fanno".

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