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Cultural Conflict and Merger Failure: An Experimental Approach

Author

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  • Roberto A. Weber

    () (Department of Social and Decision Sciences, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Colin F. Camerer

    () (Division of Humanities and Social Sciences 228-77, California Institute of Technology, Pasadena, California 91125)

Abstract

We use laboratory experiments to explore merger failure due to conflicting organizational cultures. We introduce a laboratory paradigm for studying organizational culture that captures several key elements of the phenomenon. In our experiments, we allow subjects in ÜfirmsÝ to develop a culture, and then merge two firms. As expected, performance decreases following the merging of two laboratory firms. In addition, subjects overestimate the performance of the merged firm and attribute the decrease in performance to members of the other firm rather than to situational difficulties created by conflicting culture.

Suggested Citation

  • Roberto A. Weber & Colin F. Camerer, 2003. "Cultural Conflict and Merger Failure: An Experimental Approach," Management Science, INFORMS, vol. 49(4), pages 400-415, April.
  • Handle: RePEc:inm:ormnsc:v:49:y:2003:i:4:p:400-415
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    File URL: http://dx.doi.org/10.1287/mnsc.49.4.400.14430
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    References listed on IDEAS

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    1. Blume, Andreas, et al, 1998. "Experimental Evidence on the Evolution of Meaning of Messages in Sender-Receiver Games," American Economic Review, American Economic Association, vol. 88(5), pages 1323-1340, December.
    2. Schein, Edgar H., 1983. "The role of the founder in the creation of organizational culture," Working papers 1407-83., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. Ravenscraft, David J & Scherer, F M, 1987. "Life after Takeover," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 147-156, December.
    4. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
    5. Ravenscraft, David J. & Scherer, F. M., 1989. "The profitability of mergers," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 101-116, March.
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    Keywords

    Experiments; Organizational Culture; Mergers;

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