The Culture–Performance Relationship in M&A: From Yes/No to How
| Date | 01 March 2006 |
| Published date | 01 March 2006 |
| Author | Satu Teerikangas,Philippe Very |
| DOI | http://doi.org/10.1111/j.1467-8551.2006.00477.x |
The Culture–Performance Relationship in
M&A: From Yes/No to How
Satu Teerikangas and Philippe Very
*
Institute of Strategy and International Business, Department of Industrial Engineering and Management,
Helsinki University of Technology, P.O.BOX. 9500, 02015 HUT, Finland and
*
Dpt Management & Strategy,
Edhec Business School, 393 Promenade des Anglais, BP 3116, 06202 Nice Cx3, France
Email: satu.teerikangas@tkk.fi [Teerikangas]; philippe.very@edhec.edu [Very]
Do cultural differences have an impact on the performance of M&A? Despite the widely
accepted myth that they do, and in a negative way, a review of extant research provides
contradictory findings. In this article, we explore reasons for this contradiction and
propose solutions in the form of propositions and a theoretical framework. We begin
with a brief overview of extant research on the culture-performance relationship in
M&A. In light of the contradictions emerging from this review, we move on to
identifying three areas of complexity explaining this confusion, and for each one, we
suggest propositions to guide future research. We then summarize our argument using a
theoretical framework. Because of the long-term and dynamic nature of the M&A
process, we argue that instead of studying the simple performance impact of cultural
differences in M&A, we should move on to thinking how cultural differences impact on
the M&A process and its outcome.
Introduction
Over the past two decades, mergers and acquisi-
tions have become increasingly commonplace as
the means of international expansion for compa-
nies seeking global reach. They provide access to
competence and a local intelligence base without
carrying the burden of starting up a subsidiary
from zero. Despite their apparent success, over
half of these integrative ventures end up report-
ing failure (Cartwright and Cooper, 1993; Has-
peslagh and Jemison, 1991). This has been traced
back to an inadequate strategic rationale behind
the deal, a lack of pre-acquisition planning,
evaluation or post-acquisition implementation
management (e.g. Cartwright and Cooper, 1992).
Cultural differences have also been blamed for
this high failure rate, for domestic and cross-
border deals alike (Buono and Bowditch 1989;
Buono, Bowditch and Lewis, 1985; Cartwright
and Cooper, 1992, 1993; Chatterjee et al., 1992;
Datta, 1991; David and Singh, 1994; Morosini,
1998; Morosini and Singh, 1994; Nahavandi and
Malekzadeh, 1988; Sales and Mirvis, 1984;
Weber, 1996; Weber, Shenkar and Raveh,
1996). Given their implicit nature, differences in
e.g. national or organizational cultures seem to
go unidentified throughout the M&A process,
resulting in the newly acquired companies’ taking
a longer time, if ever, to reach their most efficient
state (Gertsen, Soderberg and Torp, 1998;
Morosini, Shane and Singh, 1998).
Within the M&A literature, a stream of
research has specifically researched the issue of
whether cultural differences contribute to M&A
performance. However, instead of proving the
commonly expected and suggested negative im-
pact of cultural differences on the performance of
M&A, these research results reveal contradictory
findings. In this article, we provide a theoretical
contribution to the question of why the assess-
ment of the culture-performance relationship in
M&A has proven difficult. We begin with a brief
review of extant research findings. Then we move
on to identifying three areas of complexity that
undermine efforts to address the expected rela-
British Journal of Management, Vol. 17, S31–S48 (2006)
DOI: 10.1111/j.1467-8551.2006.00477.x
r2006 British Academy of Management
tionship between cultural differences and the
performance of M&A. For each area of complex-
ity, propositions guiding future research are
provided. A theoretical framework summarizes
the discussion. Conclusions and implications for
future research end the article.
The impact of culture on the
performance of M&A
In our brief and succinct overview of extant
research (see also excellent reviews in Napier,
1989; Schweiger and Walsh, 1990; Schweiger and
Goulet, 2000; Schoenberg, 2000; Stahl and Voigt,
2003; Vaara, 1999), we divide past research into
three categories in terms of whether it has studied
the relationship between: (1) organizational
culture, (2) national culture or (3) several cultures
and M&A performance. Table 1 presents the
studies pertaining to each category and, for each
one, the key findings.
The relationship between organizational culture
and the performance of M&A
The study of culture began in the social sciences
where first anthropologists, later sociologists,
social psychologists and cross-cultural psycholo-
gists have studied culture throughout the twen-
tieth century. The notion of organizational
culture was introduced as early as the 1960s
(for historical overviews, see e.g. Alvesson, 2002;
Alvesson and Berg, 1992; Czarniewska-Joerges,
1992; Hatch, 1997; Parker, 2000; Trice and Beyer,
1993), but it was not until the 1980s that the topic
became of increasing research and managerial
interest with the publication of the works of
Ouchi (1981) and Peters and Waterman (1982). A
commonly used definition of organizational
culture focuses on the beliefs, values and assump-
tions shared by an organization’s members
(Schein, 1985). However defined, organizational
culture is today regarded as important in
determining an individual’s commitment, satis-
faction, productivity and longevity within the
organization (Holland, 1985; O’Reilly, Chatman
and Caldwell, 1991) as well as in understanding
organizational climate (Ashkanasy, Wilderom
and Peterson, 2000; Denison, 1996).
In the early 1980s, the concept was introduced
into the M&A literature. Whilst some studies
have highlighted the human and cultural con-
sequences of differences in organizational cul-
tures (Buono, Bowditch and Lewis, 1985; Marks,
1982; Sales and Mirvis, 1984), others have
focused on the importance of cultural fit (Cart-
wright and Cooper, 1992, 1993; Chatterjee et al.,
1992; Larsson and Finkelstein, 1999). In parallel,
efforts to measure the organizational culture –
performance relationship through survey-based
research have surfaced.
In his study of organizational fit and the
performance of US domestic acquisitions, Datta
(1991) found differences in top management
styles, but not in reward and evaluation systems,
to have a negative performance impact. Weber
(1996) researched the role of corporate culture fit,
autonomy removal and commitment of managers
to the performance of US mergers across
different industries. The relationships between
the studied variables were found to be complex,
varying across industries and providing different
results with different measures of performance.
Differences have also been found to provide
potential for value creation. Krishnan, Miller and
Judge (1997) studied the impact of top manage-
ment team complementarity on the performance
of US acquisitions. They found differences in
functional backgrounds to have a positive impact
on post-acquisition performance. Complementar-
ity of top management team members was seen as
a means of enhancing organizational learning
and lowering turnover rates. Based on their
study, Larsson and Finkelstein (1999) argue that
complementarity of operations is a useful way of
explaining M&A success, as it represents the
potential for synergy realization in a deal.
To conclude, extant findings suggest that a
performance impact between differences in orga-
nizational cultures and M&A exists. However, we
see that results vary as to the nature of this
impact from negative, complex to positive. With
these findings, it seems difficult to provide an
upfront conclusion as to the performance impact
of organizational culture on M&A.
The relationship between national culture and the
performance of M&A
Early studies on culture in M&A were made by
American or British scholars. With the rise of
cross-border deals, European scholars began to
take an increasing interest in the phenomenon.
S32 S. Teerikangas and P. Very
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