Title: The double-edged effect of cultural distance on cross-border acquisition performance

Authors: Mohammad Faisal Ahammad, Keith W. Glaister

Addresses: Division of Accounting & Finance, Nottingham Business School, Nottingham Trent University, Burton Street, Nottingham, NG1 4BU, UK. ' Management School, The University of Sheffield, 9 Mappin Street, Sheffield, S1 4DT, UK

Abstract: This paper investigates the effect of national culture distance on cross-border acquisition performance. In this paper, we hypothesise that culture distance relates negatively to cross-border acquisition performance because it hinders integration capabilities, but that culture distance also elevates the positive association of integration capabilities and cross-border acquisition performance because it provides more learning opportunities that can only be exploited with strong integration capabilities. Empirical tests with a sample of cross-border acquisitions made by UK firms provide reasonable support for the proposed hypothesis. We find that culture distance constrains communication between acquirers and their acquired units, bringing about a negative indirect effect on acquisition performance. However, we also find that culture distance enriches acquisitions by enhancing the positive effects of communication on acquisition performance. Our study provides additional support for a double-edged effect of culture differences on acquisition performance, and illustrates the importance of integration capabilities.

Keywords: cultural distance; cross-border acquisitions; acquisition performance; national culture; integration capabilities; learning opportunities; UK firms; United Kingdom; mergers and acquisitions.

DOI: 10.1504/EJIM.2011.040909

European Journal of International Management, 2011 Vol.5 No.4, pp.327 - 345

Available online: 26 Jun 2011 *

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