The double-edged effect of cultural distance on cross-border acquisition performance
by Mohammad Faisal Ahammad, Keith W. Glaister
European J. of International Management (EJIM), Vol. 5, No. 4, 2011

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.

Online publication date: Sun, 26-Jun-2011

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