Introduction
Mergers and acquisitions (M&A) are important strategic choices for business enterprises. The achievement of success in M&A has been a topic of longstanding concern to both business practitioners and academic scholars. It has been widely recognized that M&A are initiated for purposes of cost efficiency, economies of scale, product differentiation, tax benefits, and, more generally, increased synergy. Although the process of merging has structural, financial, and operational dimensions, it is fundamentally about people, their relationships, and the ways in which they do things to achieve whatever needs to be done or undone. As a result, literature on merger management emphasizes that, in order to understand the process of merging, the focus needs to be on how people, and, by extension, the cultural situations that shape them, understand and act in the world.
Until the last decade or so, scholars studying issues of M&A and organization did not have a noticeably culture-centered focus on everyday issues in organizational settings. However, following the wave of mergers and corresponding reflexive analysis focusing on these events, the 1990s began to reveal a preoccupation with the management of culture in change. The combination and change of different cultural artifacts between the continuum represent the depth of integration in mergers and acquisitions. When cultures are compatible, cooperative, and non-competitive, the way a company's culture works is often adopted in mergers and acquisitions.
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Cultural Dimensions and CSR
CSR models and practices evolve within each country based on cultural values. However, national culture will also have an influence on corporations established in a country through the vision and values conveyed by top management. Many cross-cultural theories have investigated the link between national culture and corporate behavior. Subsequently, an increasing number of studies have also improved our understanding of the relationship between corporate social responsibility (CSR) and corporate behavior when they are involved in a merger and acquisition (M&A) and active in a context of international business, locating headquarters and subsidiaries in different countries. In international business, culture can be considered a critical success factor. In particular, a possible cultural misunderstanding can lead to an ineffective implementation of CSR strategies and goals, demonstrating a general failure to exploit the social, strategic, and environmental effects of the possible synergies following the merger.
Therefore, when a potential discrepancy between the CSR models of merged companies coming from different countries is predicted, the possibility of lower financial problems is high. For this reason, the cultural and CSR fit, as well as the investment in the beginning to develop this relationship, should be considered important key drivers of the accumulation of shared experience between partners and, consequently, an increase in the expected value of the synergy offered by economies of scale and possible operational and financial synergies. Moreover, if the ability to identify possible cultural obstacles in an acquisition process is one of the factors that allow us to ensure the success of M&As, it is crucial to study the cultural characteristics of the groups involved in the acquisition process through the identification of their cultural values, concepts, outlines, or details of the information mentioned earlier.
Cultural Similarity and M&A Outcomes
There is abundant empirical research on M&A, and a unified conclusion can be drawn: the performance of M&A is not very satisfactory, and in many cases, the post-acquisition financial performance of enterprises will decline. In order to explain the factors that affect M&A performance, scholars have conducted many empirical studies, and this paper mainly reviews studies on the relationship between cultural similarity and M&A outcomes. Early theoretical studies have proposed that culture can affect the integration process and the post-merger outcome. Many studies have supported this view by empirical methods. The validity of this hypothesis is supported by a spate of studies. It is found that in the same industry, the more similar the culture between the acquirer and the target, the more likely the M&A is finalized, and the more likely it is.
Similarly, serial M&A can also gain stronger productivity. Regarding empirical research on the impact of cultural similarity on M&A performance, there is no unified conclusion, and the specific conclusions reached by different scholars are also different. Case studies of domestic M&As in various countries respectively obtained the same conclusion: if the culture of the merged enterprise is integrated in time, M&A can achieve good results. It is found that the cultural differences between the merged company and the acquirer cannot guarantee M&A success. However, the higher the level of cultural similarity, the smoother the integration process. Research on the M&A of two banks and manufacturing companies found that the greater the cultural similarity between the acquirer and the target, the easier it is to achieve smooth integration. In the long run, it is also beneficial to improve the company’s performance. In the study of the global high-tech industry and a local acquisition of a leading mining company, it was also reached that the higher the level of leadership consistency and the more cultural similarities, the more likely a successful merger will be. Research on cross-border M&A found that the earlier in the merger process, the more efficient the acquirer's integration implementation process, and the higher the post-M&A performance.
M&A Decision Making
Our research considers acquisitions by Western or Japanese companies of other organizations from different cultures, in order to identify some of the effects on M&A of cultural differences or similarities in decision making. To achieve that, we contemplate case studies in which we focus on the impact of national culture on the post-merger integration (PMI) process. We found that cultural similarities and differences can increase the risk of failure, and the nature of this influence depends on the cultural dimension. Using this information, managers can assess the consequences of the cultural differences in an M&A to prepare for and counteract them.
In practice, cultural issues are often seen as possible sources of M&A complications, and they are also associated with expanding internationally. We now apply the above cultural effects to derive insights, which may be useful to decision-makers. To smooth the PMI process and improve the chances of M&A success, managers are advised to select an acquisition target with a culture orientation that minimizes the danger of discrepancies in management decision-making. Consequently, a cultural assessment should be integral within the M&A planning and due diligence process. To sum up, there is evidence to suggest that, factors permitting, a recommended shift from the past would be towards a strategy in which cultural similarity is sought. Two useful things can be drawn from our insights: lessons to inform future research and developments in the theory and a series of practicable recommendations that can contribute to the increasing likelihood of success in a cross-border M&A setting.
Conclusion
Increased globalization has led to more M&A deals and cultural differences; therefore, it is of high importance to integrate this when considering M&A. This study showed that cultural similarity is related to the outcomes of M&A, specifically with regards to acquisitions. Similar employee values lead to more positive work attitudes for the acquiring employees on the psychological and behavioral level. When looking at the operational levels of MPB, we discovered that especially the influence of old and new employees on CSR declines. We also analyzed the adjustment processes after M&A, common characteristics (number of employees, value lost, integration speed), and found that a close fit leads to easier integration, reflecting that potential problems are actually solved before the deal even occurs.
Given the explorative nature of this study, many questions remain open and call for future research. When analyzing the relationship between cultural similarity and outcomes of M&A in general and change processes in particular, the average cultural similarity on a national level might oversimplify community mentalities. Therefore, it would be enriching to analyze these relationships in the cultural setup of specific industries. Furthermore, this study did not analyze the process behind the impact of national cultural dimensions on CSR. Hence, it would be interesting to see how these effects evolve over time or across different project sizes. This also ties in with a wider context in organizational science, as findings regarding the relevance of organizational culture and the interaction with national culture have not provided clear answers yet. Hence, it would be fruitful to tie this in with organizational sciences, discuss cultural alignment in M&A processes based on a longer time frame, and further enhance their external validity. Finally, it would be interesting to get a deeper understanding of the discussed problems. It would, thus, be interesting to see to what extent the revealed problems in the integration can actually lead to a failure of the M&A deal and at what cost. Thus, studies of a longitudinal nature can shed more accurate light on the relationship between national culture differences and organizational outcomes of M&A or business processes in general.
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