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Unsuccessful mergers: Are ‘cultural differences’ the problem or just a scape goat?

Datum:01 februari 2017
Auteur:Frederik Wermser
Unsuccessful mergers: Are ‘cultural differences’ the problem or just a scape goat?
Unsuccessful mergers: Are ‘cultural differences’ the problem or just a scape goat?

Managers and researchers alike recognize that cultural differences between merging organizations are an important factor for the success of mergers and acquisitions (M&As). Some even go as far as stating that the cultural fit between two merging organizations is as important as the strategic fit between the merger partners (1). Culture can broadly be defined as the norms, values, beliefs, and attitudes shared by a nation or organization (2). Differences in organizational and, for cross-border M&As, national culture can have various positive and negative effects on the success of mergers. A minority of studies on M&As highlight the potential positive effects of cultural differences, such as opportunities for exchanging best practices and knowledge transfer (e.g., 3). However, in most cases cultural differences are primarily perceived as obstacles hampering the success of M&As.

A recent study by Vaara and colleagues (4) aims to put this emphasize on the negative effects of cultural differences in perspective. In their study amongst managers of 92 Finnish mergers Vaara and his colleagues found that managers often use problems related to cultural differences as an “easy explanation” when M&As are unsuccessful. Thus, rather than acknowledging that their own managerial actions were ineffective, managers did attribute the lack of success between the merging organizations to cultural differences. In contrast, when M&As were successful managers were more likely to attribute this success to their own actions.

This tendency of managers to attribute success to themselves and failure to cultural differences can be explained in psychological terms. We all are motivated to see ourselves in a positive light and also to be perceived as such by others around us. Therefore, we tend (unconsciously) to more readily take credit for success than for failure.

However, Vaara and colleagues made an additional, very interesting finding. In case of an extreme M&A failure, managers were more likely to attribute failure to their own managerial actions. Thus, the following pattern emerged: Managers take responsibility for successful and for extremely unsuccessful M&As, but point at cultural differences as responsible for relatively unsuccessful mergers. The explanation for this surprising pattern is sought in what it means to be a manager. In their own eyes and the eyes of others, managers are expected to be in charge of organizational developments. Shifting all responsibility for an extremely unsuccessful M&A to cultural differences, implies that one admits to have been passive and not in charge when the M&A went through turbulent times towards failure. It is as if being seen as having lost control over a situation is worse than being seen as having made mistakes.

So, what can we learn from the above? First, that we should be more careful when readily using cultural differences as an explanation for lack of success in M&As. In some cases, the focus on problems resulting from organizational differences might be motivated by needs for positive self-perception rather than a striving to provide objective information. Secondly, the identification of this self-serving element in the evaluation of merger success through managers emphasizes the need for objective and structural approaches to assessing the way cultural differences influence the success of M&As.

Drs. Frederik Wermser (f.l.wermser@rug.nl) is PhD Candidate on the project “Cultural Interoperability in the integration of Netherlands and German military units”.

 

References

1 - Sarala, R. M., Junni, P., Cooper, C. L., & Tarba, S. Y. (2016). A sociocultural perspective on knowledge transfer in mergers and acquisitions. Journal of Management, 42, 1230-1249.

2 - Goulet, P. K., & Schweiger, D. M. (2006). Managing culture and human resources in

mergers and acquisitions. In G. K. Stahl & I. Björkman (Eds.), Handbook of Research in International Human Resource Management (pp. 405-429). Cheltemham, UK: Edward Elgar.

3 - Björkman, I., Stahl, G. K., & Vaara, E. (2007). Cultural differences and capability transfer in cross-border acquisitions: The mediating roles of capability complementarity, absorptive capacity, and social integration. Journal of International Business Studies,    38, 658-672.

4 - Vaara, E., Junni, P., Saraka, R. M., Ehrnrooth, M., & Koveshnikov, A. (2014). Attributional tendencies in cultural explanations of M&A performance. Strategic Management Journal, 35, 1302-1317.