National culture differences and its impacts on cross-border M&A performance

In the past decades, cross-border mergers and acquisitions have increased in popularity, with a significant push in number of transactions in the 1990s. Amongst other reasons, companies are looking for acquiring targets abroad to participate in fast-growing markets and geographies while increasing their in-house capabilities. The international nature of these transactions poses unique challenges related to the differences in national culture between the parties, which can be reflected in discrepant corporate and working cultures and might directly impact the performance of these deals. In that context, the measurement of national cultural differences is of large interest of cross-regional research and has been applied to study companies’ and employees’ profiles and behaviors. Authors suggest that the national environment (our country) exerts influence in individuals and decision makers, which influences management control systems, leadership attitudes, relationship between workers and strategic decisions of firms. For instance, one of the major contributions in the topic was done Hofstede (HOFSTEDE, 1980), who defined five criteria that can be used to differentiate the main characteristics between countries. After that, other studies added alternative layers of analysis into the dimensions proposed by Hofstede, with the GLOBE study standing out (HOUSE et al., 2002). The reflections of these national dimensions on the corporate environment are several and range from the level of lateral relationships and the dependence on chain of command to the differences in Human Resource practices and strategy development. In countries where power is distributed unequally and hierarchy is present, for example, organizations manifest a vertical structure with minimal lateral relationships, clearly representing a ‘pyramid of people’. Thus, replicating the same management system across nations might not be effective when dealing with the workforce and might actually result in negative consequences for the company. Following this line of thought, several authors studied what is the actual impact of national culture on cross-border M&A to see if performance is really affected. When analyzing performance, the literature suggests conflicting results, with some studies indicating that this cultural distinction might actually raise performance for the entities involved. This suggests that the assumption of culture distance as a negative aspect in a transaction might not be sustained in all cases, showing that this topic needs to be evaluated on each case. With these conflicting results considered, it is, therefore, important to have add the cultural aspect as an another layer of analysis when considering cross-border M&A, especially because it does not always raises the same results performance-wise. This ‘culturalist’ view encourages, then, that the understanding of the corporation should also take into consideration its scenario and its cultural configuration, including the set of attitudes and beliefs that characterizes workers and managers. As stated by Adler and Jelinek (ADLER; JELINEK, 1986), to better deal with cross-cultural frameworks it is fundamental to see corporations as a combination of managerial influence and national conditioning, and not as one or another.