Cultural Difference or Similarity, Selection of Targets and Post- Acquisition Performance

Abstract

This paper examines how difference as well as similarity in Individualism-Collectiveness cultural background between the acquirer and target affects the acquirer’s post-acquisition performance during internationalization. Besides examining how distance in individualism will affect acquirer’s post-acquisition performance, two groups will be compared to find out whether the heterogenous types of similarity in Individualism-Collectiveness will affect the post-acquisition performance differently. The first study of the analysis of 681 cross- border deals reveals that a bigger difference in individualism is indeed negatively associated with post-acquisition performance; and this negative association will be tampered if there is a national status difference between the acquirer and the target. The second study of the analysis of 867 cross-border deals tests how similarity in Individualism-Collectiveness influences acquirer's post-acquisition performance. This test further reveals that when the acquirer and the target both come from collectivistic cultures, the post-acquisition performance will be better compared to the situation where both firms come from individualistic nations. These findings enrich the current literature that has focused on the difference of cultural background of acquisition by revealing effects of different types of cultural similarity on acquisition performance, meanwhile offer interesting implications for corporate managers when search for potential acquisition targets.