Effect of Cultural Differences on Performance of Merger and Acquisition via Psychological Safety: A Framework

Abstract

This article proposes a framework connecting cultural difference with performance of M & A via psychological safety of target firms employees. Existing studies have suggested the need of effective social-cultural integration post acquisition for the success of M & A of culturally distant firms. This paper includes leadership visibility as the boundary condition of relationship between cultural difference and psychological safety of the employees of target firms. Existing literature indicates cultural difference between merging organization as one of the factors for the poor performance of M&A. Proposed framework elucidate, mechanism through which cultural difference between merging firm effects the performance of M&A. However there is extant literature investigating effect of cultural difference on performance but studies examining the mechanism of this effect is still in its infancy. This study contribute to the literature by investigating the mediating role of psychological safety and moderating role of leadership visibility.