Mars-Venus Marriages: Culture and Cross-Border M&A

(forthcoming)). Nevertheless, it is common to find negative average post-acquisition
performance of acquirer firms (see King et al 2004 for a meta-analysis) and cultural issues are
often believed to be important in explaining this performance. Theories in the area of foreign
entry mode choice have included the “evolutionary process logic, the knowledge based
perspective and transaction cost economics” (Zhao et al (2004)). Culture affects at least the
last two if not all three of these mechanisms (see Zhao et al (2004) for culture’s role in
transaction costs and Bjorkman et al (2007) for the role in capability transfer).
In spite of recurring discussions and anecdotal evidence, it is fair to say that the effects
of culture on the prospects of M&A success are murky. Stahl and Voigt (forthcoming) point
out that the literature suggests a negative impact of cultural differences on socio-cultural
integration, particularly in light of perceptual and cognitive factors, such as social
categorization and the Social Identity Theory. Some studies posit that the cultural distance
between firms tends to result in unavoidable cultural collisions during the post-acquisition
period (Jemison and Sitkin (1986); Buono et al. (1985)). Datta and Puia (1995) find empirical
evidence on the detrimental effect of acquirer-target cultural distance on shareholder wealth in
acquiring firms. As with several empirical explorations of the impact of culture on M&A,
Datta and Puia's (1995) methodology has some serious limitations. They examine windows of
up to 30 trading days from the first press report of the cross-border acquisition in the Wall
Street Journal – an approach that is evidently susceptible to dating errors, and which at best
only captures “announcement effects” and not the long-term performance of the acquiring
firm.
On the other hand, there has been some discussion in the theoretical literature in the
international business and strategy areas on operational explanations of potential gains from
cultural disparity. Subscribers to the resource-based view of the firm posit that culturally
distant mergers can provide competitive advantage to the acquirer by giving them access to
unique and potentially valuable capabilities. It has been argued from an organizational
learning perspective, that culturally distant mergers can spur innovation and learning by
helping break rigidities. In addition, Very et al (1996) find that national cultural distances
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