riskier than domestic ones (Angwin and Savill, 1997). The logic is that cultural
and communication barriers can be major obstacles to achieving integration
benefits. The ‘cultural distance hypothesis’, in its most general form, suggests
that the difficulties, costs, or risks associated with cross-cultural contact
increase with growing cultural differences between two individuals, groups, or
organizations (Hofstede, 1980; Kogut and Singh, 1988).
Consistent with the cultural distance hypothesis, extant theory on M&A
integration indicates that the organizational and/or national cultures of merging
firms have to be similar, or at least complementary, in order to integrate success-
fully(see the models of Cartwright and Cooper, 1993; Nahavandi and Malekzadeh,
1988; Sales and Mirvis, 1984). For example, Cartwright and Cooper’s cultural
fit model proposes that, in mergers of equals, the corporate cultures of the
combining firms should be similar or adjoining types because both organiza-
tions have to adapt to the other culture and create a kind of ‘third culture’.
International M&A seem to be particularly difficult to integrate because they
require ‘double layered acculturation’ (Barkema, Bell and Pennings, 1996),
whereby not only different corporate cultures, but different national cultures
also have to be combined.
However, contrary to accepted wisdom, cross-border M&A are not neces-
sarily less successful than domestic transactions (for reviews, see Schweiger and
Goulet, 2000; Stahl, 2001). One source of evidence comes from studies that
examined the impact of cultural distance on M&A performance. While some
studies found that cultural differences had a negative effect on M&A perfor-
mance (e.g., Chatterjee et al., 1992; Datta, 1991; Weber, 1996), others found a
positive effect (e.g., Larsson and Risberg, 1998; Morosini, Shane and Singh,
1998; Very, Lubatkin and Calori, 1996). For example, Larsson and Risberg
(1998) found higher degrees of acculturation (defined as the development of
jointly shared meanings fostering cooperation between the combining firms),
lower levels of employee resistance, and a higher extent of synergy realization
in cross-border M&A. Acculturation and synergy realization were particularly
high in cross-border M&A that were also characterized by strong organizational
culture differences, that is, M&A characterized by dual culture clash – a finding
that directly contradicts the cultural distance hypothesis. Larsson and Risberg
(1998) argue that, in contrast to domestic M&A, where organizational cultural
differences tend to be neglected, the presence of more obvious national cul-
tural differences may have increased the awareness of the significance of
cultural factors in the integration process. They conclude that ‘cross-border
M&A may not only be “cursed” with additional culture clashes but also be
“blessed” with a higher propensity for culturally aware selection and integra-
tion management’ (p. 40).
Other authors have offered additional explanations of why cultural differ-
ences in M&A can, under some circumstances, be an asset rather than a liabil-
ity. Morosini et al. (1998), in a study of cross-border acquisitions, found that
national cultural distance enhanced post-acquisition performance by providing
HRM in Cross-Border Mergers and Acquisitions 91