IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i8p2307-d223591.html
   My bibliography  Save this article

A Comparative Study of Cross-Border and Domestic Acquisition Performances in the South Korean M&A Market: Testing the Two Competing Theories of Culture

Author

Listed:
  • Sung-Jun Lee

    (College of International and Area Studies, Hankuk University of Foreign Studies (Global Campus), 81 Oedae-ro, Mohyeon-eup, Cheoin-gu, Yongin-si 17035, Gyeonggi-do, Korea)

  • Soojin Kim

    (HUFS Business School, Hankuk University of Foreign Studies (Seoul Campus), 107 Imun-ro, Dongdaemun-gu, Seoul 02450, Korea)

  • Joongwha Kim

    (HUFS Business School, Hankuk University of Foreign Studies (Seoul Campus), 107 Imun-ro, Dongdaemun-gu, Seoul 02450, Korea)

Abstract

To gain a sustainable competitive advantage through cross-border mergers and acquisitions (M&As), acquiring firms need to correctly anticipate the consequences of national cultural differences. By comparing the cultural antecedents as well as the performances of domestic M&As (DMA) and cross-border M&As (CMA) in the Korean M&A market from 1999 to 2007, this study aims to gauge whether CMAs can be a viable option for a sustainable growth strategy. This paper tests two conflicting hypotheses (H) regarding the effects of cultural differences. From the perspective of the essentialist (“classic”) concept of culture, DMAs will outperform CMAs (H1) because culture clashes may take place less often in DMAs than in CMAs. However, from the perspective of the social constructivist concept of culture, the post-merger performance will be dependent upon the stability and legitimacy of the intergroup status relations between the acquiring and acquired firms regardless of whether it is DMA or CMA (H2). This study also scrutinizes the moderating effects of the level of integration on these two hypothesized relationships (H3 and H4). The results of this paper demonstrate that the social constructivist concept of culture overall provides a better theoretical explanation.

Suggested Citation

  • Sung-Jun Lee & Soojin Kim & Joongwha Kim, 2019. "A Comparative Study of Cross-Border and Domestic Acquisition Performances in the South Korean M&A Market: Testing the Two Competing Theories of Culture," Sustainability, MDPI, vol. 11(8), pages 1-23, April.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:8:p:2307-:d:223591
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/8/2307/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/11/8/2307/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ingmar Björkman & Günter K Stahl & Eero Vaara, 2007. "Cultural differences and capability transfer in cross-border acquisitions: the mediating roles of capability complementarity, absorptive capacity, and social integration," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 658-672, July.
    2. Bauer, Florian & Matzler, Kurt & Wolf, Stefan, 2016. "M&A and innovation: The role of integration and cultural differences—A central European targets perspective," International Business Review, Elsevier, vol. 25(1), pages 76-86.
    3. Maurizio Zollo & Harbir Singh, 2004. "Deliberate learning in corporate acquisitions: post‐acquisition strategies and integration capability in U.S. bank mergers," Strategic Management Journal, Wiley Blackwell, vol. 25(13), pages 1233-1256, December.
    4. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1990. "Do Managerial Objectives Drive Bad Acquisitions?," Journal of Finance, American Finance Association, vol. 45(1), pages 31-48, March.
    5. Piero Morosini & Scott Shane & Harbir Singh, 1998. "National Cultural Distance and Cross-Border Acquisition Performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 137-158, March.
    6. Günter K Stahl & Rosalie L Tung & Tatiana Kostova & Mary Zellmer-Bruhn, 2016. "Widening the lens: Rethinking distance, diversity, and foreignness in international business research through positive organizational scholarship," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(6), pages 621-630, August.
    7. Rikard Larsson & Sydney Finkelstein, 1999. "Integrating Strategic, Organizational, and Human Resource Perspectives on Mergers and Acquisitions: A Case Survey of Synergy Realization," Organization Science, INFORMS, vol. 10(1), pages 1-26, February.
    8. Yildiz, H. Emre, 2014. "Not All Differences Are the Same: Dual Roles of Status and Cultural Distance in Sociocultural Integration in Cross-border M&As," Journal of International Management, Elsevier, vol. 20(1), pages 25-37.
    9. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.
    10. Ahammad, Mohammad Faisal & Tarba, Shlomo Yedidia & Liu, Yipeng & Glaister, Keith W., 2016. "Knowledge transfer and cross-border acquisition performance: The impact of cultural distance and employee retention," International Business Review, Elsevier, vol. 25(1), pages 66-75.
    11. Lee, Sung-Jun & Kim, Joongwha & Park, Byung Il, 2015. "Culture clashes in cross-border mergers and acquisitions: A case study of Sweden's Volvo and South Korea's Samsung," International Business Review, Elsevier, vol. 24(4), pages 580-593.
    12. Michael Lubatkin & Roland Calori & Philippe Very & John F. Veiga, 1998. "Managing Mergers Across Borders: A Two-Nation Exploration of a Nationally Bound Administrative Heritage," Organization Science, INFORMS, vol. 9(6), pages 670-684, December.
    13. Ahern, Kenneth R. & Daminelli, Daniele & Fracassi, Cesare, 2015. "Lost in translation? The effect of cultural values on mergers around the world," Journal of Financial Economics, Elsevier, vol. 117(1), pages 165-189.
    14. Slangen, Arjen H.L., 2006. "National cultural distance and initial foreign acquisition performance: The moderating effect of integration," Journal of World Business, Elsevier, vol. 41(2), pages 161-170, June.
    15. Taco H Reus & Bruce T Lamont, 2009. "The double-edged sword of cultural distance in international acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(8), pages 1298-1316, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Wanli & Wang, Chaohui & Ren, Qizhe & Zhao, Ding, 2020. "Institutional distance and cross-border M&A performance: A dynamic perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 66(C).
    2. Karolis Andriuškevičius & Dalia Štreimikienė, 2022. "Energy M&A Market in the Baltic States Analyzed through the Lens of Sustainable Development," Energies, MDPI, vol. 15(21), pages 1-21, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahammad, Mohammad Faisal & Tarba, Shlomo Yedidia & Liu, Yipeng & Glaister, Keith W., 2016. "Knowledge transfer and cross-border acquisition performance: The impact of cultural distance and employee retention," International Business Review, Elsevier, vol. 25(1), pages 66-75.
    2. Qi Ai & Hui Tan, 2018. "The intra-firm knowledge transfer in the outward M&A of EMNCs: Evidence from Chinese manufacturing firms," Asia Pacific Journal of Management, Springer, vol. 35(2), pages 399-425, June.
    3. Bauer, Florian & Matzler, Kurt & Wolf, Stefan, 2016. "M&A and innovation: The role of integration and cultural differences—A central European targets perspective," International Business Review, Elsevier, vol. 25(1), pages 76-86.
    4. Alexandridis, George & Hoepner, Andreas G.F. & Huang, Zhenyi & Oikonomou, Ioannis, 2022. "Corporate social responsibility culture and international M&As," The British Accounting Review, Elsevier, vol. 54(1).
    5. Ye, Silin & Zhou, Jing & Jiang, Yunwen & Liu, Xiaming, 2023. "Managers as the bridge: How cultural friction influences the integration of cross-border mergers and acquisitions," International Business Review, Elsevier, vol. 32(4).
    6. Wang, Daojuan & Hain, Daniel S. & Larimo, Jorma & Dao, Li T., 2020. "Cultural differences and synergy realization in cross-border acquisitions," International Business Review, Elsevier, vol. 29(3).
    7. Jinhee Kwon & Cheong Kim & Kun Chang Lee, 2020. "Moderating Effect of the Continental Factor on the Business Strategy and M&A Performance in the Pharmaceutical Industry for Sustainable International Business," Sustainability, MDPI, vol. 12(12), pages 1-14, June.
    8. Günter K. Stahl & Andreas Voigt, 2008. "Do Cultural Differences Matter in Mergers and Acquisitions? A Tentative Model and Examination," Organization Science, INFORMS, vol. 19(1), pages 160-176, February.
    9. Yunjae Bae & Kyungsuk Lee & Taewoo Roh, 2020. "Acquirer’s Absorptive Capacity and Firm Performance: The Perspectives of Strategic Behavior and Knowledge Assets," Sustainability, MDPI, vol. 12(20), pages 1-28, October.
    10. H Emre Yildiz & Carl F Fey, 2016. "Are the extent and effect of psychic distance perceptions symmetrical in cross-border M&As? Evidence from a two-country study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(7), pages 830-857, September.
    11. Dikova, Desislava & Rao Sahib, Padma, 2013. "Is cultural distance a bane or a boon for cross-border acquisition performance?," Journal of World Business, Elsevier, vol. 48(1), pages 77-86.
    12. Reus, Taco H., 2012. "Culture's consequences for emotional attending during cross-border acquisition implementation," Journal of World Business, Elsevier, vol. 47(3), pages 342-351.
    13. Mirc, Nicola, 2012. "Connecting the micro- and macro-level: Proposition of a research design to study post-acquisition synergies through a social network approach," Scandinavian Journal of Management, Elsevier, vol. 28(2), pages 121-135.
    14. Boateng, Agyenim & Du, Min & Bi, XiaoGang & Lodorfos, George, 2019. "Cultural distance and value creation of cross-border M&A: The moderating role of acquirer characteristics," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 285-295.
    15. Daniel R Clark & Dan Li & Dean A Shepherd, 2018. "Country familiarity in the initial stage of foreign market selection," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(4), pages 442-472, May.
    16. Renneboog, Luc & Vansteenkiste, Cara, 2019. "Failure and success in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 650-699.
    17. Satu Teerikangas & Olivier Irrmann, 2016. "Cultural Change Following International Acquisitions: Cohabiting the Tension Between Espoused and Practiced Cultures," Management International Review, Springer, vol. 56(2), pages 195-226, April.
    18. Srivastava, Saurabh & Singh, Shiwangi & Dhir, Sanjay, 2020. "Culture and International business research: A review and research agenda," International Business Review, Elsevier, vol. 29(4).
    19. Colman, Helene Loe, 2020. "Facilitating integration and maintaining autonomy: The role of managerial action and interaction in post-acquisition cabability transfer," Journal of Business Research, Elsevier, vol. 109(C), pages 148-160.
    20. Cristina López-Duarte & Marta M. Vidal-Suárez & Belén González-Díaz & Nuno Rosa Reis, 2016. "Understanding the relevance of national culture in international business research: a quantitative analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1553-1590, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:8:p:2307-:d:223591. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.