Cultural effect on synergy realization in cross-border acquisitions: a contingency perspective

This study examines two levels of cultural differences - national and organizational on synergy realization simultaneously by considering two critical implementation factors as the moderators: pre-acquisition due diligence and post-acquisition coordination efforts. Meanwhile, we argue cultural impact and their moderating effect may differ in different synergy realization contexts (e.g., Type-1 vs Type-2 synergies as posed in this study). Four groups of hypotheses are derived from the literature and tested using regression analysis based on a sample of 103 international acquisitions performed by Nordic companies. Results show that both national and organizational cultural differences only exert negative impact on realization of Type-2 synergy which is more implicit/intangible, less predictable, usually tacit-knowledge intensive and/or complementary, but no impact on realization of Type-1 synergy which is explicit/tangible, more predictable, less tacit-knowledge intensive, and/or based on cost reduction and similarity. Meanwhile, national cultural differences generate stronger negative effect at higher level of significance than that of organizational cultural differences. Moreover, proactive due diligence prior to the acquisition is found to effectively moderate the negative impact of high cultural distance whereas no evidence shows the moderating role of post-acquisition coordination efforts.