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Abstract

Cultural distance is one of the most widely used distance construct in international business. However, scholars have long questioned the notion that cultural distance has a homogenous impact on organizational actions and performance. We redress this by examining how the relationship between cultural differences and deal abandonment in cross-border acquisitions is contingent on firm-level cultural experience reserve and industry affiliation. Drawing on the organizational learning theory and cultural friction perspective, we first propose that the cultural experience reserve of a focal firm mitigates the positive impact of cultural differences on cross-border deal abandonment. We then hypothesize that the firm’s industry context affects the uncertainties associated with cultural differences. Our findings based on a sample of 197 Indian services sector firms support our theoretical predictions.

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... One of the main criticisms of the distance concept is that distance reflects only national differences, even though firms may interact with the different context at different levels (see Shenkar, 2001Shenkar, , 2012Popli, Akbar, Kumar & Gaur, 2016;Konara & Mohr, 2019, for more details). Simply put, the distance concept assumes that all firms within the same pair of home-host countries are influenced equally by institutional differences, regardless of the different levels of the firms' interaction with the differences. ...
... In addition, distance assumes a linear effect of institutional differences, since the concept does not consider the reverse impact, although foreign subsidiaries may gain experience over time or through changes during their operations (Luo & Shenkar, 2011;Zeng et al., 2013;Popli et al., 2016). Accordingly, distance could not reflect potentially changeable mechanisms that generate the influences of institutional differences. ...
... Yet, Zaheer et al. (2012) proposed that Shenkar's criticisms are applicable to other dimensions of institutional differences. In a similar vein, scholars have argued that the process of interaction and resistance leading to friction is equally validated in the context of other institutional dimensions (Orr & Scott, 2008;Popli et al., 2016). Hence, we expect friction may be more appropriate than distance to assess the differences in economic and political differences. ...
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Past research on foreign divestment has recognized the impact of economic and political differences¹. However, the prior findings remain equivocal. We adopt the Positive Organizational Scholarship perspective to provide more contextualized insights into the effects of economic and political differences on foreign divestment. Specifically, we consider the juxtaposition of national differences and levels of firm interaction with the different contexts. Thus, we develop the concept of friction to assess levels of economic and political differences. We further argue that economic friction will have a curvilinear (U-shaped) effect on foreign divestment, whereas political friction will produce a monotonic (positive) effect. Moreover, we introduce ownership level as a moderator into the main hypotheses. Drawing on data from 2400 foreign subsidiaries of 310 Finnish multinational enterprises, from 1970–2010, we provide support for our main hypotheses, although the moderating effect of ownership levels is not supported. We further compare the effects of differences measured by friction with those measured by distance. Accordingly, our research highlights the importance of detecting specific conditions for the investigation of the impact of economic and political differences in the foreign divestment literature.
... The notion that culture affects mergers and acquisitions decisions and performance (Teerikangas and Very (2005)) stem from a growingly recognized theoretical prior in management that highlights the effects of national or regional cultures on management and business performance cannot be ignored (Olie (1990), Angwin (2000)), and is supported by some recent multidisciplinary and interdisciplinary scholarship. Popli et al. (2016) unearth cultural experience reserve as an important idiosyncratic firm-specific capability that mitigates the effects of cultural distances in deal abandonment. The authors suggest that the foreign experience of acquiring firms plays an instrumental role in reducing the culture gaps that may emerge in equity based transactions including mergers and acquisitions (Shenkar et al. (2008), Olie (1994)). ...
... This, in turn, results in nationalistic bias of firms which is later documented by several studies in the context of acquiring firms buying behavior and performance (Angwin (2000), Teerikangas and Very (2005)). Popli et al. (2016) finds a moderating role of cultural experience reserve and industry affiliation in the relationship between cultural distance and the likelihood of cross-border deal abandonment. The authors argue that the effects of cultural distance are mitigated for firms with greater cultural experience reserves. ...
... All the orientations have appropriate coefficient signs and three dimensions (uncertainty avoidance, future orientation and gender egalitarianism) are statistically significant, consistent with the dominant effect of these dimensions on the factor analyzed dimension. The negative and significant coefficient for power distance and positive and significant coefficient for human orientation are also consistent with positive association between the factor analyzed people oriented culture dimension and probability of firms becoming targets, as power distance loads negatively and human orientation loads positively on this factor analyzed dimension.In nutshell, the results reported on probability of firms becoming target and their robustness substantiate the theoretical prior emphasizing the critical role understanding the target country culture can play in success of M&A activity(Angwin (2000),Teerikangas and Very (2006),Popli et al. (2016)). ...
Preprint
To examine the effects of culture on mergers and acquisitions activity, this study focuses on the national culture orientation of target firms. In particular, we investigate: (i) which cultures are more likely to become targets; and (ii) how the cultural orientation affects the shareholder value of target firms. Using the GLOBE culture framework, we find that the firms from result oriented cultures are less likely to become targets and experience higher cumulative abnormal returns. Traditional oriented cultures are more likely to become targets and experience lower cumulative abnormal returns. We also observe a higher probability of firms from people oriented cultures becoming targets. Our findings suggest that understanding the cultural orientation of target firms can meaningfully impact the M&A outcome. JEL Classification: G34, M14, Z1
... The existing literature has examined the entrepreneurial mindset in the context of various independent factors including commitment (Tröster & Van Knippenberg, 2012), cultural distance (Autio, Pathak, & (Slangen et al., 2011); capital market LOF (Bell et al., 2012); CSR rating (Campbell et al., 2012); degree of integration (Choi & Contractor, 2016); FII ownership (Baik et al., 2013); Performance (Berger et al., 2017); probability of VC syndication (Dai & Nahata, 2016) Other Independent variables/ antecedents used: geographic distance (Choi & Contractor, 2016); governance (law) (Choi & Contractor, 2016); information cost (Bell et al., 2012); institutional distance (Bell et al., 2012); power distance, R&D intensity (Choi & Contractor, 2016); reciprocity (Berger et al., 2017); technology specialization (Choi & Contractor, 2016); trust (Berger et al., 2017); unfamiliarity cost (Bell et al., 2012) Cluster 6: Firm performance Dependent/ Outcome Variables used: abnormal returns (Aybar & Ficici, 2009;Dinner et al., 2019); cost of equity (Gray et al., 2013); deal abandonment status (Popli et al., 2016); firm performance (Azar & Drogendijk, 2019;Chiao et al., 2009); residual state ownership (Boubakri et al., 2016); time to get desired cost saving and service levels (Hutzschenreuter et al., 2011) Other Independent variables/ antecedents used: cultural experience reserve (Popli et al., 2016); Governance (Law) (Boubakri et al., 2016); key employee retention (Reus & Lamont, 2009); market focus (Chiao et al., 2009); past experience (Aybar & Ficici, 2009); power distance (Gray et al., 2013); right vs left wing (Boubakri et al., 2016); understandability (Reus & Lamont, 2009) Cluster 7: Entrepreneurial mindset Dependent/ Outcome Variables used: attained cost savings targets (Peeters et al., 2015); entrepreneurial behavior (Autio et al., 2013); entrepreneurial rate (Stephan & Uhlaner, 2010); funding time (Jancenelle et al., 2019) Other Independent variables/ antecedents used: cultural alignment (Jancenelle et al., 2019); cultural distance (Autio et al., 2013;Peeters et al., 2015) Cluster 8: Interaction Dependent/ Outcome Variables used: FDI mortality rate (Zeng et al., 2013); horizontal sales activity (Slangen & Beugelsdijk, 2010); performance (Katsikeas et al., 2009); vertical activity (Slangen & Beugelsdijk, 2010) Other Independent variables/ antecedents used: governance imperfection (Slangen & Beugelsdijk, 2010); transaction specific assets (Katsikeas et al., 2009); uncertainty (Katsikeas et al., 2009) S. Srivastava, et al. International Business Review xxx (xxxx) xxxx Wennberg, 2013; Stephan & Uhlaner, 2010), openness (Tröster & Van Knippenberg, 2012), labor regulation (Young & Makhija, 2014), and organizational structure (Huang et al., 2011). ...
... The existing literature has examined the entrepreneurial mindset in the context of various independent factors including commitment (Tröster & Van Knippenberg, 2012), cultural distance (Autio, Pathak, & (Slangen et al., 2011); capital market LOF (Bell et al., 2012); CSR rating (Campbell et al., 2012); degree of integration (Choi & Contractor, 2016); FII ownership (Baik et al., 2013); Performance (Berger et al., 2017); probability of VC syndication (Dai & Nahata, 2016) Other Independent variables/ antecedents used: geographic distance (Choi & Contractor, 2016); governance (law) (Choi & Contractor, 2016); information cost (Bell et al., 2012); institutional distance (Bell et al., 2012); power distance, R&D intensity (Choi & Contractor, 2016); reciprocity (Berger et al., 2017); technology specialization (Choi & Contractor, 2016); trust (Berger et al., 2017); unfamiliarity cost (Bell et al., 2012) Cluster 6: Firm performance Dependent/ Outcome Variables used: abnormal returns (Aybar & Ficici, 2009;Dinner et al., 2019); cost of equity (Gray et al., 2013); deal abandonment status (Popli et al., 2016); firm performance (Azar & Drogendijk, 2019;Chiao et al., 2009); residual state ownership (Boubakri et al., 2016); time to get desired cost saving and service levels (Hutzschenreuter et al., 2011) Other Independent variables/ antecedents used: cultural experience reserve (Popli et al., 2016); Governance (Law) (Boubakri et al., 2016); key employee retention (Reus & Lamont, 2009); market focus (Chiao et al., 2009); past experience (Aybar & Ficici, 2009); power distance (Gray et al., 2013); right vs left wing (Boubakri et al., 2016); understandability (Reus & Lamont, 2009) Cluster 7: Entrepreneurial mindset Dependent/ Outcome Variables used: attained cost savings targets (Peeters et al., 2015); entrepreneurial behavior (Autio et al., 2013); entrepreneurial rate (Stephan & Uhlaner, 2010); funding time (Jancenelle et al., 2019) Other Independent variables/ antecedents used: cultural alignment (Jancenelle et al., 2019); cultural distance (Autio et al., 2013;Peeters et al., 2015) Cluster 8: Interaction Dependent/ Outcome Variables used: FDI mortality rate (Zeng et al., 2013); horizontal sales activity (Slangen & Beugelsdijk, 2010); performance (Katsikeas et al., 2009); vertical activity (Slangen & Beugelsdijk, 2010) Other Independent variables/ antecedents used: governance imperfection (Slangen & Beugelsdijk, 2010); transaction specific assets (Katsikeas et al., 2009); uncertainty (Katsikeas et al., 2009) S. Srivastava, et al. International Business Review xxx (xxxx) xxxx Wennberg, 2013; Stephan & Uhlaner, 2010), openness (Tröster & Van Knippenberg, 2012), labor regulation (Young & Makhija, 2014), and organizational structure (Huang et al., 2011). ...
Article
This study explores the role of culture and international business in internationalization outcomes through a systematic review and analysis of articles published between 2009 and 2019. By mapping the current research domain, this review reflects the avenues for future research in theory development, context, characteristics, and methodology (TCCM) in eight research clusters identified as national culture, external uncertainty avoidance, knowledge transfer & collaboration, HRM & management practices, international diversification research, en-trepreneurial mindset, interaction, and firm performance. The clusters were grouped into independent factors and internationalization outcome factors. This framework provided deeper insights into the theoretical implications which will lead to further advancement in these research areas.
... The higher the cultural distance between countries, the more significant is the difference between management practices, which may cause internal conflicts and affect the performance (Kogut and Singh, 1988;Ahammad and Glaister, 2011). Moreover, Popli et al. (2016) and Kale and Singh (2017) have found that culture can significantly constrain acquisition performance from emerging markets' multinationals. Thus, the consensus among IB scholars is around the thought that cultural distance increases transaction costs (Beugelsdijk et al., 2010) and poses a liability of foreignness for multinationals (Zaheer, 1995). ...
Article
Purpose Cultural distance can be a challenge for internationalization. However, in some instances, it is possible that different cultures could represent a benefit for multinational enterprises (MNEs) from emerging contexts. Drawing on the knowledge-based view (KBV), the authors propose that greater cultural distances lead to benefits for multinationals seeking to absorb new knowledge overseas. Design/methodology/approach The authors performed ordinary least squares regressions with moderation tests over a database containing 101 cross-border acquisitions to test the study’s hypotheses. The acquisitions were performed by Brazilian firms between 1995 and 2015, targeting 24 host countries. Findings The study’s results indicate that cultural distance positively affects the firm's post-acquisition performance and that absorptive capacity moderates these results, improving the positive effect. The study suggests that cultural diversity is an asset for the multinationals in question. Practical implications When deciding to invest in a foreign country, managers should consider this cultural diversity as one more value creation driver, especially if the firm has well-developed innovation capabilities. Originality/value The study’s findings contribute to the international business literature providing further evidence that emerging markets multinationals can create value in acquisitions through the firm's abilities to exploit cultural asymmetries. Thus, the authors also emphasize that absorptive capacity plays a strategic role in multinational's international strategies.
... Because acquisitions represent a preferential way for accessing external resources and know-how, and because the extent to which they may be attained is subject to valuation barriers and possible opportunistic behaviors [78], difficulties may exponentially increase as the distance and the geographic dispersion of resources increase as well [79], thus generating obstacles to the effective valuation of potential targets along with organizational resistance during the post-acquisition phases [69]. For instance, Popli et al. [80] examined the relationship between cultural distance and the likelihood of abandoning a cross-border acquisition and found that it is reduced when the acquirer has experience in the same country or in a culturally similar country. ...
Article
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The effects of cross-border acquisitions on the survival of target firms is attracting increasing academic interest. Specifically, whether cross-border acquisitions may hamper target firms’ performance or enhance their sustainable competitiveness represents a highly debated research question. Building on the knowledge-based perspective of mergers and acquisitions, this paper directs attention to absorptive capacity and investigates the likelihood of survival of target firms acquired by foreign investors. In particular, it examines the role played by three potential antecedent conditions of an acquiring firm’s absorptive capacity on the probability of the target firm’s survival: (a) The business relatedness between acquirer and target, (b) previous experience of the acquirer in the host country, and (c) the cultural distance between the countries of the acquiring and acquired firms. Based on a sample of 396 Italian firms acquired by foreign multinationals, results suggest that target firms are more likely to survive in case the acquirer benefits from previous country-level experience and in case of business relatedness, while the cultural distance between the home country of the acquiring firm and Italy does not prove to be a significant determinant of survival versus mortality of acquired subsidiaries. Overall, our analysis confirms that context familiarity, in terms of both country and business contexts, plays a fundamental role in determining the sustainable competitiveness of acquired firms.
... Salas et al. (2008, p. 903) remark how "organizations now face increased competition and this mandates collaboration across organizational, geographic, and temporal boundaries and a need to engage a demographically heterogeneous workforce." Furthermore, to meet the demands of globalization: differences amongst employees can have a detrimental effect on individual or organizational performance such as lower subsidiary performance (Singh et al., 2019), deal abandonment in cross-border acquisitions (Popli et al., 2016) and bias toward foreign and domestic products (Gaur et al., 2015). Hence, the characteristics of culturally diverse team members that influence MCT performance have become of interest to researchers and practitioners, and understanding the effective functioning of its members is a vital concern for organizations worldwide (Adair et al., 2013). ...
Article
Purpose This study aims to examine the influence of diversity climate perceptions (DCPs) on team member’s contribution to team innovation and team performance in a multicultural team (MCT). The authors also investigate the moderating effect of cultural intelligence on these relationships. Design/methodology/approach The authors draw upon the interactional model for cultural diversity to build their hypotheses. Data was gathered from 43 teams consisting of 217 members using a structured questionnaire. Ratings were obtained from both team members and supervisors. The data collected was analyzed using structural equation modeling. Findings Results indicated that when team members have positive DCPs, it had a positive impact on their innovation and performance in the team. Cultural intelligence was also found to have a direct impact on team member innovation but not on team member performance. Furthermore, cultural intelligence was found to positively moderate the DCPs – team member performance relationship but not the DCPs – team member innovation relationship. Practical implications Managing diversity is a key concern for organizations worldwide given the exponentially rising cultural diversity within the workforce. This study would enable practitioners to understand that developing positive DCPs and cultural intelligence of team members are critical to the success of MCTs. Originality/value Literature has documented mixed results pertaining to team diversity and its effect on performance, resulting in scholars urging the need to explore how the negative effects of team diversity can be mitigated. This research establishes that positive DCPs and cultural intelligence as two key factors contributing to the performance of MCTs.
... Therefore, the organizational learning of technology-acquiring M&A of home country enterprises must overcome cultural differences. This process is essentially an organizational learning process (Popli et al., 2016). ...
Article
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In recent years, cross-border mergers and acquisitions (M&As) of emerging market enterprises (EMEs) have increased rapidly, and many cross-border M&A have been conducted in the United States, Western Europe, and other developed countries. This new type of technology-acquiring cross-border M&A has several unique features. In particular, the cross-cultural differences between the home country and the host country and the cognitive differences between emerging markets and developed markets pose a huge challenge to the organizational learning of technology-acquiring cross-border M&A of enterprises from emerging markets. Based on this, the present study innovatively constructs an integrated theoretical model to explore the role of cross-cultural and cognitive differences in the organizational learning mechanism of technology-acquiring cross-border M&A in emerging markets. In this study, the partial least squares structural equation model (PLS-SEM) was used in an empirical study of 240 Chinese technology-acquiring cross-border M&A enterprises, and it was found that cultural and cognitive differences play an important role in technical ability and learning performance. The study also found that the interaction of cross-cultural differences between the home and host countries and the cognitive differences between the emerging and developed markets promoted the learning performance of cross-border M&A in the emerging markets. Based on the integration theory of cultural differences, cognitive differences, and technical ability, this paper unveils the role of cross-cultural and cognitive differences in organizational learning mechanisms of technology-acquiring cross-border M&A.
... Soni et al. (2019) observe that Indian IT companies went for cross-border M&A between 2000 and 2015 with the prominent motive of gaining competitive edge as well as surviving in the volatile period arising from subprime crisis. In addition, the factors that contributed to an increase in M&A activity in this sector were reform processes in India and globalisation; availability of Internet and web-based developments in 1995-1996; entry of foreign players and diversification of established players due to huge potential for growth (Kar, 2011); country-specific comparative advantages such as availability of cheap, abundant, dynamic, and young labour; English language skills; strategic time zone (Popli et al., 2016;Sun et al., 2012); and firm-specific advantages related to product design and project management skills (Sun et al., 2012). ...
Article
The liberalisation of the Indian economy, along with targeted policies of the Indian government for the information technology (IT) sector, has led to tremendous growth in this sector. While there has been substantial foreign investment in India in the IT sector through setting up of subsidiaries, joint ventures and acquisitions, Indian firms have also aggressively invested within and outside India through multiple modes. Among different sectors, the IT sector has been the most dominant in terms of mergers and acquisitions (M&As). This article focuses on host country (macroeconomic and institutional) determinants of M&As undertaken by Indian IT firms. Random effect negative binomial model in panel set up was selected to estimate the models. Four models were estimated as per the availability of data for 35–42 countries and for the period 2000–2015. The results for most of the variables in four models were very similar, reflecting robustness of the methodology. Most of the macroeconomic and institutional factors were found to be important determinants of the M&As by Indian IT companies. However, the economic recession of 2008–2009 was found to significantly reduce the M&A activities by Indian IT companies.
... Language difference causes complexity creating difficulties in negotiation and drafting of deal contracts, resulting in disputes and increased communication and due diligence (Dikova et al., 2010). Popli et al. (2016) reconceptualize culture as dynamic and firm-specific, changing with experience contrary to it being a country specific. Press affects the public perception about an ongoing M&A deal, dependent upon societal trust (Kim, 2019). ...
Article
Purpose The purpose of this study is to provide a broad understanding of the pre-completion stage and subsequent abandonment of mergers and acquisitions (M&As). Design/methodology/approach A total of 117 peer-reviewed, English language articles published in scholarly journals were considered in the review. The approach includes a descriptive evaluation of the literature, coupled with content analysis. The paper uses both positivist and constructivist approaches to qualitative research. The analysis is conducted with the help of R programming and Gephi visualization software. The authors organize the work around the event of outcome/closure of deal proposal. Findings It is found that earlier studies sampled on domestic M&As in developed economies (DEs). However, the interest of scholars has increased in cross-border deals and emerging economies (EEs) in the last decade. Various factors interact and facilitate the completion/abandonment of good and bad deals. The authors find that complex non-linear relationships exist, and there is a need for studies with other classification techniques focusing on predictive accuracy. Research limitations/implications The literature review is limited to articles available to the researcher using search terms related to M&A completion/termination. The databases accessed were: ProQuest, Scopus and Web of Science. However, backward snowballing was performed to avoid the omission of relevant articles. Originality/value The findings and subsequent discussions familiarize researchers and practitioners with an overview of research undertaken in the field of M&A abandonment. The authors find voids within the literature and suggest future research agendas.
... On the other hand, it indirectly creates standards that go against all cross-cultural topics, since the differences vanish and create a new common culture, but not actually reaching out for each other and not aiming to have an understanding. Business managers have long been interested in the standardization issue and suggest operational economies and the development of uniform best practices (Dorfman, 2012;Popli, 2016). ...
Article
In the 1960s, markets became global, firms became more international, and cross-border joint ventures increasingly provided firms with opportunities to rapidly expand geographical market participation. Culturally diverse settings, and the challenges linked to these, have become the focus of scholarly conversations. The importance of Cross-cultural management (CCM) significantly grew. The purpose of this paper is to review CCM-related studies and to map all the relevant areas. Summary is made of 95 sources consisting top-tier journals’ research papers and management scholars' texts in order to increase understanding in this underresearched field. From many interlinked disciplines, four major ones are identified and detailed in this paper: psychology, anthropology, international business and strategic management. Based on the analysis, the current understanding of CCM is discussed, and promising ways of further research are identified that can further advance the conversation on CCM. ------ A ’60-as évektől kezdődően egyre nagyobb a nyomás a szervezeteken, hogy nemzetközivé váljanak. A nemzetközi szervezeteknek terjeszkedésének köszönhetően egyre fontosabbá válik a kultúraközi menedzsment. Egyre szélesebb körben vitatott téma, a növekvő szakirodalomnak köszönhetően már nemcsak az üzleti világban, hanem az akadémiában is fontos szerepet kap. Az eddigi szakirodalmi áttekintések a kultúraközi menedzsmentnek egy adott részét emelték ki, a jelenlegi cikkben a fogalom egészének tanulmányozása a cél. 95 forrás feldolgozása történt meg annak érdekében, hogy körbejárható legyen a téma és az alapvető pillérek beazonosíthatók legyenek. A kutatás során nemcsak a szakirodalom összegzésére, hanem az egyes források egymáshoz való viszonyának értelmezésére, továbbá a történelem során bekövetkezett változások kiemelésére is sor került. A legrangosabb szakfolyóiratok és könyvek tanulmányozása során egyértelművé vált, hogy a jelenlegi értelmezés szerint négy alapvető pilléren áll a kultúraközi menedzsment: pszichológia, antropológia, nemezközi kereskedelem és stratégiai menedzsment. Jelenlegi cikk ezeket vizsgálja a kultúraközi menedzsment jobb értelmezése érdekében.
... Embora tais estudos sobre resultados negativos em aquisição concentrem-se, prioritariamente, na área de finanças, outros campos de pesquisa têm avançado na busca de Inclusive, considera-se também, nessa linha de abordagem, a experiência cultural em aquisições, quando se trata de F&A internacionais, entre países culturalmente similares (POPLI et al, 2016). ...
... Cultures where 'feminine' values prevail appreciate interpersonal relationships, quality of life, cooperation, balance, and harmony, while cultures where 'masculine' values prevail appreciate accomplishment, material rewards for success, assertiveness, and aggressiveness (Janićijević and Marinković, 2015). The culture influences individual perceptions and behaviour, as well as management styles, decision-making, and conflict resolution (Popli et al., 2016). ...
Article
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The purpose of this paper is to examine factors influencing employee reactions to changes brought about by crossborder acquisitions. The research was conducted in a company operating in Serbia’s retail sector that was acquired by a Belgian multinational company. The data were collected from 344 respondents. Measures of central tendency, the Mann-Whitney U test, and regression analysis were used to test the research hypotheses. The research results show that employee reactions to changes brought by cross-border acquisition were generally positive. The study show that corporate cultural differences between the acquiring company and the acquired company and the support of transformational leaders resulted in employees reacting positively to the changes. The study attempts to improve understanding of employee reactions during the process of change occurring as a result of cross-border acquisition. Additionally, this study has practical implications, as it points to how the appropriate management of human resources contributes to positive employee reactions.
... Despite their increasing contribution to global FDI, the location-specific conditions and the effects on cross-border M&A behaviour of EM firms have not been well examined so far. Moreover, most of the research about EM MNCs' cross-border M&As has generally focused on China and India (Buckley et al., 2007;Yang & Deng, 2017;De Beule & Duanmu, 2012;Ramasamy, Yeung, & Laforet, 2012;Popli et al., 2016;Rana & Haque, 2020). Accordingly, there is a need to understand the motivations behind the cross-border M&As of other EMs. ...
Chapter
The outward investment flow of Turkey has been rising since 2002, which makes it considerable due to the close relations of Turkish firms with Eastern and Western markets due to their geographic proximities. Theoretically based on the OLI paradigm and institutional theory, this study has investigated how macro-level factors affect the cross-border M&A activity of Turkish firms and how institutional differences endorse the effects of these factors for the period 2002–2013. Our findings indicate that Turkish firms prefer host countries with larger market sizes as a sign of their market-seeking investment behaviour. Additionally, this preference is stronger when the host country’s institutional development is better than that of the home country. However, we found that the strategic endowments in the host country don’t explain the intensity of cross-border M&As by Turkish firms. Also, the boosting effect of the institutional quality of the host country on the strategic-asset–seeking FDI is not supported. Finally, we have found a partial support for the OLI framework’s location-specific determinants of FDI in the case of the cross-border investment behaviour of Turkish MNCs.
... Embora tais estudos sobre resultados negativos em aquisição concentrem-se, prioritariamente, na área de finanças, outros campos de pesquisa têm avançado na busca de Inclusive, considera-se também, nessa linha de abordagem, a experiência cultural em aquisições, quando se trata de F&A internacionais, entre países culturalmente similares (POPLI et al, 2016). ...
Article
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Este trabalho investiga se e como o histórico de aquisições realizadas por duas empresas, aqui identificadas como Alfa e Beta, influenciou, posteriormente, a operação de aquisição da organização Beta pela Alfa. O estudo de caso qualitativo discute um processo de aquisição no setor educacional envolvendo duas firmas – Alfa (adquirente) e Beta (adquirida). Os resultados indicam que a experiência em aquisições anteriores implicou aprendizagem e influenciou a operação, bem como sua configuração final, sendo adotados na adquirente os modelos de gestão da adquirida, constituindo, segundo literatura revisada, uma situação de rara ocorrência.
... Third, one of the main decisions in entering new foreign markets is the degree of similarity between the new market and the markets in which a firm is already active (Popli et al., 2016). Johanson and Vahlne (1977), for example, conceptualize internationalization as an incremental process resulting from the interplay between cumulative market knowledge and decisions to increase commitment to international markets. ...
Article
To resolve the mixed and sometimes contradictory results regarding the effect of performance feedback on the tendency and timing to expand abroad, we develop a theoretical framework that takes opportunity costs into account. Our findings show a non-linear relationship, mostly an inverted U-shape, between performance both below and above aspiration and entering new foreign markets. Our results also show that industry growth rate moderates this non-linear relationship differently for firms near aspiration (below or above) compared with firms well below or well above aspiration, furthering our understanding of contextual factors and the boundaries of performance feedback theory regarding international expansion.
... These hazards are especially problematic in the context of cross-border acquisitions, which are very intricate phenomena posing tremendous challenges (Colombo et al., 2007;Shimizu et al., 2004), being influenced by national cultural distance, business practices and institutional forces in addition to organizational differences (Holland and Scullion, 2019;Khan et al., 2018;Popli et al., 2016). ...
Article
Cross‐border acquisitions are growing in volume and global economic importance, yet a considerable number end in failure. Many of these failures may be linked to people management‐related issues. We extend this stream of research by investigating the impact of the acquirer's aggregate human resource management (HRM) quality on cross‐border acquisition divestment. Our empirical analysis uses a panel database of 4128 cross‐border acquisition/year observations and an event history design. The findings confirm a curvilinear relationship and suggest that acquisition failures are not merely associated with poor HRM quality, but also with very high levels of HRM quality, that is, with both extremes. Moreover, our results show that financial slack has a significant moderating effect on the curvilinear relationship between HRM quality and the likelihood of acquisition divestment. Overall, our study reveals boundary conditions for the widely demonstrated positive relationship between HRM quality and organizational performance in an acquisition context.
... A study found that Reliance Infocomm India rolled out its CDMA network, (at the time the wave retail market in India was still in its infancy, data services and handsets supported Java [45]; [21]. The Reliance application platform, also known as R-World brought Java compatibility even to the lower end phones [30]. ...
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The study explores the various facets of different wave retail banking models, including their merits, demerits are security issues, to share the wave retail wave banking implementation in Bangladesh. Apart from that, this research evaluates the current status and preparedness of banks to facilitate wave retail banking in Bangladesh. To developed smooth operation and application of wave retail banking in Bangladesh. This research focuses only on renown Banks in Bangladesh. This trend contributes towards the anticipated growth of wave financial information services, funds transfer, bill payment and presentation, account management and customer service solutions. Therefore, this research use the Unified Theory of Acceptance and Use of Technology (UTAUT). Also, To conduct the study primarily as well as secondary data have been collected 100 users of the bank account holder in Dhaka city were interviewed to know about their interest about cashless wave banking in the retail market. In order to analyze the data, we use SPSS for pilot test and PLS for data analysis. The elaborate the current wave retail executing infrastructure of Bangladesh. Also, understand the awareness and readiness of customers satisfaction regarding wave retail banking in retail market supply chain management. This study creates a sensation among the bank and consumer satisfaction in the use of wave retail banking.
... It is followed by Feely and Harzing (2003), which analyses language management in multinational companies, and Harzing and Feely (2008), which focuses on the topic of language barriers in multinational companies. As the distance variable remains key in international business research (Kim et al., 2020;Popli et al., 2016;Singh et al., 2019) and the usage of global virtual/remotely connected teams (Mukherjee et al., 2012) are more ubiquitous in the post-pandemic world, we expect future CCSM scholars to more closely examine issues associated with the "cultural barriers." ...
Article
Abstract Purpose: Cross Cultural and Strategic Management (CCSM) began publication in 1994 and completed its 27th year in 2020. The purpose of this study is to provide a bibliometric analysis of CCSM during the period between 1994 and 2020. Design/methodology/approach: The study uses a variety of bibliometric tools including performance analysis, authorship analysis, bibliographic coupling, keyword co-occurrence and regression analysis to present the retrospect of CCSM. Findings: CCSM’s publication and citations continue to enjoy consistent growth throughout the years. While most contributions originate in the United States, the diversity of both research and the researchers themselves continues to grow. Over the period, the emphasis has been on quantitative research design. Archival data has been the most preferred data source, and content analysis the most used data analysis method, although its use has somewhat declined over the years. Major recurring themes in the journal include cultural barriers, concept of culture, national culture, culture and organizational practices, and expatriate employees. Important drivers of citations are article age, research design, archival, number of authors, non-academic, and number of keywords. Originality/value: CCSM earned its reputation for quality, and as a result is currently one of the leading journals in its field. Therefore, by closely examining its underlying knowledge structure, we provide a more complete understanding of the intellectual progress made to date in CCSM, while also shedding light on its future. Keywords: Cross Cultural and Strategic Management, bibliometric analysis, bibliographic coupling, co-occurrence analysis, performance analysis. Paper type: Research paper
... The score is based on the dimensional framework of culture by Hofstede, Hofstede and Minkov (2010). In recent years, many scholars have criticized the cultural distance construct (Popli, Akbar, Kumar, & Gaur, 2016;Shenkar, 2012), the Kogut-Singh index (Chen, Kirkman, Kim, Farh, & Tangirala, 2010;Yeganeh, 2014) and Hofstede's culture framework (Kirkman, Lowe, & Gibson, 2006;McSweeney, 2002). For example, Shenkar (2001) highlights that cultures change over time, but research has assumed that cultural distance is constant. ...
Article
Multinational teams are an organizational reality, but they present several challenges. The literature suggests that individuals with multicultural identities are more likely to show behaviors that aim at improving intercultural interactions in multinational teams, though scholars have yet to determine the precise nature of these behaviors. We address this research gap in a multimethod two-study design by identifying five team cultural gap bridging behaviors (CGB behaviors: facilitating, translating, integrating, mediating, and empathetic comforting). In Study 1, we draw on one qualitative and two quantitative datasets to identify within-team CGB behaviors and develop a measure of CGB behaviors. In Study 2, drawing from two-wave survey data, we investigate and find support for the direct relationships between cultural identity plurality and CGB behaviors and the indirect relationships via cultural intelligence.
... Still, scholars have examined the effects of cultural distance on CBA performance using multiple theories such as organizational learning theory (Dikova & Sahib, 2013), resource-based view (Patel & King, 2016), transaction cost economics (Reuer, 2001), institutional theory Du & Boateng, 2015), and corporate governance (Chan & Emanuel, 2011). To a less extent, other perspectives, such as cultural friction (Popli, Akbar, Kumar, & Gaur, 2016;Stahl & Voigt, 2008) and absorptive capacity (Park & Ghauri, 2011), have also been applied. Appendix 7.1 provides an overview of theories used in 59 studies on CBA performance and distance in our sample. ...
Chapter
Cross-border acquisitions (CBA) are a common tool of multinational firms, but what drives CBA performance remains inconclusive. We aggregate research on CBA performance to identify impacts of cultural distance and home and host country effects using a relatively new approach, predictive modeling, to classify research to identify patterns with machine learning. Predictive modeling enables considering effects not traditionally captured by meta-analysis and it offers different interpretations. We find an overall positive impact of cultural distance on CBA performance. However, we also find important host and home country effects, and the home country setting of acquirers may be as or more important than host and distance effects. As a result, there are questions surrounding the usefulness of cultural distance, and CBA research needs to consider home country effects.
... BG-affiliated firms also benefit from the 'cultural experience reserve' that is gathered through the experience of other affiliated firms (Popli et al., 2016). The strong pre-existing organizational culture of BGs is another justification for tightly integrating the operations of the acquired firm. ...
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Do emerging market multinational enterprises (EMNEs) from the Asia–Pacific region experience cultural distance in the same way that developed economy firms do? In swapping the focal home country position from developed economies to emerging economies, we examine whether the ‘illusion of symmetry’ of the cultural distance construct prevails. When EMNEs make strategic decisions about cross-border equity ownership, they are driven by the critical need for learning. We study the internationalization of Asia–Pacific EMNEs and explore how the organizational form of the business group (BG) influences the learning behavior of EMNEs while they navigate cultural distance. We perform a multilevel analysis of 400 acquisitions made by Indian firms across several industries into 38 host countries between 1990 and 2015. We find that the BG organizational form provides structural and contextual antecedents to strategic ambidexterity by leveraging the absorptive capacity and cross-cultural experience of the BG through simultaneous exploratory learning (entailing lesser control) and exploitative learning (entailing greater control). Our results hold good for other group-affiliated EMNEs from the Asia–Pacific region as well and contribute to multiple streams of literature.
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National distance (ND) is the key factor that affects international trade but the traditional trade gravity model only considers spatial distance, which is not enough. This paper therefore constructs a trade gravity model and a Generalized Moment Estimation Model (GMM) based on four dimensions-spatial distance (SD), economic distance (ED), institutional distance (ID) and cultural distance (CD)-comprehensively analyzing the impact of the heterogeneity represented by national distance on exports of wooden forest products (EWFP) from China to countries along the "Belt and Road" using panel data from 2001 to2018. The results show that the impacts of the four types of ND on China's EWFP are different and that a major change has taken place since the "Belt and Road" initiative was proposed, within which CD has become the key factor that hinders exports, while the traditional SD is not significant. Therefore, using NDs instead of the SD of the traditional trade gravity model is much more reasonable. Finally, this paper proposes some suggestions to reduce the ND between China and the route countries and to promote cooperation among them.
Article
Purpose As multinational companies enter different countries, the extent of cultural unfamiliarity they face depends on their most recent entry. We examine this pattern of added cultural distance between a newly entered target country and the closest previous one and its effect on ownership decisions in each cross-border acquisition (CBA). We also examine the combined effect of added cultural distance and time between successive acquisitions on such decisions. Design/methodology/approach The sample came from the Thomson Financial Securities Data Corporation (SDC) Platinum database, which spans different source and target countries for a 25-year period (1980–2014). We collected firm- (acquirer and target), industry-, country-, and transaction-level variables from SDC. After merging information from the different sources, the final sample comprised 10,423 CBA observations from 138 target countries. Findings Our findings reveal that the ownership share decision is affected negatively by added cultural distance but positively by the time between two successive acquisitions. In addition, prior ownership and geographic distance moderate the relationship between added cultural distance and ownership in CBAs. Practical implications Our findings suggest that MNCs' managers who consider CBAs need to carefully examine closest previous target information and CBA experience, rather than focusing on direct cultural distance between the focal firm and target firm. Additionally, they should also consider the relevance of key contingency factors. Originality/value We disentangle the effects of added cultural distance on CBA ownership decisions and explore the boundary conditions of this relationship.
Article
In this manuscript, we present three controversial cross-border merger and acquisition (CBMA) deals that failed to be consummated after public announcement. Our cross-case analysis reveals that scandal, which causes the controversy surrounding these deals, is a non-market activity, whose main concern is to ensure the status quo in the target country through generation of executive and legislative action favoring the target country threatened actor. Scandal is a last resort act that makes the deal widely salient through transformation of the bid into a national threat. Target country actors threatened by the CBMA skillfully use scandal, along with their corporate political activities (CPA), to hinder deals that they could not have stopped otherwise. It is mainly the inadequacy of the CPA efforts that lead to emergence of scandal. Once condemned of wrongdoing, the acquirers instantly become persona non grata, even in the cases where the government is supportive of the deal.
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Purpose Self-esteem values, with the new art of living, in the minds of Indians, lead to establish faith among the spiritual organization. Later on, the spiritual organizations brand their names and market the products in their branded name. These brands, which are inspired by faith and created by Indian spiritual gurus, have even disrupted the fast-moving consumer goods (FMCG) market by being customer-centric instead of being geared by lucrative returns. It is in this context that this paper aims to find the cultural divergence factors that lead to change the consumption pattern of FMCG and how such brands of faith have been segmented in the Indian perspective by spiritual gurus. The research concludes that cultural divergence variables such as power distance, collectivism, uncertainty avoidance and long-term orientation influence the brands that are inspired by faith. Spiritual gurus in India are using sociocultural marketing activities such as social endorsement and cause-related marketing strategies for segmenting the markets. Design/methodology/approach The primary data were collected from the 1,678 customers of the Isha products. The respondents were selected based on the snowball sampling. The responses were collected from the followers who visited the foundation at least three times during the period of two years in Coimbatore and purchased Isha products worth more than Rs 500. The data were collected between the period August 2016 and April 2018. Of 1,678 responses, 1,465 responses were validated after coding. Of 1,465 responses that were validated, 1,126 responses were found reliable. Findings “Cause-related marketing” and “social group endorsement” activities of the firms tend to create a brand image. To find out which of the above activities highly influence the brands of faith, realistic-operating characteristic (ROC) analysis was carried out. ROC curves were drawn to assess the brands of faith centroid values with social group endorsement and cause-related marketing variables. ROC curves explored the precision of diagnostic tests and were used to find the best “cut-off” value for impressive and unimpressive cluster test results. Research limitations/implications Cultural divergence variables such as power distance, collectivism, uncertainty avoidance and long-term orientation are influencing the brands of faith. The followers of the spiritual foundation have their own distinct culture, and their social affinity values increase the brands of faith. Social group endorsement and cause-related marketing are the marketing strategies suitable for spiritual foundation (to market their product/ service). Age, education and occupation are demographic values that influence the brands of faith. The spiritual foundations are segmenting their customers based on the occupational values, and they use the cause-related marketing strategies to increase the values of brands of faith. Practical implications As the cultural values related to the art of living have been recognized by society as the measure of social well-being, the spiritual leaders can enhance their brands of faith. The social media communication about cause-related marketing can create trust in society. On the other hand, societal marketing activities cannot target the entire society. Hence, it is to be stratified. While stratifying, the players of diversity markets have to target a group based on the values generated by the stakeholders in the foundation. The diversified markets created by the Indian spiritual gurus are providing cultural diversity. Social implications The business value created by spiritual foundations is increasing the social values which are essential to uplift society. The author concludes that if business values and societal values are integrated by any group of people, it improves economic value to that society and they can use the social currency in the form of “brands of faith”. Originality/value The cultural values of a society are measured and compared with national and global index. The enumerate method is an original one.
Article
The effect of acquirer's board size on the outcome of an acquisition (i.e., whether an announced deal gets abandoned or completed) was examined on the basis of a sample of 775 cross‐border acquisitions. The study took into consideration the moderating effect of formal institutional development of the home country. Results showed that board size was negatively associated with the likelihood of deal abandonment and that this relationship was weaker for home countries where formal institutional development was high. The study contributes to the literature on group decision‐making theory, institutional view of corporate governance, and acquisition outcome.
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This paper presents a review and critique of the 20-year-old literature on institutional distance, which has greatly proliferated. We start with a discussion of the three institutional perspectives that have served as a theoretical foundation for this construct: organizational institutionalism, institutional economics, and comparative institutionalism. We use this as an organizing framework to describe the different ways in which institutional distance has been conceptualized and measured, and to analyze the most common organizational outcomes that have been linked to institutional distance, as well as the proposed explanatory mechanisms of those effects. We substantiate our qualitative review with a meta-analysis, which synthesizes the main findings in this area of research. Building on our review and previous critical work, we note key ambiguities in the institutional distance literature related to underlying theoretical perspectives and associated mechanisms, distance versus profile effects, and measurement. We conclude with actionable recommendations for improving institutional distance research.
Article
Purpose In a contribution to the emerging research examining Chinese cross-border acquisitions (CBAs), the authors observe experiential learning applications for enhancing M&A completions. By emphasizing knowledge transfer, the authors reveal how target-to-target industry similarity and bidder-to-target cultural distance affect learning outcomes. Design/methodology/approach Using a binary logistic regression model, the authors examine a sample of CBA attempts announced by Chinese companies from January 2002 to December 2012 to identify the variables that affect the completion of CBAs. Findings The authors find that foreign acquisition experience but not domestic acquisition experience enhances subsequent acquisition attempts, especially when prior and focal target companies share the dominant industrial logic. Learning transfer is negatively affected when target countries are more culturally distant from China, but learning benefits appear to increase under strong bidder-to-target cultural distance. Originality/value By investigating learning in the precompletion stage in Chinese outward CBAs, the authors complement research that uses postacquisition performance to assess learning. The authors’ more fine-grained characterization reveals that acquisition experience increases knowledge transfer through experiential learning. Furthermore, the authors show that dominant industrial logic and cultural distance are underexplored contextual conditions, although they interact with foreign and domestic experience to affect the completion of CBAs.
Article
We identify and demonstrate the merit of a novel institutional factor, safety risk, which likely affects multinational corporations’ (MNCs’) international investment decisions. Safety risk refers to the extent to which security and physical well-being are endangered due to normalized aggression and criminality in society. Despite concerns from executives and policymakers, safety risk has attracted little research attention. We validate a safety risk measure and evaluate the construct’s effect on MNCs’ investments. The findings indicate that countries’ safety risk deters MNCs from investing. Further, in post hoc analyses, firms’ prior experiences with safety risk and countries’ private security investments moderated this relationship.
Article
The rise of the multinational enterprise to international prominence has been remarkable. This study takes an evolutionary approach in chronicling the development of the multinational enterprise field, to include supporting theory. The central lens whereby multinationals have been examined has experienced several significant shifts in focus over time. Likewise, the dominant multinational internationalization entry mode, cross-border acquisition, has concurrently co-evolved. As such, we contribute to the literature by providing a detailed mapping of this co-evolution (multinationals and cross-border acquisitions) across diverse contexts (e.g., management, finance, economics), to include associated research, theory, practice, and future pathways.
Chapter
Defining the priorities for your international expansion is a complex decision impacted by the type of investment you intend to make in a foreign market and by the cognitive models used by those who make the decision (for instance, their aversion to risk). The foreign market selection process consists of two steps: the initial screening of potential markets and the final decision on a shortlist of options. The initial screening of potentially attractive foreign markets, instead of focusing on generic macroeconomic indicators, should consider two aspects: market accessibility (for instance, legislative and political factors) and market attractiveness. The latter includes proxy indicators of market size and growth; costs of production factors, if the internationalization goal includes delocalization of production activities; and availability of local talent, if your goal is to internationalize your firm’s research and development activities. For the final decision about the priority foreign markets, we need to consider the hierarchy of our internationalization goals. For this strategically important decision, there may also be diverse reasoning among business units, as internationalization goals and priorities may vary according to the industry or the product and service offered. A rational decision about foreign markets involves a complex multifactor analysis, and in this chapter we propose the tools and instruments that will enable you to reason through a large number of criteria, some of which are qualitative. We end with a warning about possible decision-making biases in the foreign market selection process, looking at how your reasoning might be influenced externally and how you may find yourself subject to a bandwagon effect.
Article
What explains the variation in individual support for the territorial integrity of the state that faces violent secession? While previous research has emphasised the role of state elites, institutions, and secessionist groups, this article elucidates the popular underpinnings of the state's response to secessionist claims. The proposed theory utilises in‐group and between‐group social distance to explain individual attitudes. Greater alienation from society leads people in the core state to reduce their support for the territorial integrity of the state. The perception of the cultural distinction of the secessionist group is associated with higher or lower support for the territorial integrity of the state, depending on the feasibility of reconquest of the secessionist territory. When reconquest is probable, support for the territorial integrity of the state will be positively associated with cultural distance. When it is improbable, support for the territorial integrity of the state will be negatively associated with cultural distance. The analysis of survey data from the South Caucasian countries that have struggled with secessionist movements for decades provides strong supportive evidence for these conjectures.
Article
Foreign acquirers often encounter severe legitimacy challenges caused by the institutional distance between the home and host countries. In this study, we propose that conduit acquisition, in which an ultimate acquirer initiates a cross-border acquisition through one of its majority-owned subsidiaries already located in the host country or countries similar to the host country, can be used as a strategic response to institutional distance. Invoking institutional theory, we argue that the local presence of the conduit acquirer can help the ultimate acquirer interpret and meet the legitimacy requirements in the host country. This effect is weaker if an ultimate acquirer has alternative sources of legitimacy and is stronger if the acquisition triggers larger legitimacy concerns. Our empirical analyses of 6365 cross-border acquisitions in the United States from 2000 to 2016 support our hypotheses. We further find that conduit acquisition indeed lowers the deal failure rate and reduces the time to completion. By highlighting the organizational structure of cross-border acquisitions, this study points to a new strategic option for multinational enterprises.
Article
Purpose The purpose of this paper is to examine the influence of bilateral political relations on the completion stage premium of cross-border mergers and acquisitions(CSPCMA) and the moderating roles of cultural distance, trade openness and the nature of firm ownership for this relationship. Design/methodology/approach Based on a sample of 401 cross-border mergers and acquisitions (M&A) conducted by Chinese companies from 1995 to 2019 in the Statistical Data Center (SDC), this article used weighted least squares (WLS) to empirically test the impact of bilateral political relations between countries on the CSPCMA. Findings The better the target country of entry’s bilateral political relations with China, the lower the premium of the transaction price paid by Chinese companies at the completion stage of cross-border M&A. Among the moderators, the study found cultural distance positively moderates the relationship between bilateral political relations between countries and CSPCMA. The degree of trade openness of the target country negatively moderates the relationship between bilateral political relations between countries and CSPCMA. The negative relationship between bilateral political relations between countries and CSPCMA is stronger when the acquirer is a state-owned enterprise (SOE). Originality/value The findings of this study not only add to the knowledge about the relationship between bilateral political relations and corporate cross-border M&A premiums, but also have managerial implications for Chinese corporate managers to sustainably reduce corporate cross-border M&A premiums.
Article
The study of cultural similarity between cities is of great significance for understanding the association of cities. However, there are still the following challenges in measuring and expressing cultural similarities: finding reliable data source to reveal urban cultural features and designing effective analysis and visualization model for cultural similarity. As a cultural symbol, place name can effectively reflect urban cultural characteristics. Therefore, this paper constructs a cultural eigenvector based on the semantics of place names. A measurement method is proposed to identify the cultural similarity between different cities and to explore and express similar patterns. In the form of OD flow, a cultural semantic similarity flow (CSSF) is defined to formally express cultural relations between cities. The cultural semantic similarity flow contains three patterns, namely one-to-one patterns, one-to-many patterns, and one-to-all patterns. These patterns explain the form of cultural similarity among cities from different perspectives, as follows: (a) One-to-one patterns may well represent the potential path of cultural diffusion; (b) one-to-many patterns reveal the regional cultural center to some extent; (c) one-to-all patterns show the spatial differentiation of culture on global scale. This general analysis and visualization method aim to accurately quantitatively analyze cultural similarities and their forms.
Conference Paper
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This study explores the effects of formal and informal institutional distances and target firms in high-tech industries on the completion of cross-border M&As by Asian companies in the EU28. Drawing on the institutional theory, we address the often neglected country-level factors as determinants of deal outcome in an international setting. We purposefully choose heterogenous groups of acquirers and targets with a focus on the investment flow from the East to the West. Using a data set containing 4,456 announced deals over the 2000-2019 period, the study finds that the likelihood of an Asian firm to succeed in a M&A attempt in the EU28 is higher, when (1) the two countries stand culturally closer to each other; (2) the formal institutional environments share more similarities; and (3) the European target is in a high-tech sector. The impact of differences in institutional environment and national culture between the Asian acquirer and the European target during the pre-completion stage of the M&A process, however, differs between acquirers from emerging markets, Japan and the Four Asian Dragons.
Conference Paper
This study explores the effects of formal and informal institutional distances and target firms in high-tech industries on the completion of cross-border M&As by Asian companies in the EU28. Drawing on the institutional theory, we address the often neglected country-level factors as determinants of deal outcome in an international setting. We purposefully choose heterogenous groups of acquirers and targets with a focus on the investment flow from the East to the West. Using a data set containing 4,456 announced deals over the 2000-2019 period, the study finds that the likelihood of an Asian firm to succeed in a M&A attempt in the EU28 is higher, when (1) the two countries stand culturally closer to each other; (2) the formal institutional environments share more similarities; and (3) the European target is in a high-tech sector. The impact of differences in institutional environment and national culture between the Asian acquirer and the European target during the pre-completion stage of the M&A process, however, differs between acquirers from emerging markets, Japan and the Four Asian Dragons.
Article
Purpose The purpose of this paper is to examine the impact of inter-group conflicts on the trust toward the acquirer and then further on cooperation intention after acquisitions in cross-border mergers and acquisitions (M&As), in the lens of the social classification theory. Two types of conflicts (realistic conflicts and symbolic conflicts) and a mediating mechanism (trust toward the acquirer) exhibit different effects on cooperation intention. The research further examines two moderating coping strategies (localizing management and assigning trustworthy expatriate managers) and tests their effectiveness in promoting trust toward the acquirer and increasing cooperation intention in cross-border M&As. Design/methodology/approach The research hypotheses were empirically tested in the context of post-acquisition of Chinese companies' cross-border M&As. In total, 600 questionnaires were provided to the research participants of 37 acquired firms/units from advanced economies of 12 Chinese companies, and 209 valid questionnaires were collected (the response rate is 34.83%). Confirmatory factor analysis was conducted to verify data validity and hierarchical multiple regression analyses were employed to test relational and moderating effects. Findings This research demonstrates that both realistic and symbolic conflicts can reduce the intention to cooperate, but the latter does not have a significant influence. The results also uncover that whether employees from acquired firms trust in their acquirers mediates the relationship between realistic conflicts and cooperation intention. Moreover, management localization (a measurement of whether local/original managers are retained with a high degree of freedom and autonomy after M&As) and trustworthiness of expatriate managers (a measurement of whether the assigned expatriate managers is trustworthy) positively moderate the relation between realistic conflicts and trust toward the acquirer. In addition, trust toward the acquirer mediates the interaction of realistic conflicts and management localization on the cooperation intention of the acquirers' employees. Originality/value This study examines how inter-organizational conflicts influence trust toward the acquirer and then cooperation intentions in the context of Chinese companies' M&A behavior of targets from developed countries and gain supportive evidence, which enriches the literature on the management of international M&As. By introducing two management localization and trustworthiness of expatriate managers into the model, the research deepens our knowledge of how to build trust toward the acquirer in cross-border M&As.
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The ubiquitous presence of B2B relationships in the international business context makes it imperative for scholars to understand the risks involved in these relationships. Yet, we have an inadequate understanding of the nature and extent of risks that MNCs face in international B2B relationships. We present a comprehensive model of risks that MNCs face in different types of B2B relationships. We then discuss the strategic choices that MNCs pursue to manage these risks. Specifically, we argue that the national differences affect the nature and extent of risks that MNCs face in their B2B relationships. We then focus on equity-based B2B relationships and argue that the governance structure that MNCs choose helps alleviate both the ex-ante and ex-post risks in a B2B relationship. We also discuss the contingencies – national differences, intangible assets of the MNC, and host country- and partnership-specific experience of the MNC – that impact MNCs’ risk management strategies.
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Internationalization is a complex process that is neither always forward moving nor monotonic. Firms often reduce the depth and scope of their international footprint or even completely withdraw from foreign markets. Although scholars have recognized that there are cycles of de-internationalization and re-internationalization (and increasingly pressures for back-shoring), the antecedents and motivators for these internationalization pathways have received limited attention. In this study, we first review prior explanations as to why firm behaviour exhibits cycles of de-internationalization and re-internationalization. We then formulate an integrative framework and propose a comprehensive agenda for future research aimed at advancing internationalization theory.
Chapter
Adaptation is a buzzword for all firms engaged in international markets. Research confirms that “under-adaptation” of marketing strategies is quite frequent among firms. Why do we need to adapt? Cultural, administrative (legal), economic, geographic, and technological differences define the requirements (and opportunities). The impact of differences among countries varies among industries, markets, products, and even product or service categories. As with other elements of internationalization strategy, decisions should be taken individually for each business unit. Adaptation does not only concern the commercial offering (adaptation of product or service configuration, promotion and distribution strategies, and prices); the firm itself needs to adapt entrepreneurial formulas for each of its business units engaged in internationalization. Adaptation is not the only option for operating on global markets; under certain conditions, firms may choose to sell standardized products and services in global markets, or even to educate local customers and transform local markets. In this chapter, we also focus on cultural differences with an overview of three major studies (by G. Hofstede, F. Trompenaars, and the GLOBE research project), drawing your attention to the necessity of understanding the influence of internal cultural diversity in each location.
Article
We exploit temporal and spatial correlation in a cross-border merger and acquisition (M&A) database with worldwide coverage to show that firms’ M&A choices are significantly influenced by experience effects related to knowledge accumulation. Our empirical strategy rests on the assumption that experience effects are expected to be at play in M&A directed toward culturally contiguous countries (arguably driven by knowledge accumulation) and not in M&A deals in geographically contiguous countries (arguably driven by transport costs). The analysis is conducted on a bilateral measure of cultural distance (encompassing linguistic, religious and genetic distance indicators), which is meant to capture the idea of the cultural heritage originated by historic linkages.
Article
In international business (IB), the level of equity ownership adopted by a firm is an important decision. In this study, we review and synthesize the findings of 105 empirical studies published in prominent IB and management journals on the determinants of equity ownership stake in foreign investment decisions, published between 1991 and 2020. Three primary theoretical lenses ‒ organizational learning perspective, transaction cost economics and institutional perspective – are adopted to catalogue and synthesize the existing literature. We find that, despite the proliferation of IB studies on antecedents of level of equity ownership decisions, many unanswered questions remain. We also find that theoretical fault lines impede progress in this research stream. Based on the literature review, we suggest a research programme that includes accounting for the behavioural view of decision‐making in the organization, shifting from an atomistic perspective to a network perspective of the firm, having a better understanding of the process of internationalization and considering industry heterogeneity as well as the host country's characteristics.
Article
This article explores the role of cultural distance on long-term value creation for Chinese acquirers based on a sample of Chinese cross-border acquisition (CBA) activities from 1999 to 2017. Our finding suggests that the long-term value creation after CBA is impeded by a greater cultural distance, and such a negative correlation is more prominent among acquirers in service or strategic emerging industries. However, this negative relationship can be mitigated by the capability of prior international acquisition experience in culturally similar countries or top managers’ overseas education experience. Through drawing upon institution-, resource/capability- and industry-based views, this article takes a step toward understanding the role of cultural distance in emerging-market enterprises' (EMEs)’ international acquisitions in the long run.
Article
Purpose During the past several decades, national distance (ND) increasingly became a vital cornerstone in international business (IB) research, as both explicit and implicit distance are parts of the essential reasons for IB activities. However, there are various and chaotic methods to measure ND in the last literature; therefore, this paper aims to suggest legitimate uses of ND in the IB field and the best ND dimensions for various situations. Design/methodology/approach This paper used a historical overview of the theoretical background and conceptual development of ND based on the past four decades worth of studies in leading 17-IB journals using Google Scholar. The authors also focus on multiform ND measurement methods and details through qualitative and quantitative analysis based on previous studies’ data collection. Findings This research summarized the common measurement methods and elements of different ND and proposed solutions based on a multifaceted analysis. Originality/value The micro analysis examines each type of ND in terms of the proportion of variables, issues, measurement methods, representative proxies beyond previous studies. This research also tried to provide clarity and suggest solutions to these problems through our macro& micro-analysis.
Article
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We examine whether the cultural orientation of target firms influences outcomes of international mergers and acquisitions (M&A). Prior research shows that the national culture of the acquiring firm country influences M&A, as well the distance between the acquiring and target country cultures. Not previously studied from a cultural perspective of M&A has been the target country culture, despite estimates that about 40 percent of M&A is target-initiated. Our focus is on target firm cultural orientation, including how cultural orientation affects the likelihood of, and returns from, M&A. Our testing applies three cultural orientation factors (results, tradition, people orientation) extracted from a GLOBE cultural framework to a dataset of firm-level M&A data across 39 countries, 1990-2016. We find that firms from cultures with a results orientation are less likely to become M&A targets and also experience higher cumulative abnormal returns if acquired. While firms from countries with cultures with a tradition orientation or a people orientation are more likely to become targets but experience lower cumulative abnormal returns if acquired. These results are robust to a comprehensive range of robustness tests. Our findings suggest that understanding the cultural orientation of target firms is important to understanding M&A outcomes. JEL codes: G34, M14, Z1 Keywords: mergers & acquisitions, cultural orientation, GLOBE, cumulative abnormal returns, target country culture
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Institutional environment has become a key phenomenon for internationalization studies of emerging market firms. As the presence of emerging market firms has increased in global economy, the investigation of the impacts of institutional environment on internationalization has become vital. The aim of this study is to examine the impacts of formal and informal institutional environment differences and business group affiliation on the choice of ownership level in cross border merger and acquisitions of Turkish firms. The study has analyzed 280 completed cross border merger and acquisitions of Turkish firms between years 1987-2018. As the formal institutional distance increases, Turkish firms prefer lower level of equity ownership. In contrast, Turkish firms prefer higher level of ownership as the informal institutional distance increases. Moreover, business group affiliation has a mitigating effect only in informal institutional distance and ownership level relationship.
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The aim of this chapter is to take stock of what we know about cross-border mergers and acquisitions (M&As) by emerging market firms with a special focus on their M&A activity in economically advanced markets. A recent upsurge in cross-border acquisitions has attracted much media attention as acquisitions have not only been emerging market firms’ preferred mode of global expansion but are also currently considered a tool for achieving global and regional dominance. Research on this phenomenon is still in its infant stages and is comprised of inconsistent and sometimes contradictory explanations and findings. Moreover, emerging market multinationals expanding into economically advanced markets are confronted with numerous obstacles, with their country of origin, local resistance, and general suspicion becoming liabilities. Yet most research has taken the point of view of the recipients of emerging market multinationals’ investments with little concern about emerging market multinationals’ challenges. This literature review is aimed at summarizing past research on emerging market multinationals’ cross-border M&As and, along with that, zooming in on the challenges encountered as a way of potentially improving emerging market multinationals’ image among global investors and increasing their chances of successful international expansion via cross-border M&As. We advocate the application of signaling theory as a theoretical tool to gain a more detailed understanding of emerging market multinationals’ investment behavior.
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This article examines how spatial geography influences firms’ choice of control in cross-border acquisitions (CBAs). Building our arguments on the information asymmetry in CBAs, we argue that geographic distance affects adverse selection and moral hazard problems in CBAs. Geographic distance hinders acquirers’ efforts to assess the true value of the target firm, prompting them to opt for a partial control. At the same time, geographic distance hampers acquirers’ ability to manage contractual relationships and integrate target firms, prompting them to opt for a full control. We argue that the cost and benefit trade-off of full vs partial ownership varies at different levels of geographic distance. Accordingly, we propose a curvilinear, U-shaped relationship between geographic distance and equity ownership. This relationship is contingent on acquisition relatedness and the listing status of the acquirer (public vs private). As the geographic distance between acquirer and target increases, acquirers assume higher equity stakes in related acquisitions than in unrelated acquisitions. At greater geographic distances, public firms acquire more equity ownership than do private firms. Findings from 10,181 deals across 52 acquiring and 61 target countries provide robust support for these arguments.
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This study brings a fresh approach-a learning perspective-to the literature examining whether firms expand internationally through start-ups or acquisitions. Hypotheses concern how this strategic choice is influenced by a firm's multinational diversity and product diversity. The results show that multinational diversity leads to foreign start-ups rather than acquisitions. Produce diversity has a curvilinear effect on the tendency to use start-ups. The curvilinear effect becomes weaker at higher levels of multinational diversity.
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What we know is that the concept of cultural distance is frequently used, hotly debated and for many intuitively appealing. Suffering from a series of illusionary properties, it is argued to have outlived its usefulness. What we need to know is how to conceptualize the complexity of culture as a multi-dimensional, multi-level concept, taking context into account to measure quality rather than quantity (or distance). It is our ambition to do justice to the idea that cultural diversity not only leads to friction or problem creation, but also to enrichment and to generation of solutions. We discuss cultural conceptualizations and suggest cultural profiling and cultural positioning as alternative ways of comparing and contrasting critical cultural differences.
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In order to be able to advance scientific knowledge, researchers should consciously explore and critically evaluate alternative explanations of the phenomena under investigation. We feel that research in the area of entry-mode choice has neglected these recommendations where it concerns the impact of cultural distance (CD) on entry-mode choice. In this article, we argue that sample idiosyncrasies, coupled with an almost blind confidence in one specific measurement of CD, have led researchers in this field to systematically overestimate the role of CD in entry-mode decisions. We argue that specific home and/or host-country characteristics are equally plausible explanatory factors for entry-mode decisions as CD and plead for a more sophisticated treatment of culture in the entry-mode choice literature.
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Primarily because of the significant rate and costs of failed international assignments, the attention paid by scholars to the topic of international adjustment has increased recently. Unfortunately, most of the work has been without substantial theoretical grounding. In an effort to move toward a theoretical framework for guiding future research, this article integrates theoretical and empirical work of both the international and the domestic adjustment literatures. This integration provides a more comprehensive framework than might be obtained from either of the literatures alone.
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We develop a model of cultural positions in relationships that should be considered in addition to the more conventional cultural distance. We empirically analyse relationships between headquarters and foreign subsidiaries in multinational corporations and how high or low acceptance of power differences at both sides of the relationship is associated with headquarters influence on subsidiary competence development. ANCOVA analyses of 1529 subsidiaries in six European countries, headquartered in 28 countries, provide new insights. We find that relationships with low cultural distance, differ significantly in terms of headquarters influence depending on whether headquarters and subsidiaries agree on accepting or rejecting power differences. Similarly, relationships with high cultural distance differ depending on whether it is headquarters or the subsidiary that is from a high-power-distance culture: we find that headquarters influence is particularly dependent on great acceptance of power differences by the subsidiary.
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This study draws on the concepts of relative standing to explain the post-merger performance of recently acquired European firms. We used a 2 × 3 sampling design where we surveyed top managers of British and French firms that were acquired by British, French, and U.S. firms as to their perceptions of cultural compatibility with the buying firms, their sense of loss of autonomy since the merger, and post-merger performance. While we found that the theory adequately explains the post-merger performance of both British and French firms, suggesting that this primarily ‘made-in-the-United States’ organization theory extends beyond the cultural domain of the United States, we also found an aspect of the theory that reflects a possible cultural bias. © 1997 by John Wiley & Sons, Ltd.
Book
Why do some organizations learn at faster rates than others? Why do organizations "forget"? Could productivity gains acquired in one part of an organization be transferred to another? These are among the questions addressed in Organizational Learning: Creating, Retaining and Transferring Knowledge. Since its original publication in 1999, this book has set the standard for research and analysis in the field. This fully updated and expanded edition showcases the most current research and insights, featuring a new chapter that provides a theoretical framework for analyzing organizational learning and presents evidence about how the organizational context affects learning processes and outcomes. Drawing from a wide array of studies across the spectrum of management, economics, sociology, and psychology, Organizational Learning explores the dynamics of learning curves in organizations, with particular emphasis on how individuals and groups generate, share, reinforce, and sometimes forget knowledge. With an increased emphasis on service organizations, including healthcare, Linda Argote demonstrates that organizations vary dramatically in the rates at which they learn-with profound implications for productivity, performance, and managerial and strategic decision making. © Springer Science+Business Media New York 2013. All rights are reserved.
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Cultural distance is a widely used construct in international business, where it has been applied to foreign investment expansion, entry mode choice, and the performance of foreign invested affiliates, among others. The present paper presents a critical review of the cultural distance construct, outlining its hidden assumptions and challenging its theoretical and methodological properties. A comprehensive framework for the treatment of the construct is developed and concrete steps aimed at enhancing rigor are delineated.
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Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
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Drawing on work from behavioral learning theory in psychology, this study examines the influence of prior organizational acquisition experience on the performance of acquisitions. This theory, which examines both the conditions preceding organization events and organizational responses, predicts that experience effects may range from positive to negative. Consistent with this theory, data from 449 acquisitions show an overall U-shaped relationship between organization acquisition experience and acquisition performance. In addition, the more similar a firm's acquisition targets are to its prior targets, the better they perform. These findings suggest that relatively inexperienced acquirers, after making their first acquisition, inappropriately generalize acquisition experience to subsequent dissimilar acquisitions, while more experienced acquirers appropriately discriminate between their acquisitions. Behavioral learning theory, then, may enhance understanding of organization experience effects.
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We examine whether size-specific experience influences performance following large related, domestic acquisitions. Supporting a transfer theory of learning, our results suggest that although prior experience in making large, related acquisitions transfers positively to this focal situation, experience in making small related acquisitions hurts firm performance. We find that bidder-to-target dissimilarity in product offerings and geographic reach exacerbates the negative effects of experience in small related acquisitions. In contrast, perceived dissimilarity in organizational cultures curbs these negative effects. Moreover, retaining acquired top managers and engaging in less integration in large related acquisitions both aid acquirers in better drawing on experiences from smaller related acquisitions.
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In this paper, I outline a perspective on knowing in practice which highlights the essential role of human action in knowing how to get things done in complex organizational work. The perspective suggests that knowing is not a static embedded ca- pability or stable disposition of actors, but rather an ongoing social accomplishment, constituted and reconstituted as actors engage the world in practice. In interpreting the findings of an empirical study conducted in a geographically dispersed high- tech organization, I suggest that the competence to do global product development is both collective and distributed, grounded in the everyday practices of organizational members. I conclude by discussing some of the research implications of a perspective on organizational knowing in practice. (Distributed Competence; Geographically Distributed Organizing; Know- ing; Organizational Knowledge; Organizing Practices) With the intensification of globalization, acceleration in the rate of change, and expansion in the use of informa- tion technology, particular attention is being focused on the opportunities and difficulties associated with sharing knowledge and transferring "best practices" within and across organizations (Leonard-Barton 1995, Brown and Duguid 1998, Davenport and Prusak 1998). Such a focus on knowledge and knowledge management is particularly acute in the context of global product development, where the development and delivery of timely and innovative products across heterogeneous cultures, locales, and mar- kets are critical and ongoing challenges. Dealing effec- tively with such challenges requires more than just good ideas, strong leaders, and extensive resources; it also re- quires a deep competence in what may be labeled "dis- tributed organizing"—the capability of operating effec- tively across the temporal, geographic, political, and cultural boundaries routinely encountered in global operations.
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Do expatriate managers fulfil the role of 'value-seeking connectors' in cross-border acquisitions? Building from the organizational knowledge and the MNC literature, this paper focuses on the use of expatriate managers for transferring experience-based knowledge within the MNC and its impact on the survival of acquired subsidiaries. Using a sample of cross-border acquisitions by Japanese MNCs, we analysed the impact of expatriate managers on the relationship between the acquirer's industry, host country and acquisition experience and the survival of the acquired subsidiary. Results show that the contribution of expatriation to the acquired firm's survival varies considerably depending on the type of experience considered. In fact, connectivity through expatriation is costly and only when appropriately sent abroad do expatriate managers build an effective bridge over the troubled water that characterizes the challenging post-acquisition integration.
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This paper reviews the literature on organizational learning. Organizational learning is viewed as routine-based, history-dependent, and target-oriented. Organizations are seen as learning by encoding inferences from history into routines that guide behavior. Within this perspective on organizational learning, topics covered include how organizations learn from direct experience, how organizations learn from the experience of others, and how organizations develop conceptual frameworks or paradigms for interpreting that experience. The section on organizational memory discusses how organizations encode, store, and retrieve the lessons of history despite the turnover of personnel and the passage of time. Organizational learning is further complicated by the ecological structure of the simultaneously adapting behavior of other organizations, and by an endogenously changing environment. The final section discusses the limitations as well as the possibilities of organizational learning as a form of intelligence.
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For firms seeking to strategically combine their resources with those of other firms, two popular alternative governance structures emerge: alliance or acquisition. In this paper, we propose a dyadic perspective to examine how and why configurations of two firms' resources and capabilities affect the costs and benefits associated with each governance structure. More specifically, we posit that factors such as (1) the resource similarity and complementarity between a pair of firms, (2) the combined relational capabilities of a pair of firms, and (3) the partner-specific knowledge between a pair of firms will affect the likelihood of observing that pair of firms forming an alliance vs. engaging in an acquisition. We test and find support for our hypotheses using extensive longitudinal data from a sample of the largest firms in the United States from 1991 to 2000. Copyright © 2007 John Wiley & Sons, Ltd.
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Examines the correlation between the exploration of new possibilities and the exploitation of old certainties in organizational learning. Also discusses the difficulty in balancing resource management between gaining new information about alternatives to improve future returns (i.e., exploration) and using information currently available to improve present returns (i.e., exploitation). Two models which evaluate the formation and use of knowledge in organizations are developed. The first is a model of mutual learning in a closed system having fixed organizational membership and stability. The second is a model which considers the ways in which competitive advantage is affected by knowledge accumulation. The analysis indicates that the choice to rapidly develop exploitation over exploration might be effective in the short term, but is potentially detrimental to the firm in the long term. (SFL)