The Effect of Cultural Dimensions on Cross-Border Mergers and Acquisitions

Title

The effects of cultural dimension on the Cross-Border Merger and Acquisition

Objectives

- To determine the effect of Power Distance on Cross-Border Merger and Acquisition

- To examine the effect of Individualism on Cross-Border Merger and Acquisition

- To identify the effect of Masculinity on Cross-Border Merger and Acquisition

- To investigate the effect of Uncertainty avoidance on Cross-Border Merger and Acquisition

- To identify the effect of geographical distance on Cross-Border Merger and Acquisition

- To analyze the effect of GDP per capita on Cross-Border Merger and Acquisition

- To determine the effect of economic freedom on Cross-Border Merger and Acquisition

- To examine the effect of stock market on Cross-Border Merger and Acquisition

Problem Statement

The importance of cross-border Mergers & Acquisitions (M&A) seems to have increased as a means to expand and compete internationally. They are a mean to enter foreign markets, secure resources and increase global outreach. In theory, the phrase "mergers and acquisitions" (abbreviated M&A) refers to buying, selling and combining different companies in order to gain improved financial performance, create a global presence, and face the global competitive market.

To describe the differences in national culture, Hofstede (2001) has developed five dimensions. These have been used in his extensive survey that describes the differences of more than 50 national cultures and are commonly used by other researchers when measuring distance and evaluating relationships between different national cultures. Hofstede’s dimensions are used in many of the studies measuring cultural distance in M&As (e.g. Morosini et al, 1998; Angwin, 2001; Olie, 1990; Shimizu et al., 2004; Weber et al., 1996; Barkema et al., 1996).

We investigate how cultural differences affect Cross-Border Merger and Acquisition. We focus in particular on how Power Distance, Individualism, Masculinity, Uncertainty avoidance affect Cross-Border Merger and Acquisition.

Significance of Study

The effect of culture impacts performance and should not be ignored as a determinant in Cross-Border Merger and Acquisition. We believe that our research topic will gain importance in the future, and the influence of culture on M&A deals may increase.

This trend towards cross border M&A will put a special, maybe unprecedented emphasis on the management of different cultures and thus on the understanding