When two become one - A study on the impact of sociocultural factors on the PMI process in cross-border M&As
Master’s Thesis 30 credits Department of Business Studies Uppsala University Spring Semester of 2019
Date of Submission: 2019-05-29
John Karlsson Amanda Olsen Supervisor: Henrik Dellestrand
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“The really interesting part is that we are building a company and we are building it
through meetings like this, it is all built on words. I mean, there are finances and other
things, but it is all built on how well we talk to each other”
- Respondent from one of the conducted interviews (2019)
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Thank you…
As the idea for this master’s thesis was initiated during the autumn of 2018, we could not
comprehend the satisfying feeling of one day holding this final product in our hands. This
paper is a result of endless amounts of motivation, collaboration, and foremost
dedication. Our intention was to generate something that could serve both academia and
practitioners with insightful findings and recommendations for future endeavors. The
process has been tiresome at times, but that is immaterial compared to the joy of writing
a piece concerning a topic that we are both passionate about.
We have learned so much along the way, and we have received immense support
throughout this period. We will be forever grateful to our supervisor, Henrik Dellestrand,
who has constantly helped and challenged us to ensure that this piece reached its full
potential. Moreover, this paper would not have been possible without the insights from
our invaluable Case Company that granted us with both time and personal engagement to
help us realize this study. You know who you are, and we will always be thankful for
your important contribution. Finally, we want to direct a thank you to our fellow students
who have contributed with cherished input along the way. You are all stars and we wish
you the best of luck for your future commitments!
We hope that you enjoy the reading!
John & Amanda
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Abstract
There is a paradoxical realism as the number of cross-border mergers and acquisitions
(M&As) increases on a global scale, despite the fact that organizations’ failure rate to
generate the expected value from these cross-border M&As remains high. Researchers
have argued that these failures have been connected to the post-merger integration (PMI)
process in which multiple challenges are imposed. However, the findings within the area
are both limited and scattered, and researchers have emphasized the need to enhance the
understanding of how different sociocultural factors impact the integration process of
merging organizations in an international context.
Therefore, this study was conducted to investigate how sociocultural factors impact the
PMI process in cross-border M&As. The empirical data was collected through a
qualitative multiple case study from a Swedish company that has conducted numerous
cross-border M&As. Four acquisitions in different international settings were examined,
and 16 interviews were carried out with employees from both the case company and the
acquired firms.
The findings demonstrate that sociocultural factors on four different levels need to be
considered; national, company, team and individual. Interestingly, the findings highlight
that there is no apparent connection concerning the level of psychic distance between
national cultures and the challenges imposed in the PMI process, as previously suggested
by research. However, national culture still matters, but this study suggests that the most
substantial impact on the PMI process derives from sociocultural factors on a company
cultural level. This is surprising as most research on culture has been focusing on the
national level, and this suggests that future research should shift focus to incorporate and
investigate additional levels of culture as well.
Keywords: Cross-Border M&As, Post-Merger Integration, Sociocultural Factors,
Culture, Enablers, Constraints, Success Factors
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Table of Content 1. Introduction 5
2. PMI in Cross-Border M&As 9
2.1 Cross-Border Mergers and Acquisitions 9
2.2 Post-Merger Integration 10
2.3 Sociocultural Factors 12
2.3.1 National Level 12
2.3.2 Company Level 14
2.3.3 Group Level 15
2.3.4 Individual Level 15
2.3.5 Tangled Levels 16
2.4 Analytical Framework 17
3. Methodology 19
3.1 Research and Methodological Approach 19
3.2 Research Design and Strategy 19
3.3 Setting and Selection 20
3.3.1 Multiple Case Study 20
3.3.2 Selection of Respondents and Data Collection 22
3.3.3 Interview Guides 24
4. Empirical Findings 30
4.1 The Acquisition and PMI Process 30
4.2 Case 1: Acquisition in the Scandinavian Region 32
4.3 Case 2: Acquisition in the North Atlantic Region 37
4.4 Case 3: Acquisition in the Middle East Region 40
4.5 Case 4: Acquisition in the Slavic Region 44
4.6 Cross-Case Comparison 48
5. Discussion 51
5.1 The Impact of Sociocultural Factors 51
5.2 Success Factors and Practical Improvements 55
6. Concluding Remarks 57
6.1 Sociocultural Factors in the PMI Process of Cross-Border M&As 57
6.2 Practical and Theoretical Contributions 58
6.3 Limitations 59
6.4 Future Studies 59
7. References 61
7.1 Articles and Books 61
7.2 Websites 69
8. Appendix 70
Appendix 1: Interview Guide for Managers at the Case Company 70
Appendix 2: Interview Guide for Employees at the Case Company 71
Appendix 3: Interview Guide for Employees at the Acquired Firm 72
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1. Introduction
Imagine that you are entering a board room to pitch a new investment idea for your
company. You open up your PowerPoint-presentation that demonstrates that the suggested
investment proposition has a 9% chance to reach its objectives. In other words, a 91%
chance to not generate the expected value. This is probably not a number that your CFO
would be excited about, and yet, this is the reality for a significant part of the conducted
cross-border mergers and acquisitions (hereinafter “cross-border M&As”) (Weber & Tarba,
2012). However, despite this high failure probability, the amount of conducted cross-border
M&As is increasing (Deloitte, 2017).
In 2015, the value of cross-border M&As exceeded a figure of $1.6 trillion (Caiazza,
Shimizu & Yoshikawa, 2016). To put this into perspective, this is more money than the
United States spent on social security throughout the same year (National Priorities, 2019).
Due to this, one could argue that it lies in the best interest for both practitioners and
academia to investigate the reasons behind these high failure rates; is it simply a coincidence
that some cross-border M&As succeed whereas others fail, or are there some underlying
factors that need to be considered?
The current literature on this topic implies that cross-border M&As tend to fail due to
improper post-merger integration (hereinafter “PMI”) management (Ruess & Voelpel, 2012;
Weber, Tarba & Rozen, 2011). However, the research on specific factors and their impact
on the PMI process is still scarce despite its importance for practitioners. Therefore, the
ambition for this study is to enhance the understanding of the complexity regarding PMI
processes in international settings and how organizations should manage these processes to
obtain the desired outcomes of their cross-border M&As.
Despite an evident increase in cross-border M&As, recent studies highlight the paradoxical
realism in which the number of cross-border M&As increases although the share of
unsuccessful cross-border remains high (Aklamanu, Degbey & Tarba, 2015; Reus, Lamont
& Ellis, 2016; Weber, Tarba & Öberg, 2014; Yahiaoui, Chebbi & Weber, 2016). It is
important to bear in mind that today, the definitions of successful and unsuccessful cross-
border M&As differ. Different studies have applied different measurements, but the
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common denominator is that cross-border M&As are perceived as failures once they fail to
create added value for the shareholders (Child, Faulkner & Pitkethly 2001; Schweiger &
Lippert in Stahl & Mendenhall, 2005).
Further, an M&A can be described as successful if it reaches its initial objectives and
unsuccessful if it does not reach the initial objectives (Weber & Tarba, 2012). Rozen-
Bakher (2018) argue that the three main dimensions to measure the success of cross-border
M&As are integration success, synergy success, and profitability success. For this particular
study, the focus is directed to the integration dimension. This choice of focus derives from
the fact that even though the dynamic of cross-border M&As and domestic M&As is
similar, there are multiple factors of the international aspect in cross-border M&As that can
impose significant challenges in the PMI stage (Rozen-Bakher, 2018).
PMI refers to the process of integrating the whole or parts of the acquired firm into the
acquiring firm. The literature regarding the PMI process has developed over time in which
earlier studies argue that the target company should be fully integrated into the acquiring
organization (Boderner & Capron, 2018). Later research, however, points out that the goal
of the PMI process is to find the best and most efficient mode to create value in relation to
the acquired set of resources and simultaneously balance the economic and organizational
costs involved in the process (Boderner & Capron, 2018). This logic implies that the target
organization does not need to be fully integrated into the merged organization as certain
functions are better kept non-integrated (Boderner & Capron, 2018).
Bearing this in mind, it is important to highlight the fact that a significant share of cross-
border M&As remain unsuccessful due to incorrect PMI management independently of
whether the acquiring firm is fully or only partly integrated (Ruess & Voelpel, 2012).
According to Ruess and Voelpel (2012), the PMI process consists of five distinct fields that
are the strategic, structural, personnel, cultural and stakeholder integration. The authors
argue that it is crucial for managers to balance all these fields in order to realize successful
PMI in cross-border M&As.
Ruess and Voelpel’s (2012) logic concerning the connection between cross-border M&A
failure and poorly managed PMI processes is further supported by Weber, Tarba, and Rozen
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(2011). In addition, they argue that there is a scarcity in research that focuses on specific
factors in the PMI process and the authors attempted to fill this gap in one of their studies.
They argue that a common method for calculating M&A success is based on pre-merger
factors. To demonstrate, the strategic fit between the target and the acquiring firm has often
been used to measure the synergy potential whereas PMI factors including cultural
differences have been neglected (Weber, Tarba & Rozen, 2011). The pre-merger factors
analyzed seldom consider the PMI process of cross-border M&As and, therefore, fail to
include aspects such as interaction, communication and, coordination problems that can
arise due to cultural clashes (Weber, Tarba & Rozen, 2011). In relation, Bauer and Matzler
(2014) argue that the high failure rate of cross-border M&As is a consequence of the failure
to understand different cultures. To support this, a report from KPMG reveals that one-third
of the managers interviewed claimed that their unsuccessful acquisitions were a
consequence of cultural differences (Kelly, Cook & Spitzer, 1999).
In addition to these authors, multiple researchers in the business field highlight the need for
additional studies on M&A success and failure (Stahl et al., 2013). The authors argue that a
shift from traditional factors including strategic measurements and financial numbers to
sociocultural and HR-related factors that impact the integration process is needed (Stahl et
al., 2013). In the authors’ study, the factors mentioned include cultural fit, management
style, patterns of dominance, cultural tolerance and social climate (Stahl et al., 2013). This
reasoning receives further support from Barkema, Bell, and Pennings (1996) who
demonstrate that both organizational and national culture among other influences can
impose several challenges related to cross-border M&As. Further, Bansal (2015) argues that
researchers today have disregarded organizational behavior and its central role in the
integration process. Moreover, Björkman, Stahl, and Vaara (2007) suggest that due to the
complex nature of culture, future studies should include both national, organizational,
industrial, professional and functional culture to not limit the study. In relation to this, the
importance of PMI from a sociocultural perspective has been pointed out by Caiazza,
Shimizu, and Yoshikawa (2016) as an area for future research.
Due to the current literature’s limited ability to demonstrate the different sociocultural
factors that are important to consider in the PMI process of cross-border M&As, it is further
unknown how different sociocultural factors impact these integrations. Consequently, the
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purpose of this study is to unfold underlying sociocultural factors that are important to
consider in cross-border M&As and to investigate how these factors impact the actual PMI
process in an international context. Through this, the ambition is to provide useful insights
for academia and practitioners. Therefore, the research question that this study aims to
answer is:
How do sociocultural factors impact the PMI process in cross-border M&As?
To answer this research question, data will be collected from a Swedish company that
throughout the last decade has conducted numerous acquisitions overseas. The company
operates in the technology sector and is present in several countries around the world. The
PMI processes of four international acquisitions will be used as cases for this study. Data
will be collected through interviews with employees from the case company as well as from
the four acquired firms to obtain insights into the PMI processes. As the case company has
requested to be anonymous in this study, it will simply be referred to as the “case company”.
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2. PMI in Cross-Border M&As
2.1 Cross-Border Mergers and Acquisitions Cross-border M&As are strategic actions employed by organizations to obtain resources
(Pablo, 1994; Shimizu et al., 2004) and gain local access in foreign countries (Shimizu et al.,
2004), but foremost due to the potential of synergy gains (Seth, Song & Pettit, 2002).
According to Campbell and Goold (1998), the six forms of potential synergy are shared
know-how, shared tangible resources, pooled negotiating power, coordinated strategies,
vertical integration, and combined business creation. These strategic actions are
implemented to create value for stakeholders through economic gains (Hitt, Harrison &
Ireland, 2001). According to Baker McKenzie, the total number of cross-border M&As
exceeded a value of $1.6 trillion in 2015 (Caiazza, Shimizu & Yoshikawa, 2016), and a
report from Deloitte demonstrates that the value of cross-border deals has witnessed a
combined annual growth rate of 15% between the period 2010 and 2015 (Deloitte, 2017).
Despite the increase in cross-border M&As, there is a paradoxical realism as most M&As
are still considered to be unsuccessful. In fact, it has been noted that no more than one-
quarter of the M&As realize their financial goals (Marks and Mirvis, 2001). Furthermore, a
research study conducted in 2007 on over 200 European M&As reveals that only nine
percent were considered “completely successful” in realizing the initial objectives (Weber &
Tarba, 2012). There are multiple manners in which the success or failure of cross-border
M&As can be measured, and shareholder value and business performance measures are two
of the traditional methods employed (Child, Faulkner & Pitkethly, 2001). Moreover, Weber,
Tarba, and Rozen (2011) claim that a common method implemented to calculate M&A
success is based on pre-merger factors. Nevertheless, the common denominator is that cross-
border M&As are perceived as failures once they fail to create added value for the
shareholders (Child, Faulkner & Pitkethly, 2001; Schweiger & Lippert in Stahl &
Mendenhall, 2005). Moreover, common reasons for M&A failure have been argued to
derive from multiple underlying factors related to post-merger integration (Hewitt, 2011).
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2.2 Post-Merger Integration According to Ruess & Voelpel (2012), the PMI process concerns strategic, structural,
personnel, cultural as well as the stakeholder integration. In relation to this, previous
research on M&As has stressed the importance of the PMI phase due to its apparent impact
on the potential realization of the much-desired synergy effects from the performed deals
(Larsson & Finkelstein, 1999; Pablo, 1994). Similarly, Schweiger (2002) highlights that the
implementation of a well-constructed integration process is crucial to maximize value
creation and diminish value destruction. Moreover, the PMI process of cross-border M&As
is seldom considered in the pre-merger analyzing phase. To exemplify, the strategic fit
between the involved organizations is often used to calculate the synergy potential whereas
factors relating to the PMI process including interaction, communication, and coordination
factors are often neglected (Weber, Tarba & Rozen, 2011).
Therefore, one of the key objectives of the integration processes is to anticipate and identify
the potential challenges that could influence the organization’s ability to develop a
competitive advantage and to define measures that need to be implemented in order to
prevent difficulties related to the PMI (Hitt, Harrison & Ireland, 2001). In relation to this,
Zollo and Singh (2004) argue that an essential challenge for the organization is to identify
the right balance between implementing the required level of organizational integration and
simultaneously minimize the disruptions to the acquired organization’s resources and
competencies (Liu and Woywode, 2013).
The current literature differs in terms of whether organizations should aim to only integrate
parts of the acquired organization or whether the targeted company should be fully
integrated into the purchaser’s organization (Bodner & Capron, 2018). Nevertheless, a
substantial proportion of cross-border M&As still remain unsuccessful because of improper
PMI management no matter whether the integration level of the acquiring firm (Ruess &
Voelpel, 2012). Ruess and Voelpel’s (2012) reasoning in regard to the relationship between
unsuccessful cross-border M&As and improper PMI processes is reinforced by Weber,
Tarba, and Rozen (2011). Moreover, the authors claim that the research that focuses on
individual factors in the PMI process is scarce.
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In terms of post-merger integration modes, Haspeslagh and Jemison (1991) established three
integration modes that differ in terms of the level of integration. This integration mode
framework has been extensively employed, but cultural impacts are neglected (Liu and
Woywode, 2013). However, the framework has been revisited by Weber, Tarba, and Reichel
(2009) in which the researchers integrated the cultural-specific element into the integration
mode. Within this, the authors demonstrate that not only may cultural differences influence
the integration mode, but cultural-specific dimensions can also have a significant impact
(Weber, Tarba & Reichel, 2009).
For cross-border M&As in particular, it has been highlighted that cultural differences need
to be accounted for as they can impose substantial difficulties in the integration phase
(Lupina-Wegener, Schneider & Dick, 2011). Furthermore, it is argued that the
incompetence to understand different cultures is the foundation for unsuccessful cross-
border M&As (Bauer, Matzler & Wolf, 2016). Moreover, Angwin claims that cultural
assessment tends to be given a low priority from executives in the due diligence process
(Angwin, 2001). Therefore, organizations need to understand that in order to realize the
potential of an M&A, the measures needed in the integration process must be identified and
discussed as part of the merger discussion (Weber and Tarba, 2012).
There is a mutual understanding among most management researchers that agree on the fact
that cultural differences and integration efforts throughout the PMI period are essential to
enable the desired additional value (Finkelstein & Cooper., 2010). Moreover, it has been
argued that cross-border M&As are facing particular difficulties in regard to integration due
to the fact that they concern “double-layered” acculturation including both organizational
and national cultural differences (Barkema, Bell & Pennings, 1996). In relation to this,
Bansal (2015) argues that organizations that focus on resolving cultural differences during
the integration phase on an organizational level have a 26 percent higher probability to be
successful.
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2.3 Sociocultural Factors
An organization's setting does not only consist of national culture. Instead, it has been
argued that an organization is embedded in a setting that consists of several levels of culture
(Stahl & Voigt 2008; Björkman, Stahl & Vaara 2007; Karahanna & Evaristo, 2005;
Barkema, Bell & Pennings, 1996). Based on this, Karahanna and Evaristo (2005) argue that
it becomes important to understand how these different levels of culture impact the
organization that, in turn, will influence both the managerial and work behavior within the
organization. Due to this, studies and findings from various researchers are included in the
following section to provide a broad base for this study’s analytical framework. Moreover,
the different levels of culture identified by Karahanna and Evaristo (2005) are to be used as
a guideline to initially categorize different levels of culture (see figure 1).
2.3.1 National Level
A high degree of cultural differences between two countries is commonly referred to as
high cultural distance. Moreover, the cultural distance between two countries has been
demonstrated to be related to the choice of entry mode, the perceived ability to control and
manage foreign operations as well as the ability to organizational learning (Björkman, Stahl
& Vaara, 2007). These cultural differences can be related to the concept of “psychic
distance” initiated by Johanson & Vahlne (1977) that refers to factors that prevent the flow
of information between distinguishing markets. These factors include differences in
language, education, business practices, culture, and industrial development. Hence, factors
that complicate the understanding of foreign environments (Johanson and Vahlne, 2009). In
the context of cross-border M&As, a high cultural distance has been considered as an
obstacle, in particular in regard to the PMI process. This concerns the fact that not only do
organizational cultures need to be combined, but there is also a need to consider national
cultures (Björkman, Stahl & Vaara, 2007). However, the expanding body of research within
this topic has revealed contradictory results.
In a study conducted by Rozen-Bakher (2018), Hofstede’s well-established framework was
used to understand how national culture impacts the success of cross-border M&As due to
the fact that national culture has been considered as one key contributor to the high failure
rates of these deals (Stahl & Voigt, 2008). This framework consists of four dimensions that
are used to compare national cultures including Power Distance (PDI), Individualism vs.
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Collectivism (IDV), Uncertainty Avoidance (UAI) and Masculinity vs. Femininity (MAS)
(Rozen-Bakher, 2018). To demonstrate, a country that scores high in PDI accepts
hierarchical orders whereas a country that has a low score strives to distribute the power.
Moreover, a country that has a high IDV primarily consists of individuals that care for
themselves rather than for the greater society, and UAI refers to the degree to which
members of a society feel comfortable with uncertainty and ambiguity. Finally, a MAS
culture reflects a society in which achievement, heroism, and material rewards are important
in comparison to a feminine culture that is characterized through cooperation, caring for
each other and quality of life (Hofstede Insight, 2019).
It is argued that national culture influences a company’s organizational culture in terms of
managerial practice that in turn will increase the risk of conflict between managers and
employees in the merged firms. The consequence of this affects the possibility to integrate
the firms and realize potential synergies (Rozen-Baker, 2018). The findings from the
author’s study imply that not all four dimensions from Hofstede’s framework have the same
impact on M&A success. In fact, the results show that PDI and MAS have an impact on
M&A success whereas the other two dimensions do not influence the success of the deals
(Rozen-Baker, 2018). Interestingly, the findings indicate that a high degree of difference in
MAS between two countries actually has a positive impact on integration and synergy
success. The reasoning behind these findings is that a masculine culture is more concerned
with tasks, quality, and control that also reflects a high degree of assertiveness and
competitiveness. Countries that display a high degree of masculinity are also more inclined
to prioritize work before family. These characteristics that reflect a high masculinity culture
are argued to be reasons for integration and synergy success in M&As (Rozen-Baker, 2018).
Despite the fact that multiple studies imply that culture has a negative impact on post-
acquisition performance, other researchers highlight that cultural distance might have a
positive influence on PMI (Björkman, Stahl & Vaara, 2007). The reasons behind these
inconsistent findings are argued to derive from the assumptions and limitations in the
conducted studies, and Stahl and Voight (2008) argue that the relationship between cultural
distance and post-acquisition performance is complex and unidentified variables complicate
the understanding of the impact that cultural differences have on M&A performance.
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2.3.2 Company Level
In addition, another study investigates cultural differences and their impact on integration
from an innovation perspective (Bauer, Matzler & Wolf, 2016). In this study, the authors
separate PMI into two different areas in terms of human integration and task integration.
Human integration refers to the reduction of uncertainty and the establishment of a shared
identity whereas task integration concerns the coordination of transferring capabilities and
resources. Bauer, Matzler, and Wolf (2016) argue that human integration will have a
negative impact on the innovation capabilities in an organization whereas task integration
will have a positive impact on innovation. The arguments behind this reasoning are that
human integration often results in conflicts due to cultural differences that impact a
company’s innovation capabilities in a negative manner. This can be related to the concept
of “administrative heritage” that concerns the fact that an organization’s capabilities develop
over several years and are tied to a number of attributes including organizational assets,
managerial responsibilities, and relationships that cannot be shifted early (Ghoshal &
Bartlett, 1990). On the other hand, task integration allows an organization to follow well-
established routines and manage coordination and flexibility (Bauer, Matzler & Wolf,
2016). Thus, the findings indicate that if an organization does not aim to interrupt its
innovation process during an M&A integration, the organization should focus on task
integration rather than on human integration.
With that said, as the authors demonstrate in the study, one needs to understand the
complexity of knowledge and innovation. Nowadays, knowledge is more seldom stored in
machines, processes or routines, but it is rather more tacit in nature and stored in humans
(Bauer, Matzler &Wolf, 2016). Today, organizations often acquire other companies to
access explicit knowledge and “know-how”. This implies that to actually access the sought-
after knowledge, the acquiring company might not be able to ignore human integration in
the PMI process. Furthermore, Bauer, Matzler, and Wolf (2016) argue that cultural
differences have a negative impact on the integration process and that organizations should
rather acquire other organizations with a high cultural fit. The author argues that a high
cultural fit between two organizations will decrease the number of problems that normally
occur during the human integration process. However, one could argue that this argument is
contradictory to numerous other studies that imply that a heterogeneous group tends to have
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a more positive impact on creativity and innovation in a merged organization due to
knowledge transfer and the sharing of best practice (Carlile, 2004; Pinjani & Palvia 2013).
2.3.3 Group Level
A similar study was conducted by Stahl and Voight (2008) who also divide the PMI
process into the task and human aspects in which human integration refers to sociocultural
integration. In the study, the authors use the social identity theory to describe why problems
can occur throughout the sociocultural integration. Normally, a group of people tend to feel
biased towards their own group and have negative perceptions towards members of other
groups. This is referred to as in-group bias and creates an “us-versus-them” situation that
tends to be stronger during threats (Stahl & Voigt 2008). In terms of an M&A, one could
assume that the target company feels threatened by the acquiring firm, especially if the
acquisition is considered a hostile takeover. In this scenario, it is not the national culture that
impacts the integration process but rather the group culture. This is related to an argument
from Bansal (2015) who argues that current research on M&A has disregarded
organizational behavior that is a central part of the integration process and the potential
success of performed M&As. This implies that different levels of culture need to be
considered in the investigation on sociocultural integration (Stahl & Voigt 2008).
2.3.4 Individual Level
Further, a previous study conducted by Schmidt (2002) concludes that the most common
reason for M&A failure is related to the people and that a key factor for M&A success
concerns the ability to properly manage the human integration process. In relation, and as
highlighted earlier, another study reveals that organizations that prioritize to solve people-
related problems including cultural differences and developing a shared identity during the
human integration process have a 26% better chance to succeed (Bansal, 2015). According
to Bansal (2015), the human integration process is defined as the creation of shared values
and a positive attitude among the employees of the emerging organization. Moreover,
human integration success is defined as positive feelings among the employees in the
merging organization. The results from this study indicate that the fewer human interaction
mechanisms that are used, the higher the amount of negative emotions and insecurity that
are reported from employees (Bansal, 2015).
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Moreover, the study indicates the importance of cultural training in cross-border M&As and
the importance of both formal and informal social interactions. Employees in organizations
that only implemented formal interaction initiatives in the human integration process
reported negative feelings and dissatisfaction to a much higher degree than employees in
organizations that used informal mechanisms (Bansal, 2015). Due to the nature of cross-
border M&As, one could argue that informal interaction mechanisms are harder to leverage
due to the distance and that this can impose problems in the human integration phase.
2.3.5 Tangled Levels
Björkman, Stahl, and Vaara (2007) argue that due to the complex nature of culture,
researchers should focus on different levels of culture. In relation to this, Teerikangas and
Very (2006) argue that organizations need to be careful in predicting the impact of
organizational, national or other cultures on M&As as diverse sources of complexity prevent
us from accepting or declining a clear relationship between culture and M&A performance.
Moreover, multiple researchers indicate the importance of understanding sociocultural
factors and their impact on the PMI process of cross-border M&As (Reus & Lamont, 2009;
Graebner et al. 2017; Rozen Baker 2018). This suggests that further research should not
only be limited to specific cultural measurements but rather accept the complexity and
investigate a broader range of sociocultural factors that can impact the PMI process in cross-
border M&As.
Last, a study conducted by Hajro (2014) demonstrates the causality between national and
organizational culture differences and its impact on the PMI process in cross-border M&As.
According to Hajro (2014), the findings indicate that the complexity behind the PMI
processes is more significant than previously shown and that both national and
organizational culture, in turn, will influence different underlying factors that can impact the
PMI process. These findings indicate that the national culture of a country will impact both
individual and organizational values and beliefs and that it is important for practitioners to
understand how these differences can collide once integrating two organizations from
different countries (Hajro, 2014). These findings are supported by Sag, Kaynak, and Sezen
(2016) who argue that organizations and their people reflect the values of the society in
which they have been founded, and that there is a need to adapt to these to be able to
perform.
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2.4 Analytical Framework
To this date, findings in this area are scattered and sometimes contradictory. This has
been argued to derive from limitations in the conducted studies (Stahl & Voight, 2008).
Certain researchers argue that high psychic distance imposes significant problems in the
PMI process whereas other researchers argue the opposite. Other researchers touch upon the
importance of human integration, cultural fit, people’s attitude and how these aspects impact
the PMI process, while others highlight the importance of understanding organizational
culture and how administrative heritage can impose in-group biases between two
organizations.
Thus, the common denominator in the collection of research is the conclusion that the PMI
process is complex in its nature and adding the international perspective enhances this
complexity (Björkman et al. 2007). The reason for this concerns the fact that industries,
organizations as well as individuals who live and operate in a specific setting are impacted
by the national culture (Hajro, 2014; Sag et al. 2016). Based on this, one could argue that
each PMI process in an international setting is specific in its nature and understanding these
different contexts become important to realize the full potential of cross-border M&As.
Today, many researchers point toward the importance of understanding how different
sociocultural factors on different levels of culture can impact the PMI process (Stahl &
Voight, 2008; Reus & Lamont, 2009; Graebner et al. 2017; Rozen Baker 2018). This
argument is further supported by previous findings that conclude that the most common
reason for M&A failure is people-related, and an organization's ability to solve these people-
related problems will, in turn, affect the chance of M&A success (Schmidt, 2002).
These previous findings and arguments indicate that challenges can occur on different
cultural levels including national, organizational and personal and that they all, in turn, can
impact the PMI process. This opens up for questions regarding which sociocultural factors
and how these factors impact the PMI process and if the impact diverges in different
international settings.
18
Figure 1: Analytical framework. Levels of culture adapted from Karahanna & Evaristo (2005).
To answer the question on how sociocultural factors impact the PMI process in cross-border
M&As, previous research and findings will be employed as a guide. However, the study
itself will be explorative in its nature that in turn enables the study to be open and not
limited beforehand. This allows a proper investigation of the complexity behind the PMI
process and the potential to unfold underlying sociocultural factors that can impact the
process. Further information on how the study is to be conducted is demonstrated in the
following section.
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3. Methodology
3.1 Research and Methodological Approach
The intention of the study was to obtain a deeper understanding of how sociocultural
factors impact the PMI process a cross-border M&As. Due to both scattered findings and
limitations in earlier studies, research has emphasized the importance of considering
different levels of cultural factors once studying the PMI process in cross-border M&As.
Particularly, in regard to the human and cultural integration of the two merging
organizations. Based on this, a qualitative approach was considered suitable to investigate
this phenomenon.
A qualitative research design is less structured, more flexible and open-ended compared to a
quantitative approach, and is considered suitable once investigating a social phenomenon
(Azungah, 2018). Further, since the findings in the area are scattered and limited, the
purpose of the study was to generate new knowledge and insights rather than testing an
existing theory. This means that the study adopted inductive reasoning that is considered to
be an appropriate study approach as the phenomenon investigated is poorly explored (Doz,
2011). An inductive approach combined with a qualitative research design can enable a
further understanding of the phenomenon and answer the questions about ”how” and ”why”
(Doz, 2011). This choice of research design enabled the study to be conducted with an open
mind and, based on the collected data, generate new knowledge to the area.
3.2 Research Design and Strategy
Due to the complexity of the PMI process in cross-border M&As, it was necessary to
study the process in-depth in order to answer the stated research question. The aim was to
understand how different sociocultural factors impact the PMI process in cross-border
M&As. Therefore, the choice of a case study approach was considered applicable as the
goal was to obtain a deeper understanding and insight of a phenomenon that is not well-
explored (Yin, 2009). Further, since the PMI process is complex in its nature, a case study
allowed a study on the complexity and nature of the specific case or cases (Stake, 1995).
Also, a case study focuses on understanding the dynamics within a single setting and can
20
further be used to generate rather than testing theory, as was the aim of this study
(Eisenhardt, 1989).
The choice of an exploratory research strategy was considered suitable in order to gain a
better understanding of the specific phenomenon (Bryman & Bell, 2015). Initially, a
literature review was carried out before conducting the interviews at the case company. The
literature review allowed screening of the current research on this topic, as well as to
identify gaps within the area. This enabled the formulation of the problem statement as well
as the construction of the interview guides. The purpose of the interviews was to access
insights and knowledge from individuals that had been involved in the examined PMI
processes (Brown & Sauter, 2012).
3.3 Setting and Selection
3.3.1 Multiple Case Study
The data was collected from a Swedish company that operates in the technology sector.
The company is classified as a medium-sized organization consisting of approximately 500
employees. The company has throughout the last decade expanded into several new markets
and is today present in 16 countries around the world. The headquarters is located in
Sweden and contains most of the global functions within the company. To ensure the
anonymity of the company, no further details will be disclosed.
For this study, four cross-border M&As within the above-mentioned case company were
studied, meaning that a multiple case study approach was applied. The four different cross-
border M&As represented four different PMI processes. These acquisitions occurred in four
different international settings, but the home market of the case company was constant.
Together with the case company, it was decided to focus on four particular cross-border
M&As that had been conducted during the years 2016 and 2017.
The reasoning for choosing these specific acquisitions was because they had all occurred
close in time to each other, meaning that the PMI processes were similar. This helped to
reduce the possibility of scattered findings as it is argued that an organization’s PMI
capabilities are enhanced for each time that a cross-border M&A is conducted. This could
21
therefore impact the outcome of the PMI processes if the acquisitions studied had occurred
over a protracted period of time. Moreover, as displayed in the table below (see table 1),
there is a distinct difference in the number of employees between case 1 and the other three
cases. This difference was considered interesting as it would generate the potential of
comparing whether the numbers of employees had an impact on the PMI process from a
sociocultural perspective.
The reasoning for studying four different cases was to strengthen the potential findings as
this allowed a comparison of both differences and similarities between the cases (Baxter &
Jack, 2008). This means that a comparative multiple case study approach was applied.
Moreover, the multiple case study approach enabled both data analyses within each case as
well as across different situations (Yin, 2003). Further, since the study was interested in the
international context of the PMI process, multiple cases in different contexts enabled
analyses of similarities and dissimilarities in regard to the international aspect.
Moreover, a multiple case study is argued to be more convincing in its theory generating
than a single case study as the possible findings are grounded in several empirical pieces of
evidence (Eisenhardt & Graebner, 2007). This is further supported by Miles and Huberman
(1994) who argue that a multiple case study adds weight to the findings as the validity and
stability of the study are enhanced. In the table below (see table 1), a short description of the
different cases is made available. To ensure the anonymity of the company, the specific
markets will not be presented, but the regions of the acquired firms are highlighted.
Case Region Industry Founded Acquired Employees
1 Scandinavia Technology 2013 2016 30
2 North Atlantic Production 2011 2017 2
3 Middle East Technology 2013 2017 4
4 Slavic Production 2013 2017 3 Table 1: Cases.
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3.3.2 Selection of Respondents and Data Collection
The company that was employed for data collection was a company that has conducted
several cross-border acquisitions throughout the last decade with the ambition to integrate
the acquired firms into the existing organization. The integration aspect of these cross-
border M&As was crucial as the purpose of the study was to study the PMI processes. As
the company had conducted several cross-border M&As, the respondents were able to
provide valuable insights into the specific topic that enabled a proper investigation of the
phenomenon. Due to this, the selected organization was considered a suitable company for
this study. The fact that the cases themselves were used to investigate the phenomenon
implies that the study was instrumental (Stake, 1995).
The data was collected through semi-structured interviews. In order to collect data from
knowledgeable people in regard to PMI experience within the organization, a representative
from the expansion team at the case company helped identify key people that had been
involved in the concerned PMI processes. 16 people, whereas eight represented the case
company and eight the acquired firms, were identified as suitable participants. The
participants all came from various departments including legal, customer experience, HR,
expansion, technical and production as well as from different levels including executives,
managers, and team members. A common denominator for all the participants was that they
had been present and involved in at least one of the four cases examined.
Semi-structured interviews were considered as a suitable data collection method for this
study as interviews enabled the possibility to obtain an understanding of a complex
phenomenon (Bryman & Bell, 2015). Semi-structured interviews also provided the
interviewers with the possibility to be rather flexible during the interview compared to a
more structured approach. The interviewers could ask supplementary questions to the
responses and the questions in the interview guide could be more general in the frame of
references compared to a structured interview (Bryman and Bell, 2015). The interview
guides that originated from the analytical framework provided by the literature review are
discussed in the next section.
Before the interviews started, the interviewers explained the topic, why the interviews were
conducted and the purpose of the study to the respondents. Moreover, as the respondents
23
were invited to the interviews, they were provided with a document containing information
about the study, the topics that would be discussed as well as a short presentation of the
interviewers. The respondents were also informed that the interviews would be recorded and
that all recording would be treated confidentially and that their names would not be
revealed. Furthermore, since the organization aimed to be anonymous, the interviewers
signed a confidentiality agreement with the case company beforehand that confirmed that
the company would not be revealed in the report.
In the table below (see table 2), the participants are presented. To ensure anonymity, the
respondents’ names and positions have been excluded, instead, they have been assigned a
letter that will be used as identification once presenting quotes and statements.
Participants Represented Interview Time
Respondent A Case company Face-to-face 29 min
Respondent B Acquired firm 1 Video call 24 min
Respondent C Case company Face-to-face 71 min
Respondent D Acquired firm 2 Video call 32 min
Respondent E Case company Face-to-face 33 min
Respondent F Acquired firm 4 Video call 45 min
Respondent G Case company Face-to-face 40 min
Respondent H Case company Face-to-face 35 min
Respondent I Acquired firm 3 Video call 35 min
Respondent J Acquired firm 1 Video call 47 min
Respondent K Case company Video call 38 min
Respondent L Case company Face-to-face 38 min
Respondent M Acquired firm 3 Video call 28 min
Respondent N Acquired firm 2 Video call 19 min
Respondent O Case company Face-to-face 39 min
Respondent P Acquired firm 4 Video call 23 min Table 2: Participants.
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3.3.3 Interview Guides
For this study, three interview guides were developed in order to answer the stated
research question. One was aimed for employees at a managerial level at the case company.
This interview guide included more questions regarding the intentions with the acquisitions
as well as questions regarding the pre-acquisition analyses (see appendix 1). The purpose
behind this was to obtain an enhanced understanding of the factors that were considered in
the pre-M&A stage and the desired outcomes of the acquisitions. The other two interview
guides were constructed for employees at a non-managerial level at the case company and at
the acquired firms respectively (see appendix 2 & 3).
The interview guides were developed based on the analytical framework in which the
purpose was to have as open questions as possible to allow the research to detect underlying
factors. Further, the interview guides were developed to guarantee that the interviewers were
well-prepared for the interviews and to ensure that the agreed-upon questions were asked to
safeguard that the desired data was obtained (Mason, 2011). Further, the interview guides
were discussed together with this study’s supervisor. This was made to ensure that the
proposed phenomenon was actually studied and through this strengthen the internal validity
(Drogendijk, 2008)
Pilot interviews were held before the actual interviews with the case company. The aim of
this was to test the questions to see if any questions needed to be simplified or clarified. This
is supported by Dalen (2008) who argue that pilot interviews allow researchers to change
and modify questions if needed. The interview guides were sent to the case company one
day before the interviews occurred to highlight the topics that would be discussed. To send
out the interview guides in advance can create biased responses as the respondents will have
time to prepare answers (Bryman & Bell, 2015). However, for this study, the purpose of
sending out the interview guides beforehand was to allow the respondents to reflect over the
interview subjects that could lead to more in-depth answers during the interviews.
Moreover, to send out the interview guides in advance could also save time as the
respondents could prepare answers that would allow the data collection process to be more
efficient.
25
Due to the fact that semi-structured interviews were chosen as the data collection method,
the questions in the interview guide were constructed to be open-ended and designed to
allow the respondents to discuss the topics in an open manner. However, to ensure that the
necessary data was collected, specific sub-questions were prepared in case they were needed
as discussion starters. This data collection method also enabled the interviewers to ask
supplementary questions based on the answers. This was argued to be a suitable method for
this study as the PMI process is considered to be complex and because the aim was to
understand underlying factors that can impact this process.
The interviews were initiated by a couple of general questions to provide the necessary
background information, including questions regarding the name, position, and location of
the interviewees. The interview content was then divided into three different sections
including pre-merger, PMI and present segments. The questions in the pre-merger section
covered areas regarding the interviewee’s role in the acquisition process and the attitude
towards the acquisition among others. The PMI section focused on in-depth questions
regarding the actual integration process and the present segment was designated to discuss
the outcome of the acquisition including the PMI management.
Moreover, as the interviews were conducted, it was made apparent that the organizations
were overall satisfied with the outcome of the integration process, despite the fact that
challenges occurred along the way. Due to the flexible nature of semi-structured interviews,
the choice was made to include a question regarding potential success factors. If respondents
stated that they were satisfied with the outcome of the acquisition, a follow-up question
regarding how they managed to overcome these challenges was raised. This question was
not stated in the initial interview guides but did in fact provide valuable input, especially for
practitioners, in terms of how to overcome challenges connected to sociocultural factors.
3.4 Data Processing
The purpose of the study was to understand how different sociocultural factors can
impact the PMI process in cross-border M&As. Due to the complexity of the integration
process and the area being rather unexplored, it was decided to follow an inductive approach
in which the aim was to generate rather than testing existing theory. Based on this, Gioia’s
26
methodology for data processing was perceived as suitable. This means that the collected
data was segmented into concepts, categories, and patterns to generate new theoretical
knowledge and insights (Gioia et al., 2012).
As the interviews of this study had been recorded, the first step of the data processing was to
transcribe the content. The purpose behind this was to revise the answers from the
respondents and transform them into text, as this would ease the process of reviewing the
answers again for the coding and analysis. The transcribed interviews were also sent to the
participants. This step was considered suitable as it allowed the persons interviewed to add
or correct comments if something had been misunderstood. However, the participants were
not allowed to remove or withdraw any of the information that had been shared during the
interviews. Instead, the participants were promised anonymity and that their interests would
be considered once dealing with sensitive information, as suggested by Gioia (2012).
The initial content analysis of the data was conducted with the help of a data processing
model presented by Gioia (2012) in which each of the four cases was coded separately (see
figure 2). In this initial step, statements and concepts for each individual interview were
highlighted and placed in the box “1st Order Concepts” in the data processing model. In this
stage, the attempt was to include as much relevant information as possible that could be
connected to sociocultural factors and thus, could help answer the stated research question.
This resulted in a significant number of statements and concepts, but it also ensured that no
sociocultural factor was neglected or excluded in the first step.
This initial content analysis was conducted individually to ensure that the coding of the
interviews was free from external influences. This step is recommended by Ghauri and
Grönhaug (2010) and increases the reliability of the study. Once the initial content analysis
had been conducted, the next step was to compare the statement and concepts that had been
highlighted. If both authors had highlighted the same statement or concept in the interview,
this was included in the model. If a statement or concept had only been highlighted by one
author, the authors discussed that particular finding and the statement or concept was then
included if it was considered relevant by both.
27
Due to the fact that the study concerned different perspectives and consisted of the
perspective from both the case company and the acquired firms, two separate data
processing models were developed and employed as well. However, both data processing
models were identical in their structure. The reasoning was that this method allowed the
search and identification of similarities and dissimilarities between the different perspectives
of each case. This further allowed the reduction of statements and themes to a more
manageable amount.
Once the first step of the coding was done, the statements and concepts were clustered under
different themes meaning that the 2nd order analysis was conducted. This process followed
the recommendation from Gioia (2012) in which the research starts with a more open coding
that is later followed by the search for similarities and reduction of concepts. This step of
the process is referred to as axial coding.
As the statements and concepts had been clustered into themes, the different themes were
classified as either enablers or constraints for each case. Thus, the underlying factors that
this study aimed to unfold were identified and are presented in figure below (see figure 2).
These themes were further clustered into the different levels of culture that had been
identified in the analytical framework. This data processing method was employed for each
individual case separately before the cross-case analysis was initiated.
In terms of the comparison, a search for similarities and dissimilarities between the cases, as
well as explanations for these, was made. This approach was argued as suitable for a study
of this manner as it allows the initial findings to be either strengthen or the research to open
up for further questions (Ravenswood, 2011). This data processing approach concerned a
rigorous analysis of the collected data that enabled the quality to be ensured. Moreover,
through the transcription of all interviews and the employment of the same data processing
model throughout the entire process, it could be guaranteed that each interview and case was
analyzed in the same manner. Once all steps of the data processing had been executed, the
identified concepts and themes for each case were displayed in accordance with the Gioia
framework (2013). This framework allowed a clear illustration of how the concept and
themes emerged throughout the data processing.
28
1st Order Concepts 2nd Order Themes Aggregated Themes
29
Figure 2: Data Structure. C = Case Company, A= Acquired Firm, Number = Representing the specific case.
30
4. Empirical Findings
4.1 The Acquisition and PMI Process
The investigated case company has conducted multiple cross-border M&As throughout
the last decade in which the four acquisitions examined in this study are included.
According to one managerial respondent at the case company, the purpose behind these four
acquisitions was:
“To get a quick footprint on the markets. To round corners and to not grow organically from scratch.” - Respondent G
In agreement with this, a colleague to the respondent highlighted that the organization aimed
to expand and searched for and identified suitable opportunities to enable this.
This growth mindset is reflected in the company’s organizational culture as several
respondents emphasized that the organization is ever-changing and focusing on
geographical development and that the organization is characterized by an entrepreneurial
spirit that derives from the people within the company. Moreover, multiple respondents
highlighted that the company has a soft and inclusive culture.
“[…] currently in an expansive phase constantly looking for new opportunities.” - Respondent H
“A very nice and fun company where there is a lot going on at all times.” - Respondent A
“There are no internal politics and it is rather prestigeless.” - Respondent L
“A very inclusive environment that starts from the top down.” - Respondent G
Before the company enters new markets, whether it may be organically or through an M&A,
the organization conducts thorough analyses to determine the market potential. These
analyses include assessing the local matureness of the industry that the company operates in,
as well as understanding the consumer behaviors of the identified target group. According to
one managerial respondent, almost every market has potential and whether or not the
31
organization succeeds is predominantly a result of how well the organization understands
the particular market.
“Are there any markets that we could not succeed in? Maybe so, but in that case, it is more because of our own performance than due to the market itself.” - Respondent G
Once the market potential has been determined, the focus is directed to understanding the
local competition. In this stage, the company considers both general competitors as well as
actors that the firm could potentially acquire. In terms of assessing whether an acquisition
should be made or not, the company performs both people, financial and legal due diligence
on the target organization. Due to the fact that these organizations tend to be rather small,
the personal fit is also important to consider.
“Here, I believe that our management has been rather influential regarding what kind of people and culture that we want in our organization. Are these people entrepreneurs that
we believe will succeed with our help, is this a person that we want to work with?” - Respondent C
“Since we have not embraced someone else’s technology, we have been keener to acquire the founder’s local relationships, to be honest. We want the relationships in the local
industry, and we want the person to be motivated to run the business locally.” - Respondent C
Once the right target firm has been identified and the acquisition terms have been agreed
upon, the PMI phase is initiated. In this stage, the global teams have an important role to
onboard and educate the local offices. The global teams are service functions primarily
based in the headquarters that operate to help the local offices, and this receives high
priority within the organization. Most of the onboarding is managed from a distance through
online meetings, and this was highlighted by multiple respondents.
“Global teams set up weekly or biweekly meetings with the local teams to onboard the locals.” - Respondent H
“They receive education and onboarding in different departments, so they are very well taken care of.” - Respondent G
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Despite the fact that the company is keen on integrating the acquired firms and to help them
understand how the organization operates, it is also crucial that the offsite units remain their
local touch.
“We want all companies to incorporate our culture to some degree, but it is also important that they are locally responsive… Otherwise, we have failed according to me.”
- Respondent G
“The local companies need to act as our company but also be locally adaptive.” - Respondent C
Even though most of the integration is handled online through digital platforms, the
company has also recognized the need for physical gatherings. As part of the integration, the
company organizes conferences approximately twice per year in which the local teams are
invited to Sweden to learn more about the organization. In addition to this, the relevant
teams also travel to the local offices once needed.
“It is super important that you are welcoming and do that little extra. You can’t just give them an access card, present the team, point at the meeting room and say good luck. That
doesn’t work in the integration process, you need to create relationships.” - Respondent L
“The conferences are important as you can really see that they learn more about the culture and so on.” - Respondent A
4.2 Case 1: Acquisition in the Scandinavian Region The firm that was acquired in Scandinavia was a start-up company in the technology
sector and a competitor on the Scandinavian market. Due to the fact that the firm was
considered an aggressive player on the market, the case company decided to perform an
acquisition to ensure a market-leading position. The firm had approximately 30 employees
as the acquisition occurred and has today grown to a number of 40 employees at the local
office.
According to one of the former employees at the acquired firm, the company had a special
culture and mentality due to the people within the organization. Moreover, the acquired
33
company was described as having a dynamic structure with a lot of things happening
internally that in turn impacted the working environment at the company.
“People that are building start-ups, it is often a special mentality among those people, a little more gun holds, call to action, who likes the problem, challenges, and conflicts and
building something from scratch.” - Respondent J
On the topic of how the integration was managed, the respondents from the acquired firm
mentioned the conference at the headquarters in Sweden and visits from the headquarters
to the local office. However, it was also pointed out that there was a lack of strategy for the
integration that created uncertainty about the future for the employees in the acquired firm.
In regard to the integration process, both sides agreed on the fact that it was not the
smoothest process. One managerial respondent from the case company declared:
“One could think that it would be easier to buy a company in Scandinavia rather than in the Middle East, but that is not the case.” - Respondent G
In terms of the challenges imposed in the integration process, respondents from both the
case company and the acquired firm highlighted multiple aspects. In terms of national
culture, several respondents highlighted that there were significant differences regarding
behavior and communication.
“They are very direct in their communication, not as consensus-driven as in Sweden.” - Respondent K
“We are focusing less on talking and more on doing, while Swedes focus too much on talking.” - Respondent J
“Swedes are very polite and not so direct in their communication and I think our culture is much more direct.” - Respondent B
As employees from the acquired firm described their company culture before the
acquisition, the respondents portrayed it as an experimental, aggressive start-up with a
masculine culture in which the masculine culture was defined as a stressful environment
with heavy workloads and direct and humorous communication.
34
“[…] handling everything through humor. But very little of that more intimate talks.” - Respondent J
“[…] used to being very experimental and being really aggressive in the market.” - Respondent B
This view of the company culture was also shared by the case company who used
aggressive player, tough negotiator and start-up atmosphere to describe the acquired firm. In
comparison, there are apparent differences from how the case company described their own
company culture as demonstrated earlier.
In terms of adaptation to the routines and processes, the two organizations had different
standpoints on how to run the business locally.
“We had discussions where we really couldn’t move forward because they were too proud of their brand that they knew what would be best.” - Respondent K
“Different ways of working as we were local, and they were global.” - Respondent J
“[…] the way of working was pretty different, and the structure was pretty different, so a lot of employees left.” - Respondent B
However, this frustration that created problems in the integration process was something
that the case company was used to.
“The local markets often have their own ideas that cannot be realized due to global guidelines… It can impose certain frustration among the local markets when they need to
obey our orders.” - Respondent C
During the interviews, it was made apparent that there was a presence of in-group bias
between the two organizations.
“There was a lot of tension at the beginning that I think came from loyalty to the brand.” - Respondent K
“Some reluctance to cooperate from our side due to pride.”- Respondent J
35
As a consequence, some of the employees from the acquired firm left the company as they
could not see a future within the company. One respondent argued that the reason for this
derived from the fact that some employees did not enjoy being part of a larger organization,
whereas other employees did.
“[…] did not like the corporate spirit that somehow comes when you are a part of a larger structure.”- Respondent J
“A lot of developers left at the time because they couldn’t really see a future in the company from their perspective.” - Respondent B
On the topic of the outcome of the acquisition, respondents from the acquired firm argued
that it had turned out good.
“[…] I think we are 100% adapted into the case company now.” - Respondent B
“[…] I think recently, we have made the best of two worlds.” - Respondent J
This perception of the outcome was also shared by the respondents from the case company.
They argued that the acquisition had exceeded the financial expectations so far and that it
had generated the expected value.
However, for this specific case, the case company did not manage to change the brand name
of the acquired firm. From the case company’s perspective, this was seen as a failure as the
intention is always to have all local businesses operating under the case company’s name.
Respondents argued that the inability to change the brand name was due to a lack of clear
strategy for the integration initially. Because, for the change of brand name to be sensible, it
would have been necessary to change it directly after the acquisition had occurred.
“It was one of the toughest decisions to do actually, it would have been much easier if we wouldn't have to do it, but that was because we did not do it in the beginning.”
- Respondent C
“It would have been much easier, if they wanted to use their brand name in the local market, to do it back then.” - Respondent J
36
“[…] they continued to have two brands in the markets instead of removing one of the ,brands back then. It would have been much easier to implement their name and remove our
name out of the market in 2016 […]” - Respondent B
On the question of how the integration process could have been improved, it was stated:
“[…] all the employee stuff that is important, what is important for these people, what are their needs right now, what are they feeling insecure about?” - Respondent J
“[…] there wasn’t really a clear strategy on what to do.” - Respondent B
This aspect was also highlighted by other respondents who argued that better people
inventory, and a clear plan should be implemented and communicated.
In terms of sociocultural enablers and constraints for this particular case, it is apparent that
the amount of constraints exceeds the enablers. This could, in turn, serve as an explanation
for the challenges in the PMI process. For this integration, respondents from both the case
company and the acquired firm pointed out differences regarding behavior, mentality, and
communication. Significant differences that imposed challenges were also identified on a
company level, as cultural differences related to management styles, strategic orientation,
and relationship. The acquired firm described themselves as having a more masculine
culture, and one respondent highlighted:
“We had a strong culture around our founder and they had a super strong culture around their founder.” - Respondent J
Further, for this specific case, team culture is considered a big constraint as it created a
strong in-group bias from the acquired firm’s perspective that had a negative impact on the
PMI process.
Regarding the individual attitudes towards the acquisition, there were scattered standpoints
among the employees at the acquired firm. One respondent highlighted that this respondent
could see the rationality behind the acquisition from an organizational perspective, but also
the individual opportunities that the acquisition would entail. However, some people left the
company after the acquisition. This was stated to be due to the fact that these people could
not see a future for themselves within the merged organization. Moreover, respondents from
37
the acquired firm also brought up that some did not fancy the more structured and,
according to them, limited way of working. On the other hand, from the case company’s
perspective, multiple respondents declared that they were positive and excited towards
acquiring a competitor. From this information, it is apparent that depending on the
employees’ individual attitude, this could either be an enabler or a constraint.
In terms of how the organizations managed to overcome these challenges to enable a
positive outcome, good communication and physical meetings were highlighted as
important.
“We have these conferences, and we still have them every year. All the people from all the companies get together in Stockholm and that actually means a lot.” - Respondent J
“We meet around 3-4 times a year for physical meetings, and we try to set up continuous meetings as soon as possible to find some sort of consensus on how to work together.”
- Respondent K
4.3 Case 2: Acquisition in the North Atlantic Region The firm that was acquired in the North Atlantic region was a small production company
founded in 2011. The founder highlighted that the company was initially a hobby and that
the founder did other things alongside, but that the firm had searched for solutions that could
help the company grow.
“[...] I never found anything that I liked until I found this company.” - Respondent D
In terms of the integration process, this included biweekly meetings with the global teams
and a visit to the headquarters to attend a conference. A team from Sweden also visited the
local office before the launch to ensure that everything was in order. Both respondents from
the acquired firm agreed that the integration process was managed well.
“I think that they were at that point in time, they had been doing quite a few launches before. So, it was quite smooth, everything went very well.” - Respondent D
38
“Really good. Just flawless.” - Respondent N
Regarding national culture, respondents from both the case company and the acquired firm
stated that they are similar.
“[ ...] we are very much alike.” - Respondent D
“They are very much like Sweden” - Respondent E
“I would say that their culture is pretty similar to ours” - Respondent A
In relation to this, respondents from both the acquired firm and from Sweden noted that they
had similar mentalities. Moreover, a respondent from Sweden highlighted that people from
the acquired firm’s country are more direct in their communication compared to Swedes.
However, respondents declared that this did not impose problems.
“Good communication, I feel that we can talk about everything.” - Respondent D
“They were really easy to work with.” - Respondent A
In concern to organizational culture, respondents from the case company perceived the
integration of the acquired firm into the organization as smooth. Respondents from the
acquired firm agreed with this but argued that they were not provided with the financial
tools that they were used to having in order to operate properly and to set goals. The global
teams educated the employees of the acquired firm on how they should operate according to
the case company’s standards.
“The main challenge for us is […] describing the actual business model.” - Respondent D
The relationship between the two organizations was good and one managerial respondent
from Sweden argued that this related to the fact that the founder was a good fit, and one
respondent from the acquired firm highlighted that the global teams were caring and helpful.
“The founder is a good fit [...]” - Respondent O
39
The acquired company argued that the collaboration with the global team was good, and one
Swedish respondent highlighted that the acquired firm was quick to adapt. Furthermore, it is
apparent from the interviews that the respondents from the acquired firm had a positive
attitude towards the acquisition, both from an individual and organizational point of view.
As the outcome of the acquisition was discussed, both organizations agreed that it had been
a success.
“We set some goals at the beginning and we have tripled the goals.” - Respondent N
“[...] we have been doing exceptionally well.” - Respondent D
“The acquired firm has exceeded our expectations and was the perfect fit.” - Respondent C
Through the collected empirics, it is apparent that the enablers surpassed the constraints
from a sociocultural perspective. From a national culture point of view, both organizations
argued that they are similar once considering behavior, mentality and communication and
that these dimensions, therefore, were enablers in this case.
“We are very much alike, Sweden and our country. So, that was not really, there were no problems there. We understand each other quite well.” - Respondent D
Regarding company culture, the management and strategic orientation did impose some
challenges among the two organizations. In terms of management, the fact that the local
team was not provided with the financial tools from the case company that they commonly
used to run the organization indicates two different management approaches. From this, one
could argue that the acquired firm was more focused on hard facts and figures whereas the
Swedish organization is more value-driven in its operations. Moreover, describing the case
company’s business model locally was perceived as a challenge from the acquired firm’s
perspective. Despite the fact that these two dimensions of the company culture can be
considered constraints, the data collected demonstrates that the relationship between the two
organizations was an enabler.
40
”I think each and every one of us here has a very good relationship with the other divisions.” - Respondent D
Due to the good relationships, the collaboration among the organizations was also argued to
be smooth.
“I have told them how we do things in our market. But on the other hand, they have directed me towards some matters that they do.” - Respondent N
“We want all companies to incorporate our company’s culture to some degree, but it is also important that they are locally responsive… Otherwise, we have failed according to
me.” - Respondent G
Furthermore, due to the small size of the acquired firm, it was therefore primarily the
individuals’ rather than the team’s attitude that impacted the integration. The respondents
from the acquired firm were excited for both the individual and organizational opportunities
that the acquisition would entail, and this can be related to the case company’s perception
that the acquired firm was quick to adapt.
In terms of success factors that allowed this smooth integration, the respondents from the
acquired firm stated that the similar business cultures and good communication were
important contributors to the outcome. Moreover, one respondent from the acquired firm
also argued that the case company employed the right expansion approach. Hence, hiring a
local person who has sufficient knowledge about the concerned market to manage the
operations. In terms of integration aspects that could be improved for future acquisitions,
one respondent from the acquired firm highlighted that it would be beneficial to be provided
with more financial data and insights in order to run the business properly.
4.4 Case 3: Acquisition in the Middle East Region
The firm acquired in the Middle East was a small start-up company that was built on a
modular business model. The acquired firm was searching for a partner that could help the
organization grow rather than just injecting capital, and despite the fact that the negotiation
was ongoing for quite some time, the founder of the acquired firm stated that he felt that the
two organizations were a good match.
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Regarding the integration process, respondents from the acquired firm argued that is was
managed well.
“It was as good as it could be. It is always about the intention of the people.” - Respondent I
“I think it went pretty smoothly.” - Respondent M
The content of the integration process included a visit from the local office to the
headquarters where they were introduced to the company and met their global colleagues.
The relevant teams from the headquarters did also visit the local office. Moreover, the
onboarding to the systems and processes involved multiple meetings through digital
platforms.
As the topic of national culture was discussed, notable differences were highlighted.
“I mean it’s way different. It is very, very different...just simple behavior signs. I mean different understanding, different behaviors.” - Respondent I
“There are many, many, many differences to be honest...what I am trying to say, it’s not like merging with a company in another European country.” - Respondent M
“There are big differences in doing business in our country, and also in Sweden, I mean
huge gaps.” - Respondent M
“It is another culture, it gets a little bit harder with the language and to understand each o,other. So even if both know English it was hard to understand each other in some aspects.”
- Respondent A
To demonstrate, the respondents highlighted that the two cultures have different behavioral
signs, communication approaches, and default settings.
Regarding organizational characteristics, there were notable differences in how to manage
the company locally as the acquired companies had their perspective on how things should
be done whereas the case company had their guidelines for how to operate. To demonstrate,
respondents from the case company highlighted that employees at the acquired firm were
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questioning the case company’s ways of working. Moreover, there were challenges
regarding how to implement the global business model locally.
“Their customers demand certain things that are not the way we usually do it … So, it has been necessary for us to be rather flexible there.” - Respondent A
“[...] our customers, our stakeholders, other people that we are dealing with… They don’t fit with anybody else [...]” - Respondent I
“They need to act like they are a part of our company, I think that is really important. ,,Because otherwise, we have another company. They need to have the same business model
[...]” - Respondent C
However, the two organizations were a good fit in terms of relationships. One manager from
the case company highlighted that the founder of the acquired firm was a good fit within the
company culture. Moreover, one respondent from the acquired firm stated:
“[…] we are sort of acquaintances to each other. Not just colleagues.” - Respondent M
The positive relationship also impacted the collaboration as one respondent from the
acquired firm informed that the case company was willing to collaborate and that the global
teams were important as they were always there to help. The individual attitudes of the local
team members were positive as they perceived the two organizations as a good match, and
they also enjoyed the case company’s culture.
In terms of the outcome, respondents from both organizations argued that the integration
outcome was good enough and that it has played out well concerning the circumstances.
“[…] if we were able to do everything by the book, it could be better. But in our instance, it wasn’t possible in a way at that time.” - Respondent M
“[…] the results are a little bit different than expected, on the positive side actually.” - Respondent I
“[…] goes according to plan […] on its way to generate the expected value.” - Respondent C
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Through the collected data, it is apparent that there are significant differences between the
cultures in behavioral aspects including how to conduct business and how to handle
customers. Moreover, one respondent from the acquired firm stated that the countries have
different default settings, thus indicating that they differ in terms of mentality. In terms of
communication, one respondent argued that people from the acquired firm’s country tend to
be more direct in their communications than Swedes and that this created
misunderstandings. Therefore, one could conclude that these three dimensions of national
culture were constraints for this integration.
In addition to these constraints, the data also indicates that the integration faced difficulties
regarding management approaches and strategic orientation. For the founder of the acquired
firm, it was a big transition becoming a part of a larger organization as he was used to doing
everything himself. Furthermore, it was highlighted that the organizations had different
understandings of how to properly run the business. This is also related to the fact that the
acquired firm experienced problems concerning adapting the business model locally.
On the other hand, the relationship that developed between the organizations can be
perceived as an enabler for the integration process.
“They understand how we work, we understand more how they work. So it takes some time to be completely attuned, it can’t really happen in a day.” - Respondent A
“[…] by joining and meeting the case company, I got the culture and I liked it.” - Respondent M
This positive relationship is also connected to good collaboration. On this topic, the
acquired firm stressed that the global teams were always there to help. Moreover, the
individual attitudes towards the acquisition from the acquired firm were also positive and
did, therefore, facilitate a smoother transition than otherwise expected. From an
organizational point of view, respondents from the acquired firm recognized the expansion
opportunities that the acquisition would entail, and the fact that the case company’s culture
is similar to the acquired firm’s culture but more stress-free was professed as an individual
gain.
44
On the topic of the initiatives that generated this outcome, respondents from the acquired
firm highlighted that face-to-face interactions and meetings were crucial. In terms of
improvement opportunities, one of the respondents of the acquired firm argued that the
experience level of the people involved in the integration could be enhanced. In here, the
respondent argued that it is important to have contact with employees from the case
company that have a good understanding of running international business operations.
4.5 Case 4: Acquisition in the Slavic Region
The firm acquired in the Slavic region was a small company that focused on production
within the case company’s industry. The founder of the company searched for an
organization to cooperate with and found the case company. The acquired firm was
described as having a friendly environment. According to the case company, the acquired
firm was interesting due to its internal assets that would ease the market entry and thus, the
expansion.
In terms of the integration process, the case company had some initial struggles to integrate
the acquired company due to different views on how to manage the local business. After the
acquisition, the founder of the acquired firm was appointed as country manager for the local
office. According to the case company, the founder had some resistance to the company’s
way of working. One respondent declared that this was related to the founder’s strong
passion and knowledge for her area of expertise. However, the founder lacked experience
within management and the commercial aspects that evidently imposed certain challenges in
the integration process.
“[...] they did not have the commercial mindset that was required [...] eventually we will only have to focus on the commercial and then the question is if these people are ready for
that. Yes or no? If it is no, then we don’t need them.” - Respondent L
On the question about country managers and their role in the integration process, one
managerial respondent highlighted:
45
“They have a crucial role.” - Respondent G
To overcome this problem, the case company later recruited a new country manager that
was more aligned with the case company’s goals. According to respondents from both the
case company and the acquired firm, this was an important action to ensure proper
collaboration and communication.
“Now the situation is much better than it was. We are more productive, and we are expanding.” - Respondent P
Regarding cultural differences on a national level, some distinct dissimilarities were pointed
out.
“They are quite hierarchical, similar to other Slavic countries.” Respondent O
“I find Sweden’s way a little more relaxed.” - Respondent F
These differences in behavior and mentality also impacted the communication and imposed
challenges in legal and bureaucratic aspects.
“[...] some hesitate to reach out. For example “I can’t ask this question because it is too small”[...]” - Respondent L
“It is a lot of hidden things that you have to know when you are having negotiations.” - Respondent O
As mentioned, the acquired firm described their organization as a small company with a
friendly environment. As they were asked to describe the company culture of the case
company, the respondents highlighted that the culture was nice, friendly and that they were
always willing to help.
“They were nice and friendly. They were cool, no pressure and friendly attitude.” - Respondent P
“I was very surprised on my first meeting that no one was showcasing their success… It was all just a relaxed experience where people were sharing. I was shocked, I did not
actually expect such a relaxed approach.” - Respondent F
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Moreover, concerning the differences in company culture, it was stated:
“We are very much hierarchical and I guess more numbers-driven, especially if you are in a leading role.” - Respondent F
“They are standing in a boxing ring and fighting while we stand behind massaging their back… It becomes a good fit.” - Respondent G
Due to the small team, the respondents did not highlight any signs of in-group bias or team
resistance to cooperate. However, there were problems concerning collaboration initially
due to the unclear management, but this was not considered as a team culture aspect but
rather the attitude of one individual. In fact, the responses revealed that both the acquired
firm’s and the case company’s attitude was positive, especially among the younger
employees. This was further supported by one respondent from the acquired firm that
emphasized the excitement of being part of a global company and thought that the new ways
of working were good.
“[...] the younger people are still with the company, so they probably saw the opportunities [...]” - Respondent L
“[...] it is so rare seeing people at age 25 staying at companies for that long… I believe for them it was an exciting process.” - Respondent F
In terms of the individual attitude of the acquired firm, the information from the respondents
demonstrated that the founder recognized the organizational opportunities of being part of a
global company including access to greater resources. However, as stated by the case
company, the founder was not a good fit within their company culture and therefore
recognized the need to find a replacement as a country manager that was better suited for the
position. Overall, the employees at the acquired firm seemed satisfied with the acquisition
and argued that it opened new opportunities for the company.
“Well, I was very excited. It is a huge company and yeah, I was very excited about it.” - Respondent P
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On the topic of the outcome, the majority of the respondents argued that the acquired firm
was fully integrated into the case company. Moreover, they were overall satisfied with the
outcome despite the challenges that occurred along the way. According to one respondent
from the acquired firm, they have managed to increase their productivity drastically.
However, managerial respondents from the acquired firm highlighted that it was too early to
assess whether the acquired firm had generated the expected value.
“According to me, it was all very smooth and the process was supported by the different heads of divisions.” - Respondent F
In terms of categorizing the sociocultural factors into enablers and constraints, more than
half of them could be categorized as constraints initially. However, some of these
constraints were classified as enablers after the change of management on the local market.
This apparent presence of constraints could serve as an explanation for the initial challenges
in the integration. Regarding national culture, several aspects are underlined as challenges
including differences in legal and bureaucratic aspects as well as in power distribution,
behavioral characteristics, and communication. The acquired firm’s country culture was
described as more financially-oriented and hierarchical, and this imposed challenges
especially concerning communication.
From the acquired firm’s perspective, the national cultural differences were brought up but
not highlighted as challenges in the integration phase. However, from the case company’s
perspective, the differences in national culture imposed certain challenges. Despite these
apparent cultural differences on a national level, the biggest constraints seem to have been
the initial country manager’s attitude, management, and collaboration skills. The differences
in company culture created challenges initially, but after the change of manager, factors
connected to management and collaboration were instead considered as enablers. Due to the
small team, no team culture or in-group bias was detected. Rather, in this case, the
individuals’ attitude became more important, since it could be argued to have been both an
enabler and a constraint depending on the person.
On the topic of how the integration process could have been improved, the only thing that
the respondents from the acquired firm brought up was the problem that they encountered
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concerning management. As the new country manager was recruited, this person worked
side-by-side with the former country manager for an initial period of time, and this caused
confusion in terms of how to manage the business. From the case company’s perspective, a
key success factor was the change of country manager in order to properly integrate the
acquired firm.
“At the beginning, we had some hot-points because we had two managers.” - Respondent P
4.6 Cross-Case Comparison
Table 3: Cross-Case Comparison. E = Enabler, C = Constraint, NA = Not Applicable. In the table above, all the enablers and constraints of each case have been presented. If
the sociocultural factor has been categorized with an uppercase letter, it means that this
sociocultural factor has been emphasized as an enabler or constraint from both the case
company and the acquired firm. If a lowercase letter has been used, it means that it has been
categorized as an enabler or constraint from only one perspective, either from the case
company or the acquired firm.
In three of four cases, all of the three sociocultural factors examined reveal differences on a
national level that in turn resulted in challenges in the integration process. In terms of
behavioral differences, the most significant constraint was identified in case one. This is of
particular interest as this concerns the country that is both geographically and culturally
closest to Sweden. Moreover, case 2 was the only case in which behavior and mentality
49
were enablers. Communication was the factor that had the most significant cultural impact
on a national level. In three of four cases, this sociocultural factor imposed substantial
constraints in the integration. On the other hand, in case 2 where national cultural
differences did not impose notable challenges, communication was perceived as an
important enabler.
In regard to company culture, it is evident that multiple constraints affected the PMI
process. In three of the four cases, it was highlighted that different management approaches
imposed distinctive challenges. On the other hand, in case 2, the management approaches
among the organizations were similar and this eased the integration process. Moreover, it is
evident from the cross-case comparison that the strategic orientation was the biggest
constraint. From the collected data, it could be argued that the case company has a home
country-oriented strategy despite recognizing the need for local adaptation, as it was
highlighted in several cases that the acquired firms faced problems regarding implementing
the business model locally.
On the topic of internal relationships, this sociocultural factor was classified as an enabler
for cases 2 and 3. Both the case company and these two acquired firms described their
relationship as good. The two acquired firms highlighted that the case company has been
open and including from day one that in turn fostered good relationships, and this perception
was also shared by the case company. However, this ease of creating relationships was not
applicable for case 1 and 4 in which attitudinal as well as behavioral aspects relating to
relationship caused problems. With that said, despite the fact that the relationship factor was
initially a constraint in case 4, it developed into an enabler as the acquired firm was
appointed a new country manager.
In terms of team culture, a connection between the number of employees at the acquired
firm and the imposed challenges related to team culture is apparent. In case 1, concerning an
organization of approximately 30 employees, a strong us-versus-them approach was
identified. This affected both the attitude and the collaboration opportunities between the
two organizations and this had, of course, a challenging impact on the PMI process.
However, due to the small number of employees in the other three cases, a team culture was
50
not visible. Thus, for these three cases, team culture has been considered as neither an
enabler nor a constraint due to its argued inexistence.
Regarding the employees’ individual attitudes toward the acquisition, the empirical data
reveal that individual level was indeed an enabler for the integration in all four cases. From
an organizational perspective, the respondents argued that they could recognize the
opportunities that the acquisition would bring in terms of scale and scope of their local
operations. Moreover, it is also apparent from the cross-comparison of the cases that the
employees also comprehended the individual opportunities that the acquisitions would
generate. Multiple respondents from the different cases highlighted that once they were
introduced to and came to know the case company’s culture, they instantly enjoyed it and
realized the individual opportunities of being part of the company’s culture and a global
organization.
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5. Discussion
5.1 The Impact of Sociocultural Factors From the empirical findings, it is apparent that cultural differences on a national level
matter and can impose substantial challenges in the PMI process of cross-border M&As. In
fact, all three sociocultural factors highlighted on a national level affected the integration
process in the four respective cases. These results are aligned with the reasoning from
Björkman, Stahl and Vaara (2007) in which the authors argue that high cultural differences
on a national level impact the integration in the context of cross-border M&As. However,
the notion that there is a distinct connection between the level of psychic distance and the
PMI process is contradictory to the results. According to the researchers, a high psychic
distance is argued to be an obstacle in the PMI process due to enhanced differences in
sociocultural factors, and that these differences complicate the understanding of foreign
environments (Johanson and Vahlne, 2009).
Contrariwise, it is evident from the empirical findings that the acquired firm located in the
country that has the lowest psychic distance in relation to Sweden (case 1), was the
integration that faced the most substantial cultural challenges on a national level. Moreover,
comparing the national cultures of these two organizations’ countries in case 2 using
Hofstede’s framework, the comparison demonstrates that these two countries do not have
any distinct differences concerning national culture (Hofstede Insights, 2019). Therefore,
the findings from the examined data contradict the insights from the facilitated country
comparison. However, in case 3 and case 4, in which the psychic distance and cultural
differences have been argued to be substantial, the notion that enhanced differences impose
substantial constraints in the integration process, is supported. In relation to the study from
Rozen-Baker (2018), the two dimensions in Hofstede’s framework that were argued to
impact the M&A outcome, Power Distance and Masculinity, were distinctive between the
countries involved in cases 3 and 4 (Hofstede Insights, 2019).
Due to these scattered findings, one could argue that it might not necessarily be the
similarities or dissimilarities on a national level that determine the impact on the PMI
process but rather that other influences have an important impact as well. In support of this,
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Stahl and Voight (2008) argue that the connection between the level of cultural differences
and the PMI performance is difficult to grasp as unidentified variables and its demonstrated
complexity complicates the understanding. In addition to this, according to a re-analysis on
Hofstede’s data conducted by Gerhart and Fang (2005), it is revealed that countries
themselves only explain a small share (approximately 2-4 percent) of variances in values
and that organizational differences have a greater impact. In agreement with this, Tov and
Diener (2009) highlight that by connecting entire nations to single cultures, there is
substantial risk of neglecting important differences within one nation, but also similarities
that extend beyond national borders. Moreover, it has been argued that cross-border
personal and organizational exchanges blur the differences among countries (Inglehart &
Welzel, 2005).
From the cross-case comparison of enablers and constraints from each case, it is apparent
that the three dimensions examined are interrelated and affect each other. Thus, in cases
where the behavioral aspect imposed challenges, the mentality and communication were
perceived as constraints as well. Moreover, the empirical data demonstrates that
communication is the sociocultural factor that had the most distinct impact on a national
level. This relates to a study from Moore (2006) who argues that the communication aspect
is crucial to consider in the M&A process. In relation to this, Jagersma (2006) highlights
that one of the most common reasons for failures in cross-border M&As regards cultural
incompatibility that in turn leads to poor communication.
Furthermore, it is evident from the empirical findings that the most distinct sociocultural
challenges in these four PMI processes occurred on a company level. This is somewhat
surprising as cultural differences and their impact on the PMI process in cross-border
M&As have primarily been investigated on a national level (Stahl & Voigt 2008; Björkman,
2007; Karahanna & Evaristo, 2005; Barkema, Bell & Pennings, 1996). One potential reason
for this could be that information regarding sociocultural factors that impact the integration
in international acquisitions on the organizational level is hard to obtain. Yet, researchers
have recognized the need to investigate this due to the complexity of cultural factors that are
apparent on multiple levels (Karahanna & Evaristo, 2005). This is further supported by
Bansal (2015) who argues that the existing literature on M&As has neglected organizational
behavior despite the fact that it is a crucial component in the integration process.
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The merging organizations’ management approaches and strategic orientations enforced
challenges in three of the four cases examined. This can be connected to the research
conducted by Bauer, Matzler, and Wolf (2016) in which the authors argue that task
integration is important to consider and manage in order to enable the desired integration
outcome. A proper task integration allows the merging organizations to facilitate well-
established routines and manage coordination and flexibility accordingly (Bauer, Matzler &
Wolf, 2016). However, a reasonable explanation for the absence of a smooth task
integration in these cases is the distinct differences among the organizations concerning the
two above-mentioned sociocultural factors. Connected to this, it has been highlighted that
recognizing the right balance between implementing the desired level of organizational
integration and simultaneously minimize the disruption of the acquired firm’s resources and
competencies is a key challenge (Zollo and Singh, 2004; Liu and Woywode, 2013).
Furthermore, the challenges concerning management approaches and particular the strategic
orientations among the organizations could potentially derive from the fact that the case
company is arguably rather home-country oriented in terms of their business model
(Perlmutter, 1969). This entails that despite the fact that the organization has recognized the
need to be locally responsive, the aim is still always to implement their local business model
on a global scale. This resulted in particular difficulties in case 1 in which the acquired firm
was resistance to changing their ways of conducting business. This resistance to changing
organizational behavior can be related to the concept of administrative heritage that
indicates an organization’s capabilities that have developed over time and that are difficult
to shift (Ghosal and Bartlett, 1990).
Moreover, due to the fact that the case company highlighted that one key reason for
conducting cross-border M&As is to access local knowledge, it could be argued that the
acquired firms are resistant to change as they are the ones that possess the local expertise,
and that they, therefore, feel the urge to impact how to manage the businesses locally. In
relation to this, Bauer, Matzler, and Wolf (2016) argue that firms today often acquire
organizations in order to access tacit knowledge that is stored within the people in particular
organizations. Therefore, there is a need to ensure that this access to local knowledge and
expertise is utilized. In order to do so, one could argue that human integration is critical for
the integration outcome.
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Human integration concerns the reduction of uncertainty and the development of a shared
identity (Bauer, Matzler &Wolf, 2016). It could, therefore, be reasoned that the presence of
a shared identity would ease the task integration as the merged organizations would feel
united. For these analyzed cases, it is evident that the relationship dimension was perceived
as a distinct enabler in three of four cases. This could, in turn, demonstrate that this helped
to ease the challenges concerning the two other sociocultural factors on a company level.
Moreover, in comparison to the sociocultural factors on the national level, the empirical
findings demonstrate that the three factors on a company level are not interrelated.
In addition to this, a connection between the number of employees at the acquired firm and
the challenges imposed concerning team culture is apparent. In case 1 in which the
organization consisted of approximately 30 employees, a strong us-versus-them approach
was identified. This in-group bias affected both the attitude and the collaboration between
the two organizations, and this, of course, impacted the PMI process. These challenges can
be connected to the findings by Stahl and Voight (2008) in which the authors use the social
identity theory to describe how a group of people normally have a negative perception
towards members of other teams, but also that this perception tends to be higher during the
feeling of threats.
In the other three cases, there were no clear traces of distinct team culture and it could,
therefore, be argued that team culture is something that is developed within a company that
has a certain minimum amount of people. Nevertheless, these empirical findings
demonstrate the need to recognize the impact that team culture can have on the integration
process and how to prevent this from becoming a constraint. Furthermore, in the cases
where team culture is non-existent, the importance of considering the employees’ individual
attitudes is arguably enhanced.
In the four examined cases, the empirical data reveals that the employees’ individual
attitudes towards the acquisitions were indeed an enabler for all of them. The employees
argued that they could recognize both the organizational and individual opportunities that
the acquisitions would facilitate. This was enabled through the case company’s emphasis on
human integration. This designated focus on the human aspect of the integration is
55
supported by Bansal (2015) who argues that organizations that prioritize developing a
shared identity in the human integration process have a substantially better chance to
succeed with the human integration in cross-border M&As. Moreover, the author continues
to highlight that the more human interaction mechanisms that are employed, an enhanced
amount of positive emotions towards the acquisition is apparent.
5.2 Success Factors and Practical Improvements Throughout the interviews, it became apparent that the respondents from both the case
company and the acquired firms were overall satisfied with the acquisition outcomes.
Several respondents argued that despite the fact that the integration imposed certain
challenges and was time-consuming, the acquisitions had today reached, or were on their
way to reach, the targeted objectives. On the question regarding the actions that made them
overcome the sociocultural challenges, the two identified success factors were a cultural fit
and human interaction mechanisms.
In terms of cultural fit, respondents from the case company pointed out the importance of
finding the right person and the right company to acquire. In many instances, the firms that
the case company acquire are small start-ups and this entails that the founder of the acquired
firm becomes important in terms of the integration. The case company stated that the person
behind the acquired firm needs to share the same values and visions as the case company in
order to ensure a certain level of cultural fit. This aspect has previously been emphasized in
a study by Bauer, Matzler, and Wolf (2014) who argues that companies with a high cultural
fit are easier to integrate than those that are of less fit. The findings from this study support
this argument as the acquired firm with the highest cultural fit was considered the easiest to
integrated whereas the acquired firm with the lowest cultural fit also was considered the
most challenging to integrate.
The second aspect that was highlighted as one of the most important factors to employ in
order to overcome challenges in the integration phase was focusing on physical meetings
and face-to-face interactions. Several respondents emphasized that it was easier to
communicate and collaborate with offsite colleagues after having met them face-to-face
rather than that the contact is limited to strictly digital platforms. The respondents argued
that this was due to the fact that physical meetings opened up for informal interactions in
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which the conversations were not only concerning work-related topics, and this was difficult
to achieve otherwise. These statements really emphasize the importance of physical
interactions to ease the integration process from a sociocultural perspective. These findings
can also be found in a study by Bansal (2015) in which the author argues that companies
that implement both formal and informal social interactions report a higher degree of
positive feelings from their employees. In agreement with this, Schmidt (2002) argues that
people-related related challenges are the most common reason for M&A failure and that
organizations that can solve these problems have a better chance of M&A success.
Despite the fact that the case company has identified and implemented multiple success
factors in terms of the PMI process, the information from both sides of the respondents still
demonstrates the need for future development. As demonstrated, respondents from the
acquired firms highlighted different improvement aspects connected to the integration of
their particular cases. These improvements included the need for a clear strategy and
onboarding processes, being provided with the necessary tools for operations and an
enhanced level of local awareness from the people involved in the integration processes.
Further, the importance of a clear plan for the employees at the acquired firm was
emphasized.
In relation to this, the case company highlighted similar improvement possibilities for future
acquisitions and integrations of acquired firms. First of all, a clear strategy for all
acquisitions was highlighted by several respondents as crucial to succeed with the
integration. In here, the respondents argued the need to have a clear intention for the desired
outcome of the acquisitions and a plan for how to obtain these objectives. This need for a
clear strategy was reasoned to be important to ease the integration process for employees
from both the case company and the acquired firms.
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6. Concluding Remarks
6.1 Sociocultural Factors in the PMI Process of Cross-Border M&As So, how do sociocultural factors impact the PMI process in cross-border M&As?
According to the findings from this study, the impact of sociocultural factors on the PMI
process differs depending on the international context. First of all, the findings from the
conducted study indicate that there are sociocultural factors on four cultural levels that
organizations need to account for; national, company, team and individual. For national
culture, the three factors that need to be considered are behavior, mentality, and
communication. In terms of company culture, the identified aspects of importance are
connected to management, strategic orientation, and relationships. Moreover, from a team
culture’s perspective, collaboration and team attitude were noted as significant influences.
Regarding the employees’ individual attitude, the perceived organizational and individual
opportunities determine whether the individual level has a positive or negative impact on the
PMI process.
Most interestingly, the empirical findings demonstrate that there is no apparent connection
between the level of psychic distance between the merging organizations’ national culture
and the challenges imposed in the PMI process. Thus, these findings contradict previous
research that indicates such a connection. However, national cultural differences still matter,
but the findings indicate that cultural differences on a company level impose the most
substantial impact on the PMI process in cross-border M&As. This is somewhat surprising,
as most research on cultural differences has been focused on the national level. This
suggests that future research should focus on investigating company cultures rather than
national cultures. The findings further advocate that it is crucial to consider the employee
perspective, both on a team and individual level, as employees’ attitude toward the
acquisition can have a distinct impact on the integration outcome.
This study has not only been able to identify how sociocultural factors impact the PMI
process, but it has also been able to detect and present practical implications on how
organizations can overcome challenges related to this. The collected data demonstrates that
the cultural fit between the merging organizations is important in order to succeed with the
58
PMI. Low cultural fit, especially in terms of management, can have a distinct impact on the
integration process and this suggests that the cultural fit should be considered as early as in
the target assessment phase of a potential cross-border M&A. In addition to this, the
empirical findings illustrate that physical interactions and informal gatherings are important
to consider and employ in the PMI process as these mechanisms enable the employees of
the merging firms to foster good relationships that ease the integration.
So, to revert to the question posed in the introduction; is it simply a coincidence that some
cross-border M&As succeed whereas others fail, or are there some underlying factors that
need to be considered? The findings demonstrate that there are indeed underlying factors
that need to be considered. Organizations that recognize these sociocultural factors, evaluate
the cultural fit in the target assessment phase and that focus on fostering good relationships
in the PMI process, have the odds of succeeding with their cross-border M&As on their
side.
6.2 Practical and Theoretical Contributions This study was conducted as a consequence of an identified gap in the existing literature
regarding sociocultural factors and their impact on the PMI process in cross-border M&As.
The findings from this study generate practical contributions to organizations conducting
cross-border M&As with the ambition to integrate the acquired firm. The study provides
insights on how different sociocultural factors on different cultural levels impact the PMI
process as well as practical suggestions that organizations can engage in order to overcome
challenges relating to this. Through classifying the different sociocultural factors as enablers
or constraints, it is not only apparent that these factors impact the PMI process but also how
they impact the process, and this helps direct an area of focus for practitioners. Furthermore,
the study highlights identified success factors and practical improvements in relation to the
PMI process that are considered to be relevant for practitioners.
In terms of theoretical contributions, this study has confirmed the complexity of cross-
border M&As as the findings contradict previous research on this topic regarding culture’s
impact on the PMI process. More specifically, the findings have indicated four levels of
culture that are important to consider in cross-border M&As, as well as multiple
sociocultural factors within these levels and how these factors impact the PMI process. The
59
findings also demonstrate that sociocultural factors on a company level have the most
significant impact on the PMI process, as well as success factors that can help organizations
overcome challenges connected to the PMI. Therefore, this study has contributed to theory
in the way that it provides a further understanding about challenges and opportunities in the
PMI process of cross-border M&As and an area of focus for future research.
6.3 Limitations Throughout the study, recommended actions were implemented to ensure the quality of
the paper. However, there are certain limitations that should be considered and discussed.
First of all, despite the fact that the study was able to incorporate multiple perspectives
through interviews with employees from both the case company and the acquired firms, the
data collection could have obtained greater depth. It would have been valuable to conduct
interviews with former employees that left the acquired firms at the time of the acquisitions,
or after the acquisitions had occurred. Because even though several respondents discussed
why certain colleagues decided to leave, it would assuredly have been more accurate
information and deliberate explanations from the former employees themselves.
In addition to this, regardless of the fact that the respondents were promised anonymity, it is
still a possibility that some problems or challenges were not brought up by the respondents
due to respect or concern for the case company. Moreover, as the study only focused on one
case company, the generalization of the findings is limited. Thus, if another company in
another industry would have been selected for investigation, the findings might have been
different. Finally, as the acquired firms were rather small in size, it could be argued that the
integration of larger firms differs in terms of challenges.
6.4 Future Studies This study has provided an area of focus for researchers within the area of cross-border
M&As, and particularly concerning the PMI process. The findings demonstrate
sociocultural factors on four levels, and how these factors impact the PMI process in cross-
border M&As. Therefore, a suggestion for future studies is to further investigate these levels
and these sociocultural factors’ impact on the PMI process concerning international
acquisitions. More specifically, future studies should focus on investigating sociocultural
60
factors on a company level, as this study’s findings indicate that factors on this level have
the most substantial impact.
Moreover, as only one case company was incorporated for this study, it would be of great
interest to perform a similar study on an enlarged scale and also in various industries to
detect similarities and/or differences. In addition to this, the findings from this study
indicate that sociocultural factors connected to team culture can impose distinct challenges
in the PMI for larger organizations. Therefore, to further investigate this level of culture to
either support or dismiss the indicated importance of team culture in cross-border M&As
would generate valuable insights.
61
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8. Appendix
Appendix 1: Interview Guide for Managers at the Case Company
1. General - Name? - Company? - Position? - Country? - Which of these four acquisitions have you been involved in? - When did the acquisitions take place? - What was your role in these acquisitions? - How long have you been working for the company?
2. Pre-Merger - What was the intention with the acquisitions? - How did you evaluate the target companies before the acquisitions? - What type of external analysis did you conduct before each acquisition? - What was your expectations of these acquisitions?
3. PMI - What was the intention in terms of integration of the acquired companies? - What was your role in the integration processes? - How was the integration of the acquired firms managed? - How did the collaboration between employees of the acquired firms and ### play
out? - Did you experience any specific challenges during the integration processes? - Would you say that Sweden’s business culture is different compared to the
acquired companies’ business culture?
4. Present
- How did the integration processes play out according to you? - Is there anything that could have been improved in terms of the integration
processes according to you? - Today, would you say that the conducted acquisitions have met the expectations? - Last, is there anything else that you want to mention regarding this process that
we haven’t talked about?
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Appendix 2: Interview Guide for Employees at the Case Company
1. General
- Name? - Company? - Position? - Country? - Which of these four acquisitions have you been present for? - How long have you been working for the company?
2. Pre-Merger
- How would you describe XXX as a company? - How were you informed about the acquisitions? - Did you know about the counterpart organization before the acquisitions? - What was your attitude towards the acquisitions? - Did you have an active role in the acquisition processes?
3. PMI
- How involved were you in the integration processes? - How do you think that the integration processes were managed? - Did you experience any specific challenges during the integration processes? - Would you say that the business culture of the acquired organizations home-
country are different compared to Sweden's? - How did you perceive the attitude of the acquired firms to these acquisitions?
4. Present
- How has the integration processes played out according to you? - From your perspective, do you think the integration processes could have been
improved in any way? - Last, is there anything else that you want to mention regarding this process that
we haven’t talked about?
72
Appendix 3: Interview Guide for Employees at the Acquired Firm
1. General
- Name? - Company? - Position? - Country? - How long have you been working for the company?
2. Pre-Merger - How would you describe XXX as a company before the acquisition? - How were you informed about the acquisition? - Did you know about the case company before the acquisition? - What was your attitude towards the acquisition? - Did you have an active role in the acquisition process?
3. PMI
- Did you have an active role in the integration process? - How do you think that the integration process was managed? - Did you experience any specific challenges during the integration process? - How did the employees at case company act during the integration process? - How did you perceive the attitude of the employees of the case company to this
acquisition? - Would you say that Sweden’s business culture is different compared to your
home-country’s business culture?
4. Present
- How has the integration process played out according to you? - From your perspective, do you think the integration process could have been
improved in any way? - How would you describe the company culture that you work in today compared
to before? - How would you describe your work situation today compared to before? - Last, is there anything else that you want to mention regarding this process that
we haven’t talked about?
