Organisation Development professionals know that culture can make or break the success of an acquisition or merger. Sometimes this can be difficult to quantify. I have been studying this a lot recently in relation to my doctorate. So I wanted to share some tangible research that stimulates the debate. Research on the entry of companies into new markets, has shown the economic consequences of cultural distance. Li and Guisinger identified that foreign companies that entered the US from a culturally distant country were more likely to fail (Li 1991). Analysis found that the survival rates of foreign firms decreased with cultural distance. The relationship between success and cultural distance was more prevalent in joint ventures, and acquisitions than green field start-ups (Barkema 1997). If the absence of a dominant HQ culture or leadership in a start up aids the success of a company, this could provide better insight into the success factors in entry into new markets. In China the success of foreign joint ventures have been linked to the cultural distance of the different parties (Luo 1999). Nakano (1997) identified that US and Japanese managers differed significantly in their ethics orientations (Nakano 1997). Research in Italy measured the sales growth in acquired firms for a period of two years, and there was a positive relationship to the cultural distance of the partners (Morosini 1998).
This research is an asset because it provides a direct link between culture and sales; the bottom line. This type of research is needed by managers in order to win a business case to address the people and cultural issues. Schlegelmilch and Robertson went a little deeper and showed that it was both the country and industry that affected the ethical perceptions of senior executives in the US and European countries (Schlegelilch 1995). Hofstede’s empirical research in the UK and 46 countries identified leadership preferences of “Tells,” “Sells,” “Consults” and “Joins.” This accumulated research links culture to the success or failure of international businesses. It also identifies that different leadership styles are used in different countries.
A weakness of the research is a lack of explanation as to why green field start-ups are more successful? The question leaves a research void that could be valuable to understand a possible solution. Other limitations of the research are that it does not help companies to understand the idiosyncrasies of what is not effective. What a Leader should avoid to be successful in each culture is not clear.
These very questions are what have stimulated me as a professional to contribute knowledge back to my profession, and answer some of these questions. For now I wish to arm professionals with some harder evidence that our colleagues in other departments like finance readily have.
We can relate culture change and leadership back to the bottom line.