Cross-Border Acquisitions and the Asymmetric Effect of Power Distance Value Difference on Long-Term Post-Acquisition Performance

Abstract

Inconclusive findings about the effect of national cultural differences on post-acquisition performance may be created by the failure to distinguish among the different cultural dimensions and the asymmetry of cultural differences. To demonstrate a different approach, this study focuses on one dimension of national cultural values — power distance value (PDV) and develops a framework for the asymmetric effect of PDV differences in creating two types of conflicts. The analysis of 2,115 cross-border acquisitions in the global information technology industry shows that PDV differences undermine the long-term post-acquisition performance of acquirers. This effect is stronger when acquirers are higher than targets in PDV than when the opposite is the case. This asymmetric effect of PDV difference depends on national status difference, business relatedness, and acquisition experience.