Cross Culture Management in Merger and Acquisition in Emerging Economies

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TABLE OF CONTENTS

CHAPTER 2: LITERATURE REVIEW1

Introduction1

Employee behaviour in M&A2

Social identity approach2

Cultural Similarity4

The Relationships between Multiple Identities5

The Effects of Multiple Identities on Employee Behaviours6

Changes in the environment9

Barriers to an Organizational Field9

Corporate Ownership and Control12

Intergroup Competition14

Summary of the review15

REFERENCES17

CHAPTER 2: LITERATURE REVIEW

Introduction

M & A activity is usually justified by outlining the synergistic benefits that can be achieved by the future merger of acquisition. These synergistic benefits can be located in any functional area of the business and can be used to support potential merger or acquisition activity. Also in the past financial criteria was used to justify any future merger or acquisition activity up to and including increasing the financial value of shareholders wealth in the business. These areas have been studied in depth in the past and in fact most of the financial claims made prior to merger and acquisition activity have been shown to be incorrect or misleading, to say the least. Therefore, the author has decided to concentrate on cultural issues that impact on merger and acquisition activities. Of course these issues are closely related to leadership issues which the author accepts, however due to the time availability the main focus of this literature review, and subsequent work will relate to the cultural aspects of mergers and acquisitions.

There is a plethora of effects and consequences that mergers and acquisitions have on the workforce. However, this paper only delves into some of the more prevalent and perverse effects they have on the employees. Firstly, it is attempted to explain what meant by mergers and acquisitions in the corporate world. Even though, the two words (merger & acquisition) have slightly different meaning, but they used synonymously since they produce the same effect. According to most research done, “mergers and acquisition have a very negative and pervasive impact on the employee and how they view their company.

Employee behaviour in M&A

Regarding the differences in the organizational culture and conflicts argument from Weber and Camerer (2003), they state that if organizations realize the cross culture integration factor then they might get a good result. They believed that organizations that acquire other organizations usually under estimate certain conflicts and that is the main reason they over estimate the acquisition value (Ettore 2008, p.12).

It is estimated that over 85% top executives of M&A Company's state this reason on the top. They consider this as the main reason for the failure of any merger and acquisition. They believe that main reason is culture on which merger and acquisitions depend. With the creation of a new organization with the help of merger and acquisition most of the employees are informed that best culture traits will be followed. Although it can be seen from the past experiences that in most of the cases these are not followed, they occur either in the form of domination, separation or blending as per Schein (2007).

Social identity approach

Concerning the employee behaviour in M&A, social identity approach asserts that individuals derive the meaning of self ...