Cross cultural difficulties that influences decision making


This chapter introduces the reader to the broader context of the research area with an overview of decision making in cross cultural M&A. The purpose is followed by the problem area and research question which will lead the readers through the thesis.


Decision making is a process that managers face of diverging to explore the probable options and then converging on solutions. As Pratt points out, “there is clearly a distinction between what an individual thinks(personality)and the way an individual thinks(cognitive style)” (1980). The process is made even more complex when the companies are dealing in decision making in an arena of Merger and Acquisition. Mergers and acquisitions (M&As) have become the dominant mode of growth for firms seeking competitive advantage in an increasingly complex and global business economy(Adler, 1997).Cross-border merger and acquisition has continued to increase at a torrid pace during the last decade and half, to the point that it has become a major strategic tool for growth of multinational cormporations(Cartwright and Cooper,1993). Therefore it is essential for companies to pay attention to the analysis, strategy and planning behind it’s decision making.

The management extent becomes much vast when it comes to different cultures both on the national and even greater on cross border level. The manager chances of successfully dealing with the rapid changes reduces to an extent. Multinational corporations require to hold a varied set of routines if they are to be renouned in a diverse world. Routines and repertotoires are often dependent on the multinational corporation’s unique institutional and cultural environment, and are therefore not imitated easily by other firms (Barney,1986). As multinational companies increasingly acquire targets in more culturally distant countries, they face new challenges in manageing their external environment (Moren,1980). Along side these encounters it is also important to understand the relation between national cultural distance and cross-border M&A performance while devising strategic decisions.

The difficulties in M&As are seen due to the lack of strategic decisions makingmade by organization. Managers end up having unrealistic expectations of probable synergies and fail to cope with multiple complexities. Companies now a days publish their cultural norms and values which might not be the real culture of the organization. Anthropoligists have researched that the undertaking of knowledge about a particular organisation culture does not always begin by inquiring the members themselves to identify the particular trait. In reality the cultural norms are recognised by understanding the profundity of cultural influences that are carried out in an interval within an organization. This necessitates to have an insightful long term observation and the foundation of norms,disciplines and new problem solving strategies.

The decision-making paradigms have seen to occur in many fields, including management theory, psychology, information systems, management science, and operations research. It is also a fundamental activity of all management, and research and literature concerning decision-making processes.(Stewart, 2003)


Companies are equipped to make better decisions if they are more sensitive to cultural differences in a cross-cultural environment. Effective decision-making can enable smootherwork place relationship within and across the border M&A, if managers are attuned to cross-culture management. Contextually how do organizations make decisions in a cross-cultural aquisiton is a critical research question in the study of administrative process. Researchers have paid little attention to complexities of decision making, in cross-cultural M&As’. Previous research is more concentrated on routine operational decisions that are more available to quantitative analysis and particular descriptions.(Mintzberg, 1999) Additionally other important research questions, especially related to thinking or cognition are prevailing in the dynamic research of decision making, such as; how individuals get benefit from cultural diversity learning, and how do individuals think (Mitchell et al., 2002) and make different decisions. These emerging notions defined our research questions of this thesis. Consequently, we have formulated our research problem in the following questions:

1. What are the cross-cultural difficulties affecting decision-making in the aquired firm?

2. How does these cross-cultural difficulties influence the decision-making of acquired firm?


The purpose of this thesis is to study the influence of cross-cultural implications of M&A’s on Decsion-Making.


The study is only concerned with the decision-making process in a cross-cultural acquisition and there is a less emphasis is on the cognitive factors of decision-making but the influence of cross-cultural implications on decision-making behavior in general. Due to time constraint, one case company is used for this analysis consequently the results limit to this ‘Company A’ only. Moreover, the Company A has agreed to co-operate with an anonymous status of itself and its employees. This also set boundaries to the scope of our analysis and presentation. Further, this research has been conducted on a local Swedish company acquired by an Austiran firm, so analysis and conclusions will be restricted to information obtained locally. As a result, the analysis of Austrian work behavior is also subjective from Swedish employees perspective.


To better understand the research, definitions are presented below to avoid misinterpretation of key concepts used in our study.

Decision-making –

Cross-cultural –

Company A- It is a company based in Sweden. But has agreed to participate in our research on complete anonymity of itself and its participants and therefore will be refered to as Company A throughout the paper. It’s formerly a Swedish organization which was acquired by an Austrian company in year 2000. (More information on Company A and its relevance to our study is mentioned in the Method)

1.6 Disposition

The disposition of this thesis will be as follows:

This chapter critiques the study and makes suggestions for future research.

To fulfill the purpose of this thesis this section answers the research questions.

This chapter covers analysis of the empirical findings in connection with theory and results.

This chapter present result from the qualitative interviews conducted in Company A.

This chapter presents theories within the field of decision-making and cross-cultural acquisitions.

This discusses the procedure of collecting data and interviews as our instrument. Reliability, validity and generalizability of the study are also discussed here.

Frame of Reference

The section will present the previous research and studies in the areas of decision making and Mergers and Acquisitions integration. Further in reference to existent literature this section will discuss the decision making process in M&A’s. A brief summary of the whole frame of reference is presented at the end of the section in order to make a link with our research questions and to provide a base and guidance for the creation of themes for our empirical data.

Frame of Reference

Recently, a considerable amount of management research has been developed that focuses on the cultural perspective of international acquisition performance. (Arikan,2004; Rottig and Reu,2005) Researchers argue that a lack of national cultural fit may lead to cultural clashes between the involved workforces (Larsson and Risberg,1998). This may lower employee commitment and cooperation (Cartwright and Cooper,1996), and complicate the post-acquisition integration process (Very and Schweiger,2001) Some studies exposed a negative impact of cultural distance on the performance of international acquisitions (Datta and Puia, 1995, Olie, 1994, Uhlenbruck, 2004), while others identified a positive relationship (Doukas and Travlos, 1988, Morosini, Shane and Singh, 1998). Still other studies indicate that cultural distance either has no direct effect on international acquisition performance (Markides and Ittner, 1994) or is one of the least significant variables affecting performance (Kanter and Corn, 1994). These contradicting views developed the interest in the knowing how much of the cultural differences involved in the decision making in M&A.

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This paper provides a descriptive framework that addresses the complexity of the decision making process of consequences of culture for international acquisition performance.


Cross-cultural M&A’s


A ‘way of gathering knowledge about the social world’ is the methodology notion refered to by Stauss and Corbin (1998). The specific research methodology we are inspired by for this research is the grounded theory which is consummated by qualitative methods of data collection and analysis.

To study the implications that emerge out of a cross-cultural acquisition and its influence on decision making process, we want to take advantage of the theoretical fundamentals and researches that have already been done in the realm of decision-making and cross-cultural acquisition implications. We also want to take that knowledge further through this chosen method by taking into account the case of Company A which was acquired by an Austian firm and has realized decision-making differences between the two units after the cross border Acquisition .

3.2 Research Method

Determining the ‘why’ and ‘how’ of decision-making in a cross cultural contxt of an acquired frm can be done by finding the first-hand experiences of employees in Company A. To serve the purpose of our study we chose interviews as the primary source of data collection. We felt that person-to-person interaction with semi structured questions will be best in acquiring information. Moreover, considering the characteristcs of our investigation and that all the employees could be reached within a close proximity and in a single premise, the ‘interview schedule’ was chosen instead of a ‘questionnaire’. Since culture can be a sensitive topic and the interviewees could be reluctant in answering, we ensured anonymity at the start of the interview process to make them comfortable as also stated by Kumar, Ranjit (1996). Through primary data we know the reasons behind a certain management decision. Most appropriate way of learning about opinions and behavior that are relative to culture is by asking questions directly to people involved. (Ghauri & Gronhaug, 2010) Information on the Austrian acquisition of a Swedish firm, as Ghauri and Gronhaug also states can only be gathered by asking people who have been involved or have observed the process i.e. of acquisition.

Research problems which are focused on uncovering a person’s experience or behavior and understand a phenomenon which we know little about are an example of qualitative research(Ghauri, 2004; Marshan-Piekkari and Welch, 2004). Such is the nature of our decision-making and cross-cultural research which includes social and behavioral sciences.

The Choice of Research Method

The approach is to use use a qualitative research methodolgy of investigation, data collection and analysis. Decision-making is not a fixed and static state to measure and it’s a cognitive process, besides it is not a ‘steady state phenomenon’ and changes erratically with time and environment as described by Mintzberg(1997). Quantitative research emphasizes on the quantification of data collection and analysis as argued by Bryman and Bell (2007) and observe social world as an external and objective reality. Holloway (1997) advocated of qualitative research for capturing the way the individuals experience, interpret and make sense of their environment. Bearing this in mind and our focus of discovering and understanding the role of cross-cultural factors in decision-making, we were convinced to use this method.

Consequently the choice of our research method, is qualitative and the purpose of the research inquiry is behavioral and therefore interconnected, therefore provides a basis for quantitative analysis.

The qualitative study

Our approach is purely qualitative. Auerbach (2003) claims that qualitative research involves analyzing and interpreting texts and interviews among others, in order to investigate specific patterns, i.e. examining decision-making amidst cross-cultural challenges in an acquisition.


Interviewing is the most widely utilized method in qualitative approach of investigation, as stated by Bryman and Bell (2007) and this instrument suits appropriately to find answers to our research questions, .i.e. decision-making under the implications of a cross-cultural acquisition.

The technique and construction is very important in the formulation of interviews. The interviews can be unstructured, semi-structured or structured (Saunders et al. 2007). As we were more interested in ‘theory of a particular reality’ Wengraf (2001) instead of the numerical data, we chose to settle on semi-structured interviews. We were very particular in formulating the questions as two cover both aspects of cross-cultural implications and decision-making. On request by the contact person at Company A, we got interview questions reviewed for improvement from our tutor before presenting it to the company. The interview questions were then sent out to the contact person to be distributed to the interviewees in advance.


The choice of subjects that were needed to be investigated for our research questions was crucial. Collins, Onwuegbuzie and Jiao (2006) stated that researchers should decide sample size in both quantitative and qualitative studies. In the sample from Company A, we were looking for all the people cooperating with Austrian counterpart and are making some forms of decisions. It was kind of our contact person at the company, after explaining our research necessity, he arranged ten people from mangers to engineers who were in some way cooperating with their cross border counterpart. Considering this we used purposive sampling technique which as mentioned by Maxell(1997) is used in qualitative studies to select e.g., individuals or institutions based on specific purpose.

Data Collection

The research design directed us on the empirical data. The empirical data was collected through semi-structured interviews using open ended questions. This permitted us to probe relevant issues which emerged during the interview. We aimed at making the data reliable, to ensure this we recorded the interviews upon permission and also took notes to reduce the chance of misinterpretation. In an attempt to motivate the respondents to co-operate with us and obtain factual data with their trust we ensured the anonymity and confidentiality of responses. We skipped a few questions in two interviews due to shortage of time. We completed a total of ten interviews in a session of three days with an allotted time of thirty minutes each.

Reliability and Credibility

A reliable and credible data is vital for an authentic research. Throughout our study we took measures to ensure this. During the interviews we did not rely on perceptions which affects the accuracy of our observations and used constant probing to have clear answers. We remained unprejudiced and flexible to have reliable working data.

Respondents sometimes perceive risks and may believe interviews to be jeopardizing their emotions and privacy as accounted by McCracken (1988). Knowing this, we assured the interviewees about the privacy and academic purpose of interviews. So they were at comfort in providing information conveniently. To avoid potential bias of our preconceived notions and theories we transcribed only what the interviews said, which we stored in the form of recordings and written notes taken at the time of the interview. We calim to have a plausible study, considering all the measures we took responsibly in terms of organizing and conducting the interviews.

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Qualitative Data Analysis

Our analysis was exploratory as asserted by Creswell et al. (2003) with a focus on understanding the influence of cross-cultural difficulties on decision-making by employees in an acquired firm.

Like in most of the qualitative analysis we refer to the inductive approach, as claimed by Bryman and Burgess (1994). Raw data was in the form of interview recordings and our notes taken during the interviews. We read the data vigilantly too derive concepts, themes, or a model which is common in qualitative data analyses, especially grounded theory (Strauss & Corbin, 1990). In consistency with Strauss and Corbin’s (1990), our inductive analysis began with an area of study, which was to investigate the influence of cross-cultural factors on decision-making, and let the theory to develop from data.

The analysis was organized as follows:

Interview description: To begin with, we recorded all the interviews and took notes during the interview. We read the transcripts many times to get familiar with descriptions.

Identifying discourses and theme generation: After identifying the accounts from the data, we recognized relevant discourses from the transcribed interviews, and excluded other irrelevant description. Following this we observed the core information and concluded some patterns of behavior/ theme. Later, formed categories with summary of data sets as behavioral, structural and interaction and communication to do a quality analysis and conclusion.

Discussion: In this section we explored the meanings explicitly or implicitly included in our empirical findings and looked for links of cross-cultural difficulties and decision-making. We also put forward suggestions of future research in this clause.

Empirical Data

The Interviewees

Total number of ten interviews that conducted, ee found that from technical engineers to line managers including logistics, project and bid manager everyone is cooperating with Austrian counterpart in one way or another after the acquisition. Consequently, employees at different levels of the organization are all involved in some kind of decision-making that accounts for the cross-cultural differences after the acquisition. Following are some themes that we identified that will be of assistance in developing the analysis.

Employee’s organizational behavioural

Swedes in an organization generally work in groups and are independent individuals at the same time. They also have a freedom to express views, owing to a less heirarchical system. Mutual agreement, consensus, structure and logical reasoning is very important to them for which they have a lot of meetings and discsussions. This also refers ot the notion of collective decision-making as explained by Melaville, Blank, and Asayesh (1993). Swedes are solution-oriented and are usually calm.

The essence of usual Swedes vs. Austrian behavior was narrated by Interviewee 5 as: ‘There is a great difference in the decision-making process. In Sweden everyone should agree and we ask a lot of people of what everyone think. Then we make decision after hearing all the opinions. And its opposite in Austira, you do not ask the employees if you are working as a manager. I think you are seen as a weak leader if you ask people of what they think. Its positive and negative in both ways I think Swedish way is better for working in a team and but in Austira you really make the decision and you come forward’.

Austrians on the other hand don’t have much freedom of expression due to a heirarchical system in the acquired firm view. Another common view observed was that Managers in Austria alone make decisions and value of consensus is less there. Austrain’s are social and build relationships. A lot more emotion is involed than facts in their reasoning. Moreover, Austrian’s are problem-oriented and get usually stressed under a problem.

This observation can be futher emphasized by few statements of the interviewees.

‘They have a lot more emotions and we like to base our decisions on facts.’ , Interviewee 2 said.

‘They have much hierarchy. More power distance. There is a very large distance between the manger and the individual member in the group’. Interview 4 affirmed.

Decision-making process structure

The decision-making process depends on the type of decision. If it’s a higher stake decision, the process is followed through formal procedures of contracts and agreements compared to daily operational level decisions which are simple. In Swedish unit agreement has to be reached through consensus whereas in Austrian unit, managers give a decision which is to be followed. More decision-making authority lies with managers in Austria than Swedish ones who work more as asupport function.

Interaction & Communication between units

Cooperation at the technical or the lower level works well. At the management level cooperation is difficult where decision making takes longer. Some employees expressed that even with electronic facilities available communication across the border is difficult. Employees cooperating for a longer period developed relationships of trust which helps in cooperation amidst the cross-cultutral differences

It doesn’t work well when we can’t sit together and discuss, makes harder to communicate over cross borders even though facilities are provided like skype ,video conferences, but it kills the team spirit as its not the same as for sitting together’ Interviewee 5 recalled.

On a practical point, the interaction between units is informal. But it depends on the type of decision aswell, i.e. starting a project, would follow a formal procedure of interaction. Project mangers have a closer contact compared to the rest. Informal day to day technical decisions are handled on a daily basis. Its is also hard to predict a response to an interaction from across the border, some interviewees responded.

Through data it was also understood that is easier to agree on factual information, which all can straightforwardly agree to. Language barrier has seem to affect the agreeability due to misinterpretations sometime. The technical side of the decisions are easier to agree on, compared to the decisions made at management level i.e. commercial issues. This can be analysed from the figure [1] below. The tactical decisions have been observed to have most complications whereas operational decisions are easier.


Additionally, we comprehended from suggestions put forward by the respondents that, early in the process of post-acquisition integration, communication on the differences in national and company culture can facilitate decision-making. Understanding of adapting to a culture is important. Performace indicators and clarity on who makes which decisions will also assist. Additionally, diversity courses and communication on how to work together has helped in the past and can also facilitate later on.

An interesting point observed by an interviewee during a diversity course; ‘One thing I learned from that cultural diversity course is that people is Austria are more problem oriented and here in Sweden we are soultuion oriented and that affects how we are able to communicate and cooperate’.



Unfortunately a lot of merger and acquisitions fail to achieve their hoped objectives. Solutions are of course complex. M&A are different along a number of dimensions. Companies fail to realize a blind spot, by keeping their focus mainly on costs, they minimize or defer until too late the human and cultural dimensions of blending two entities into unified growth-oriented business. In any case organization is generally a collection of people sharing a common vision, one or more location and resources such as money, equipment, and similar processes. Still much of the business management persists in believing that the latter is the most important issue, while people are only sort of the less important side of the scenario.

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The Challenge of Urgent Realization

Clearly there is an urgent need to realize, rationalize, restructure and eliminated duplication the first weeks and months of post-merger integration. Nonetheless rationalization only escalates of the new organization making it a greater value to its shareholders. It is one thing to design a new structure and relationship on paper and quite another to bring them to life. No matter how visionary and driven the leaders are the financier, quickly learns that the synergy cannot be generated merely from above or realize and reacting by reducing headcount or vice versa. Synergy requires the commitment and involvement of the entire organizations. That is the most challenging part.

Most mergers are seen of confusion, panic, uncertainty, distraction, limitation and dehumanization. The process is painful and the results are costly. When knowledge capital is vanished due to the turnover of key individuals during an M&A, when pride in the company and pride in one’s work is not appreciated through ill treatment at the hands of merger managers, when innovations are abandoned in favor of outdated practices just because one group is considered the “boss” and the new one reasoned expendable, the network that make the organization work break down and fall apart. When employees stop caring, they lose interest and motivation in improving the business processes. If they are not asked for their opinions, they have no means or enthusiasm to inform the new system designers the unrevealed secrets of success. When selection processes do not seem to be reasonable and rational, dynamic management does not step into position they take on new challenges elsewhere. These are not the circumstances which synergistic growth is likely.

Fortunately, the situation can be turned around. The M&A can become an opportunity for people to learn, grow and have a voice. Shared visioning activities and cross company M&A project teams can provide opportunities to meet new people and gain new perspectives and skills.

The problem with the acquired organization is that the managers must rearrange strategy, organizational structure, work on staffing of employees, make changes to systems and culture, all on top of the day to day business performances. They feel the pressure to quickly perform and harmonize the decisions by reaching the performance in the changed worked environment. So they do this by restructuring to create economies of scale, streamlining operations, focusing on product and market synergies while eliminating noncore businesses. During the same time they might be looking for the next merger or acquisition opportunity. This does not allow them the time and effort to ensure a synergistic and sustainable basis of people and operations to support the growth.

However for continued growth, building a foundation is the key to sustainable success because it defines how the work of creating the new organization will be continued. Regrettably most post M&A implementation plans seems to assume that if the financial priorities are comprehensively addressed the human foundation will take care of itself. The synergy created by a successful M&A




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