Interaction of Cultural and Technological Distance in Cross-Border, High-Technology Acquisitions

Abstract

The globalization of knowledge has driven an increased emphasis on cross-border, high-technology acquisitions where a target firm in a technology industry is acquired by a firm in another nation. However, learning depends on similarity of knowledge, and we find that needed similarity can be provided by either technology or culture. As a result, firms can learn from acquiring targets at increasing cultural distance or at increasing technological distance, but not both. We find an interaction where acquisitions made at longer cultural distances and less technological distance, and acquisitions at shorter cultural distances and greater technological distance improve financial performance. This means technological distance and cultural distance are substitutes or represent a trade-off where improved acquisition performance depends on having commonality (low distance) for one of the variables.

Citation

Patel, P.C. and King, D.R. (2016), "Interaction of Cultural and Technological Distance in Cross-Border, High-Technology Acquisitions", Advances in Mergers and Acquisitions (Advances in Mergers and Acquisitions, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 115-144. https://doi.org/10.1108/S1479-361X20160000015007