Amsterdam Business School
Msc Business Administration: Entrepreneurship & Innovation
The Influence Of Chinese Cultural Factors On The Integration
Process Of Chinese Cross-Border Mergers And Acquisitions:
Evidence from the Netherlands
Written by Supervision by
Rosanne Rosalie Riemersma Sun Zhe
10555315 Dr. Tsvi Vinig
Final Version
Statement of Originality
This document is written by Student Rosanne Rosalie Jannieke Riemersma who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Acknowledgement
First and foremost, I would like to express my sincerest gratitude to my supervisor Zhe Sun, who has supported me immensely during the last six months of my Masters degree, even though she in the process of completing her PhD herself. I would like to thank her for the useful comments, remarks and dedication she has provided me with through the learning process of my dissertation. I could not have asked for a more engaging supervisor on this topic. I would also like to thank Dr. Tsvi Vinig, for introducing me to the China desk of the Amsterdam Business School at the University of Amsterdam and this topic at the beginning of this year. Furthermore, I like to thank all the participants in my survey, who have made the time and effort to help me completing this research.
Table of Contents Statement of Originality…….………2 Acknowledgement ……… 3 Table of Contents ……….. 4 Abstract ……….5 Introduction ……….. 6 Theory Development ……… 8 Cultural integration and M&A performance ……… 8
Organisational Culture ………. ……….10
National Culture ………11
Alternating the static paradigm through a Yin Yang perspective ………. 13
The influence of Yin Yang on Chinese cultural aspects ………17
Guanxi ties ……… 17
Chinese Leadership and Management Style ………. 19
Method ……….. 21
Sample ……….. 22
Measures ……….. ……….23
Procedure and Results………24
Data Preparation……….24
Results ……….. 26
Guanxi, Chinese Leadership and Management Style and Sociocultural Integration ………28
Sociocultural integration and M&A Performance ……… 29
Testing for Moderation and Mediation ………. 29
Discussion and Conclusions ………. 31
Limitations, Implications and Directions for Future Research ……….33
References ……….34 Appendix ………...36
Abstract
A vast body of literature addresses the cultural integration aspect in mergers and acquisitions (M&A). Cross-border M&A is more challenging in that they not only need to take differences in organisational culture into consideration but also differences in national culture. Efforts in aligning two firms can create major conflicts between both parties resulting in failed M&A. However, when cultural integration is planned carefully the cultural differences can result in value creation and form a source of opportunity. When analysing these cultural differences, Hofstede’s model has proven to be the global tool, especially the fields of doing business and M&A. This study aims to address Chinese cross-border M&A from a different perspective. Yin yang culture is deeply rooted in the Chinese behaviour, thinking and routines. It also offers a dynamic tool to analyse culture during these times of rapid technology development and globalisation. Identification of evident cultural factors of the Chinese way of doing business leads to the development of hypotheses regarding the Chinese cultural factors that affect the sociocultural integration as well as the M&A performance. An online survey with a sample size of 31, suggest that the factors guanxi (interdependent relationships) and Chinese leadership and management style affect the sociocultural integration process. Sociocultural integration in turn proves a mediator between cultural factors and M&A performance. The implications for future Chinese cross-border M&A research are discussed.
Introduction
Whether a cross-border merger and acquisition (M&A) is successful depends on the cultural integration during the post-purchase phase. Attitudes and lifestyles with regard to business approach differ between countries (Spigarelli et al., 2013). National cultures shape individuals, and in turn the organisational culture of a firm. Therefore, a firm’s management style and its operations are a reflection of national culture, and influences its ability to acclimatise and integrate in a foreign country (Zhu & Huang, 2007). The willingness or ability of a community to converge into new ways of acting, thinking and behaving depends on their national culture (Zhu & Huang, 2007).
Literature addressing challenges faced by mainland Chinese acquirers during the post-deal phase, as well
as failed integration processes is growing. Though an increasing amount of these studies concern cases of Chinese cross-border M&A in advanced economies (Spigarelli et al., 2007; Cucino et al., 2013), little literature covers the complex post-acquisition integration of an M&A. As the amount of Chinese cross-border M&A grows; it is becoming vital to understand influential factors in the cultural integration process and their ability to successfully integrate firms. Many of our theories developed on M&A integration may not even apply when these are not modified to the specific culture of a country (Steenkamp, 2011).
The dominant paradigm analysing cultures to date has been through means of Hofstede’s six dimension
model (1980, 1990), allowing cultures to be understood through six different dimensions, e.g. individualism vs. collectivism and power distance. Despite the globalisation and rise of the internet which makes national borders more and more obsolete on the marketplace, Hofstede’s static six dimension model is still predominantly used. However, the staticity of the model fails to capture the dynamics of national culture that emerges through the intercultural interaction and cultural clashes in this globalising society. The ancient Chinese philosophy of yin yang offers a holistic alternative to analyse the concept of national culture in todays dynamic society. In addition, the principles of yin yang explain the behaviour, thinking and acting of the Chinese.
It is therefore essential to develop a theory through a Chinese cultural perspective so as to facilitate the
integration process of Chinese M&A, in which attitudinal and behavioural phenomena of the Chinese business environment are clearly mapped. In this study, the main attitudinal and behavioural phenomena addressed are guanxi, i.e. Chinese interpersonal relationships, and Chinese leadership and management style. To date, these two concepts which are derived from yin yang thinking, are still clearly visible in Chinese business. Both guanxi ties and the Chinese style of leadership and management are paradoxical concepts, meaning that these contain contradicting facets. An example of this paradoxical nature is a Chinese manager being both ‘invisible’, as in active only in the background, which can be seen as a passive way of working. While also, expecting each and every employee to work hard and do everything to the best to their ability, which is a very active way of working. Hofstede’s model fails to capture the duality of these two concepts in its static six dimension model, as this model generalises cultures without taking a cultures roots into consideration.
Not only with the rise of cross-border M&A’s and in particular Chinese M&A activity, but also with the
globalisation and internet connectivity, it is important to know how individuals react to each others national cultures. When these issues are mapped in advance, these dominant cultural factors that differ between both parties can be incorporated into an integration strategy and enhance the overall outcome of the M&A and post-deal performance.
The purpose of this research is to clarify possible challenges and difficulties during the cultural
integration process to facilitate future post-purchase M&A phases with evidence from the Netherlands. By conducting research in the Netherlands, Chinese firms can learn and prepare to bridge cultural gaps during future M&A integration. This study intends to investigate the extent to which Chinese cultural factors influence Chinese M&A integration by using evidence from the Netherlands. And if so, does this affect the M&A performance? In order to formulate an answer to these questions, the identification of the cultural factors that are predominant in the integration process and survey with acquired firms in the Netherlands is necessary.
The Netherlands is representative as one of the advances economies China is interested in to conduct
M&A. From 2009 to 2014, Chinese firms have acquired over 14 firms in the Netherlands. One of the largest acquisitions was of the conglomerate COFCO taking over Nidera in the food sector, with a transaction value of 2.847 US dollar, and a stake of 51% (MergerMarket, 2014). In 2014, the new tax treaty between the People’s Republic of China and the Netherlands has entered into force, stimulating more in- and outbound investments both ways. It is expected to lead to a further increase of Chinese foreign direct investment (FDI), and M&A in the Netherlands (Bruinhorst & de Lange, 2014). As M&A in the Netherlands grows; it is becoming essential to understand influential factors in the cultural integration process and their ability to successfully integrate firms.
In order to proceed with the research conduction, it is necessary to establish a theoretical framework so as
to support and provide a comprehensive overview on the topic. The following four concepts and their interrelations have to be clarified: national culture, organisational culture, M&A performance, the M&A integration process as well as the cultural integration process. Whether a cross-border M&A adds value depends on the post-deal M&A integration process and this integration process is influenced by the cultural integration, which in turn is influenced by the organisational culture of a firm. Organisational culture is influenced by national culture as it shapes the way people behave and think (Olie, 1994; Morosoni et al., 1998; Stahl et al, 2007; Stahl & Voigt, 2008; Zhu & Huang, 2007). The following section contains a review of literature on M&A performance and the cultural integration process, whereafter studies on organisational and national culture are assessed. Finally, Chinese yin yang thinking is introduced as an alternative to Hofstede’s cultural distance paradigm. The yin yang principle acts as a key perspective through which this research is conducted.
This study will add to existing literature as it will provide a new means of analysing Chinese outbound
business. It will provide knowledge on the extent to which explicit Chinese cultural factors, derived from yin yang, influence doing business and especially during the integration process of an outbound M&A. Previous
literature has not addressed this particular facet of the Chinese influential cultural factors by providing statistical evidence obtained from acquired firms, and the involved legal and consultancy firms. This research can serve as a new means of analysis, as well as a contributor to existing knowledge on Chinese outbound M&A.
Theory Development
Cultural integration and M&A performance
What is M&A performance, and how is this measurable? M&A performance, and in particular the concept of performance, is vague. According to Weber et al. (2011) M&A performance has to do with the post-deal integration process and cultural differences of the organisation and country of both parties.
According to Datta (1991) some studies show that the relatedness, i.e. the strategic fit, of firms result in a
better performance, other studies point out that there are no differences between a related or a non-related acquisition regarding their performance. Whether both parties are related or not depends on the motivation behind the process. Non-related firms might aim for e.g. sales growth or other financial reasons. However, most acquisitions are business related and aim to achieve a superior competitive position through the generation of synergies e.g. economies of scale or scope, which is also the case for Chinese firms (Datta, 1991; Haspeslagh & Jemison, 1991; Hitt et al., 2001; Stahl & Voigt, 2008). Nonetheless, relatedness of firms only leads to superior M&A performance when the post-acquisition integration of both firms is done effectively (Datta 1991; Zhang et al. 2015).
An effective integration in an M&A context is “the combination of firms into a single unity or group,
generating joint efforts to fulfil the goals of the new organisation.” (Olie, 1994). Datta (1991) argues that the main goal of a post-merger integration process is that firms are able to fully exploit the capabilities of both firms. Post-M&A integration is therefore closely linked to the quality of the deal. So the performance of an M&A is superior when the firm can enjoy the aimed synergetic benefits of the deal which are a result of the extent to which the post-M&A integration was effective.
Theoretically an effective integration process should lead to a successful M&A, in practice this is not
always the case as the integration of two parties proves to be challenging. A post-merger integration is the period after the deal has been closed. During this time, the operations of the target can be obtained by the buyer if the deal was structured as an acquisition. If it is a merger, then the operations can be combined (Financial Times Lexicon, 2015). When two parties are engaged in an M&A integration, conflicts can arise, i.e. miscommunication, power struggles and using antagonistic terms of ‘us’ and ‘them’ to describe a situation, that increases tension within the firm (Olie, 1994). Stahl and Voigt (2008) state that synergetic aspects in M&A integration play a critical role in whether an M&A is successful. Therefore, to measure M&A performance, Stahl and Voigt (2008) have utilised the aspect of sociocultural integration, i.e. the
shared identity, positive attitudes and trust, and task integration, i.e. capability transfer, resource sharing and learning. These aspects all verge careful planning and need to be incorporated into the integration process. In other words, it is crucial to execute a carefully designed integration process so as to minimise inter-organisational and intercultural friction (Stahl & Voigt, 2008).
Placing M&A in an international context further complicates the integration process. Cross-border M&A
need the so-called ‘double layered acculturation’, where acculturation can be defined as “the process of cultural and psychological change that results following meeting between cultures” (Sam & Berry, 2010). Meaning that firms have to deal with integration organisational culture as well as national culture, i.e. integration at a double level. This is a fundamental difference between a national M&A and a cross-border M&A. As will be explained in the next section, organisational culture reflects national culture and differences during a cross-border M&A are likely to come to the surface. Many business failures have been caused by failing to consider the cultural dissimilarities of the involved countries (Steenkamp, 2011). Cultural integration aims to reduce cultural differences in the acquired company (Zhu & Huang, 2009) as these can be laid out to form a major obstruction when aiming to exploit the M&A benefits to the fullest, i.e. the use of know-how and scarce resources (Stahl and Björkman, 2007; Stahl & Voigt, 2008). These differences manifest in attitudes, actions as well as thoughts and behaviour of employees. The cultural differences increase the potential of conflict and form obstacles to management agreement (Olie, 1994). Strong leadership needs to direct the organisational and cultural acclimatisation of the unison, but also align both parties expectations. The need of leadership coincides with what Schein (2010) argues in his work, that culture consists of assumptions based upon the ideas, actions and routines of a leader. A strong leader is therefore necessary as he/she is able to change, manipulate and so integrate culture. If both firms are not integrated well, full exploitation of resources will prove difficult (Spigarelli et al., 2013).
Olie (1994) argues that “organisational diversity is negatively related to merger performance”. This
organisational diversity is caused among other reasons by organisational and national culture. Differences can be seen in thought, behaviour, and actions. Moreover, employees with different norms, values and beliefs of their work place are brought together. These differences may even manifest in for example, dress code and use of language. This may lead to dividing the firm into an in-group and out-group, i.e. ‘us’ and ‘them'. Olie (1994) states that shaping a common identity eliminates these divisions and creates a subculture to which all members can relate to and share a common identity other than their nationality.
However, Olie (1994) approaches cultural differences as obstacles in the integration process of an M&A.
Cultural differences in cross-border M&A can be seen as a source of opportunities in terms of value creation and learning rather than having a negative effect on performance (Stahl & Voigt, 2008). According to the resource-based view of a firm, sustainable competitive advantage comes from possessing a unique set of capabilities or resources that are rare and above all, difficult to imitate (Barney, 1986; Barney, 1991). These resources can be in the form of human capital, so the advantage lies in the specific set of routines, repertoires and combines knowledge of the members of the firm. The historical path of building routines are shaped by the firm’s national culture (Morosini et al., 1998). The advantage of a cross-border M&A lies in that it
provides a new pool of capabilities and resources that the firm did not have before, enabling the firm to enhance the performance of both parties through learning from one another and specialisation in the others' national context (Morosini et al., 1998). Thus, if a firm is successful in integrating two firms from different countries and able to enjoy the synergetic benefits, this firm’s resources will be unique in a way that is both rare and difficult to imitate or replicate. This implies that the influence of cultural differences on the synergetic benefits relates to the overall M&A performance of a firm, where the relatedness of both parties moderates this effect (Datta 1991; Zhang et al. 2015). Thus, if both parties are related prior to the M&A, i.e. both parties are active in similar industries, the planned generation of synergies and knowledge transfer is more likely to be successful provided that the sociocultural integration post-deal is done effectively. Based on these arguments, M&A performance, i.e. greater benefit of synergies, will serve as the dependent variable. The degree of cultural differences as an independent variable. Sociocultural integration mediates the effect of cultural differences so as to obtain the greater benefits of the M&A and the prior relatedness of both parties moderates the effect of sociocultural integration of cultural differences. Therefore, this study proposed the following two hypothesis:
HYPOTHESIS 1 Cultural differences have a positive effect on the benefits of synergies if mediated by sociocultural integration.
HYPOTHESIS 2 Differences in national culture are more positively associated with sociocultural integration and M&A performance when the degree of relatedness is high than when the degree of relatedness is low.
Organisational Culture
Organisational culture like national culture is a concept so complex, there has yet to be a consensus on the
definition. Many a research is written on the phenomenon of organisational culture. Hofstede et al. (1990) argue that the concept contains the following characteristics: it is holistic, historically determined, related to anthropological concepts, socially constructed, soft and difficult to change. Schein (1990) states that the concept is vague and open to more than one interpretation, it is impossible to research about a group and determine facts regarding the ‘cultural phenomena’. Before doing so a researcher always needs to specify whether the group has had a long shared history and stability and intense experiences which enabled a culture to be formed. Both Hofstede (1990) and Schein (1990) argue that a common history is vital for the concept of organisational culture to exist.
Contemporarily, Hofstede (The Hofstede Centre, 2015) defines organisational culture as following: “the
collective programming of the mind that distinguishes the members of one organisation from others”. Thus, the concept is shared by the personnel within an organisation and must be deeply rooted at the core of the organisation visible through the day-to-day practices (Hofstede, 1990). Schein (1990) states organisational
culture is “a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems.” Both Hofstede’s and Schein’s perception of the topic correspond in a way that the authors agree that the concept is something collective and derives from programming or external adaption and internal integration, i.e. shared learning or trial and error providing individuals with a particular pattern. According to Schein (1990) this process is behavioural, cognitive, and emotional, causing individuals to think and act is a particular way. His assumptions reflect shared values of the individuals. Schein (1990) is therefore approaching the concept in a more psychologic manner. Likewise, Hofstede (1990) refers to this as psychological assets of a firm. It is something that is taught to new employees, as “the way we do things around here” or “the way we think about things around here” (Williams et al., 1994; Irani et al., 2004), in order to behave in a particular way and therefore to maintain the growth and survival of the organisation.
Thus, differences between organisations stem from the individuals that are employed within them. The
individuals’ perceptions, dispositions and behaviour are in turn moulded by cultural norms and beliefs (Steenkamp, 2011). Moreover, organisational cultures reflect nationality (Hofstede et al., 1990). So, values and experiences gained through ones life form an individual, and therefore in an organisation reflect national culture (Zhu & Huang, 2007).
National Culture
As mentioned above, national culture is closely related to organisational culture. This is also visible when analysing the different interpretations of national culture. Hofstede’s definition of organisational culture is linked to his definition of national culture, defining this as “the collective programming of the mind distinguishing the members of one group or category of people from others” rather than distinguishing one organisation from others (The Hofstede Centre, 2015). Hofstede (1990) divides national culture into four facets. At the core there are the shared values, e.g. what people think or are supposed to think, feel, consider right and wrong and ‘what ought to be’. The layers that surround these values all fall within ‘practices’, i.e. the layers rituals, heroes and symbols. These facets of culture are visible to outsiders, but are difficult to interpret as an outsider. Rituals are vital in a culture, these are practices exercised collectively and take place daily. Heroes are important personas with particular characteristics prized by the group, serving as role models. Finally, symbols are the gestures, manifestations, statues, objects and so on that are meaningful to the group (Hofstede, 1990).
Moreover, Hofstede’s cultural paradigm allows the concept of national culture to be measured and
analysed by means of his six dimension model. The author states that it contains the following intangible constructs, or dimensions that can serve as a tool to measure culture: power distance index (PDI), which is the expectance and acceptance of members that power is distributed unequally within their institution or
organisation; individualism versus collectivism (IDV) is the interdependency of members within a society, i.e. do members look after themselves, or do they belong to groups; masculinity versus femininity (MAS) where a masculine society is more competitive, driven by success and achievement, winners and losers, a feminine society is more caring and revolves around the quality of life, so the difference between both is success versus liking what one does; the uncertainty avoidance index (UAI) concerns the degree of controlling the future/unknown situations or ‘going with the flow’. Different societies react to this aspect in different ways, for it brings anxiety and therefore can come across as threatening. The UAI deals with the extent to which members avoid this due to the threatening aspect of it; long term orientation versus short term normative orientation (LTO) describes the extent to which societies are acceptant of societal change. Normative societies score relatively low. These societies prefer to maintain traditional normals, and are slow to accept change. Whereas pragmatic societies are acceptant of change and actively prepare for future changes; the final construct is indulgence versus restraint (IVR), which is a dimension that measures the degree of control of desires and impulses. This is dependent on the way one was raised and socialised. Weak control stands for indulgence, whereas restraint means strong control.
National cultures can be separated and subsequently distinguished by means of Hofstede’s dimensions.
Due to the relativity of the concept of national culture, its use is only meaningful if compared to one another. Without comparison there is no meaningful use of national culture.
Schein’s (1984) definition of national culture is also closely related to his definition of organisational
culture. He states that national culture is “the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and, therefore to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.” A group that has invented, discovered or developed through shared learning. According to Schein (2010), national culture comprises of three facets, artefacts, values and assumptions. These facets facilitate the analysis of different cultures, as each culture will be expressed in different degrees per level. The facets range from the tangible and visible to the embedded, the unconscious.
First, the manifestations of national culture that one can see, feel and hear are called the artefacts. The
artefacts consists of ‘visible products’ such as the language a group uses to communicate, but also the observed behaviour and manners, the clothing style, even architecture, myths and stories. For this reason, artefacts are the easiest level of culture to identify. However, these are the most difficult to interpret. This particular facet is similar to what Hofstede (1990) calls the ‘practices’, the rituals, heroes and symbols of a national culture. Schein (2010) continues that the difficulty of deciphering this level stems from the deeper assumption or meaning, when one person’s perception of the meaning based on his/her feelings can be different to another’s. It is a time-consuming process to unravel this level of culture, and only then an observer might develop a clearer understanding of the meaning behind these artefacts. Through understanding the second level of culture, i.e. shared values, the observer enables himself or herself to develop a better grasp on the artefacts. The shared values are the norms, ideologies, philosophies of a group.
Schein (2010) argues that initially a group’s beliefs and values are a reflection of the creator of these, i.e. the leader’s perception of what is ‘right’ and ‘wrong’ and how things ‘ought to be’. After time has passed, and the leader’s actions have proven successful, these become the shared beliefs of the group. When these action’s continue to be successful and reliable they transform into shared assumptions. Corresponding with what Hofstede (1990) states that these are unconscious and seldom discussed. The third layer of culture’s basic assumptions is the last and underlying embedded level of culture. The basic assumptions stem from the consensus regarding the shared values of members of a group. Hypotheses tested over time that have proven reliable and successful transformed into shared assumptions of that group and so become reality. This also means that the basic underlying assumptions can change and evolve over time. However, due to the degree of collective consensus and that these assumptions are so strongly held that they can be taken for granted, this is difficult. This means that culture defines members of a group. It defines the character and identity to the extent of what they pay attention to, the way they interpret things and react to and behave like (Schein, 2010). Meaning that Schein considers the origin of culture derives from leadership, but also that a leader is able to change culture or organisational culture.
Alternating the static paradigm through a Yin Yang perspective
As mentioned previously, organisational culture is a reflection of national culture. During a cross-border M&A the differences between two parties’ cultures are likely to come to the surface and may form an obstacle when completing the final stage of an M&A process, i.e. the integration phase. Which implies a less desirable outcome of the M&A performance. It is imperative to analyse and comprehend a specific environment and its culture before changes can be made (Schein, 1990), and particularly important before commencing the integration process. In this study the focus is on a Chinese cross-border M&A. The evidence for this study is obtained in the Netherlands. Before diving deeper into the body of literature on deeply rooted Chinese cultural aspects apparent in the business world, first the traditional approach to an analysis of both countries’ cultures by means of Hofstede’s six dimension model is applied. This model is widely known and used in the vast majority of business studies. In this research the results are used as a reference and as a comparison to Chinese philosophy, i.e. yin yang. When analysing Chinese culture one has to see it through the lens of the philosophical concepts of yin yang (陰陽), which helps us understand known concepts as the interpersonal relationships called guanxi (關係). Alongside other strongly embedded dimensions of Chinese culture as mianzi, face (⾯面⼦子), and Chinese leadership and management style so as to gain an in-depth understanding the roots of the culture.
Figure 1 provides a comparison between scores on the dimensions of culture between China and the
Netherlands (The Hofstede Centre, 2015). According to the six dimension model, China scores high on power distance (PDI) reflecting clear hierarchy within society, whereas the Netherlands scores low on this index indicating that power is distributed more equally. Secondly, China scores low in their individualism
(IDV), which means the Chinese are supposed to be highly collective in their mindset. The Dutch, on the other hand scored 80, which mean the people are highly individualistic in their lifestyle. At a high score of 66 (MAS), the Chinese are masculine, oriented at success and achievement.
Table 1. Hofstede’s six dimension model applied to China and the Netherlands (The Hofstede Centre, 2015)
According to this model the Dutch are more feminine, focussing on work or things in life that they like.
The Dutch tend avoid uncertainty (UAI) and prefer individual security. This means that the Dutch prefer a set of rules over no rules, and have an urge to work hard and be busy. China on the other hand scores low at 30 in their uncertainty avoidance index, and are more flexible. Both China and the Netherlands score high at long term orientation (LTO), meaning that both cultures are pragmatic rather than normative, accepting societal change and prepare for future changes. Finally, China scores exceptionally low on indulgence (IVR). As a restrained society, the Chinese would rather work than focus on leisure time due to social norms or peer pressure. A restrained society also tends to be more pessimistic than an indulgent society. On the contrary, the Netherlands is evidently a society of indulgence with a high score of 68, indicating that there is not difficulty for the Dutch to enjoy life.
According to Hofstede, these dimensions are the dominant providers for understanding a national culture.
However, Hofstede’s model approaches all countries in a bipolarised manner, as it scores all Asian countries as collectivist rather than individualist (Fang, 2012). The main principle of Yin Yang balance is that these dimensions of culture are not mutually exclusive, rather these coexist in everything and everywhere, they coexist within each other, are complementary to each other, and more importantly can change into one another (Fang, 2011; Zhang & Zhou, 2014). Taking the IVR and PDI indexes for example, the Chinese work hard and have a high regard of respect and hierarchy. But when examining e.g. the contrast between the formal and informal work environment, it becomes clear that the six dimension model fails to capture the complete dynamics of its society. The Chinese are not only known for their hard working routines and discipline, but also for their informal business meetings of executives with their subordinates and business partners after work in e.g. karaoke bars and restaurants, building relationships over food and beverages.
As a result, Hofstede’s model has received criticism during the last few years (Fang, 2011; Fang, 2012;
Zhou & Zhang, 2014). His six dimension model allows us to analyse national culture. However, the model was developed in the 1980s, and does not consider the recent and vast changes society has seen. According to Wang and Schaan (2008), various studies, e.g. by Hofstede (1980) and Barkema and Vermeulen (1997), on cultural values stated that these have been stable and unchanged for the last decades. However, the authors continue that national culture has experienced changes in the 25 years after Hofstede’s grand research.
PDI IDV MAS UAI LTO IVR
China 80 20 66 30 87 24
Furthermore, they have found that major changes occurred, among other countries, in China due to the tremendous changes this country has experienced. Globally, internet and technology have advanced so rapidly, subsequently the marketplace and workplace situate itself increasingly online, causing national borders to fade and cultural learning to take place all dimensionally rather than merely longitudinally from old traditions.
As Fang (2011) states, Hofstede’s approach to national culture is a pre-internet and pre-globalisation
phenomenon. Rather, Hofstede’s six dimension model means to capture national culture regardless of its context, situation and time. The results of a national culture analysis by means of the six dimension model are therefore static and generalised, placing an entire national culture under one umbrella and disregarding all its differences in various situations, contexts and moments. It is for these reasons that, and especially in this globalising society and the continuous rise of the internet, the static six dimension model of Hofstede is inadequate and does not capture all dynamics of culture (Fang, 2011; Fang, 2012). Consequently, the new paradigm of a dynamic cultural approach is overtaking Hofstede’s static approach to understanding culture. This is visible in how Fang (2012) explains culture figuratively, just like Hofstede uses the onion to explain the various layers of culture, i.e. shared values, rituals, heroes and symbols, Fang argues culture should be seen as an ‘ocean’, metaphorically. At different points in time, different facets of culture arise to the surface, i.e. are more salient than other facets of national culture which can then be temporarily suppressed. Thus, with the current globalisation, internet is more dominant and so visible on the surface in that ‘ocean’. This directly gives a dynamic meaning to the concept of national culture, and therefore context and time dependent (Fang, 2011). In other words, Hofstede’s model can still provide us with a sense of generalised features of a country’s culture, however, for specifics it is necessary to dig deeper and the yin yang perspective addresses just that during this time rapid change.
According to Fang (2012) cultures not only change and develop based on the deeply rooted ancestral
traditions, but also when in interacting with other national cultures, other nations, people, and especially the marketplaces that become more and more borderless due to the rapidly developing connectivity through internet. Hofstede and Schein, on the other hand, both argue that it is difficult for national culture to change and happens at a longitudinal level. Furthermore, due to the static vision of the six dimension model, change is ignored. However, any national culture can change both horizontally and longitudinally and changes naturally.
This can be explained and understood when analysing national culture through a yin yang perspective,
and in this study Chinese culture. After the announcement of Deng Xiaoping’s ‘open-door’ policy in 1978, interaction with other nations increased and so the Chinese encountered many different cultures. Chinese culture has seen a dramatic change since this policy (Fang, 2011; Rarick, 2015). Change is seen as the result of the interaction between yin yang. It is the fundamental principle that dictates the universe (Zhang & Zhou, 2014).
Yin Yang, or Chinese duality thinking, is a way of thinking unique to the Chinese (Fang, 2011). However,
this concept has been and can be used to analyse and understand events or situations applicable in any
cultural context (Zhang & Zhou, 2014). As paradoxical values exist side by side in every culture, not only in Chinese culture. These paradoxical value orientations complement one another, exist within one another and enforce another. Yin yang proves a tool that embraces these paradoxical value orientations and culture’s opposite traits and is therefore able to analyse any culture (Fang, 2011). It supports a central idea that culture which has come into existence through all dimensional learning over time and that culture changes over time. Furthermore, people from different cultures are able to embrace and accept different cultures within their minds simultaneously as a brain does not work on a mutual exclusive basis. Culture cannot be perceived as a static concept, as one crosses a national border and all culture is now completely different and the other’s country culture is now obsolete. Yin yang allows cultures to be perceived in a way that all cultures share similar potentials “in value orientations comprising opposing, paradoxical, and potentially incompatible cultural values” (Fang, 2011). Thus the principle of yin yang transcends the static paradigm of Hofstede as far as cultural analysis goes.
Yin yang thinking forms the base of the behaviour of Chinese as its been part of society for three thousand
years. It is visible in their business conduction, in their daily life and subsequently in their fashion of communicating and relationship style (Zhang & Zhou, 2014). It is therefore not only an alternative manner to analyse Chinese culture through the perspective of yin yang, but crucial to consider. Combining both methods of analysis can create a holistic and embracive approach so as to understand Chinese culture from both the Western perspective but also the Chinese perspective.
The concept of yin yang is holistic and dynamic, and comparable to the Western dialectical thinking
(Fang, 2011; Zhang & Zhou, 2014). The terms itself, yīn 陰 yáng 陽, already suggest the duality of the concept. The first character, yīn 陰, means shade, overcast, cloudy or the negative, feminine principle of yin yang. The second character, yáng 陽, means the sun, light, the male, masculine, positive principle of yin yang. As is clearly visible in the well-known symbol of yin yang (Figure 2), there is an opposite in everything. In yin (black) there is yang (white), and in yang there is yin. In other words, every element has its paradox, and exists in harmony and unity. Thus, in femininity there is masculinity and the other way around, the same applies to light and dark, good and bad, collective and individual and so on.
Figure 1. Yin Yang symbol
Yet, Western dialectical way of thinking is not to be confused with the Chinese yin yang duality way of
thinking, as the West tend to think in opposition (McElhatton & Jackson, 2012). Where the dialectical
thinking in the West still struggles to overcome to view the paradoxes in everything as a problem, the Chinese accept this fact and embrace the unity of opposites in terms of interdependence and view these as the natural way of life and the world. Diversity, paradoxes and change is what culture consists of (Fang, 2011). Different behaviours and contrasting values exist side by side within culture. If a certain culture tends to lean more towards one side of the spectrum, it does not mean the other side is excluded or non-existent. It merely means one side is more visible on the surface of the ‘ocean’ while the other is temporarily suppressed. This becomes especially apparent when taking another look at how Hofstede defines culture, the “collective programming of the mind”. However, a human brain is capable of adopting paradoxes simultaneously. It is able to embrace both rationality and intuition, ego-strength and anxiety, order and disorder. Thus, no matter how different two cultures may appear to be, essentially all cultures share the similar paradoxical value orientations (Fang, 2011). Hence China scores high at Hofstede’s dimension of long term orientation, easily accepting change and preparing for future change. This leads to the potential of two cultures being able to integrate and embrace different cultural values and dimensions through cultural learning and and intercultural interactions, and possibly shape a new common identity (Fang, 2012; Olie, 1994).
The influence of Yin Yang on Chinese cultural aspects
Yin yang has been part of Chinese culture three thousand years, and this way of thinking has influenced many philosophies and other cultural aspects of China, such as martial arts, medicine, and so on. Many great Chinese scholars were influenced, and in turn based their thinkings on yin yang. Examples of such scholars were Laozi (571-447 B.C.) founder of Daoism, and Confucius (557-479 B.C.) whose thoughts gave rise to Confucianism. To date, yin yang still underpins Chinese values, beliefs and and behaviours. This is reflected in well-known concepts of guanxi or Chinese relationships and mianzi or face, but also in their way of communicating, and in their leadership and management style.
Guanxi ties
Guanxi (關係), literally means relationship or connection. However, the concept carries a much deeper meaning than merely these two translations. Guanxi are in fact hierarchal interpersonal relationships that can be understood as a “system of social networks, and influential relationships which facilitate business and other dealings” (Google, 2015), and implies an exchange of favours between people (Lin, 2011). According to Lin (2011), Guanxi is about status, shared identities, connections, networking and building close interpersonal relationships. It involves aspects of harmony, mutual benefits, favours, reciprocity, mianzi
(face), and personal interaction. In business especially, guanxi is related to maintaining a certain degree of mianzi, reciprocal favours, and affect.
Guanxi ties can be divided into three different categories (Zhang & Zhou, 2014). The first is the inner
circle. This circle consists of family and close friends. Members in this circle are born into it, and the Chinese devote unconditional loyalty and trust to members of this social unit. This circle is followed by an intermediate circle consisting of mixed ties. This circle is based on reciprocity, and members aim to maintain mianzi, i.e. face, respect, and renqing, i.e. human sentiment, social norms or manners that come with reciprocal obligations. When maintaining a positive guanxi tie, mianzi (or “face”) plays a key role. The more mianzi a person possesses, the stronger the guanxi network is (Lin, 2011). Mianzi refers to a “person’s reputation, dignity, pride, social standing, feelings of prestige within their workplace, society, family and friends” (Zhang & Zhou, 2014). So this concept is closely related to guanxi. Mianzi is about caring about other’s reputation, as well as their own. In order to improve one’s social standing, a person has to avoid to lose ‘face’ in front of others which can be done by e.g. saying ‘no’ directly to one’s superior at work. A person can gain ‘face’ through e.g. returning favours. It is important to care about another’s mainzi in order to maintain harmony and hierarchy within the group (Zhang & Zhou, 2014). Thus, the more mianzi a person has, the higher their social status and the better their guanxi network is.
The intermediate circle of mixed guanxi ties and its foundation of reciprocity entail a certain indebtedness
with the other (Vanhonacker, 2004). The mixed tie relationships are maintained by members as these are based on mutual benefits and understanding. The outer layer of the circle are known as the instrumental ties. Relationships within this tie are impersonal of nature, and members seek instrumental value from one another. This relationship will cease to exist after the purpose of the initial relationship has been fulfilled (Lin, 2011; Zhang & Zhou, 2014).
The influence of yin yang is visible in guanxi, for it normally contains the positive yang energy. This is
due to the fact that guanxi when maintained, comes with benefits and instruments, e.g. access to resources and valuable knowledge and information, a member is seeking when starting such a relationship. This positive side of guanxi can be treated as an asset, a valuable resource that can improve competitive advantage (Lin, 2011; Zhang & Zhou 2014). As previously mentioned, yin yang can change into one another so guanxi ties can also change into a liability, loaded with a negative energy yin. This happens when a change in actors takes place, or the cost of maintaining this becomes a burden (Zhang & Zhou, 2014). However, when a guanxi tie is maintained properly, and an actor fulfils its reciprocal favours and duties, the concept contains positive energy and benefits.
Bearing this in mind, guanxi then becomes social capital and to Chinese firms it is closely linked to daily
life (Lin, 2011). Chinese constantly seek to extend their guanxi ties and is therefore more than open to foreigners to enter these circles. When doing business in China or with the Chinese, it is necessary to first establish guanxi ties for this is a distinct part of their business behaviour. As Vanhonacker states: “In the West, relationships grow out of deals. In China, deals grow out of relationships. The cultivation of guanxi is an integral part of doing business” (Vanhonacker, 2004: 49). Informal settings are important for relationship
building (Fang, 2012). In China, there is a sharp contrast between formal office work and the informal environment after work. The informal milieu executives and subordinates visit range from restaurants to karaoke bars. Employees drink, chat and boundaries and hierarchies between subordinates and their supervisors become less rigid. During these informal events, individuals do not have to be afraid to lose mianzi, or face/respect, with others. Therefore, one can say that this informal setting is an extremely important aspect in the process of relationship building (Fang, 2012).
Exchanging guanxi is an informal happening and is different than a normal business exchange (Zhang &
Zhou, 2014). Return on investment are not delivered directly after a guanxi ‘transaction’, and in other cases may never be delivered (Zhang & Zhou, 2014). Thus, implying guanxi relations are also dependent on trust (Lin, 2011). This corresponds with a case study conducted by Spigarelli et al. (2013) on the integration of Chinese cross-border M&A, stating behavioural attitudes are related to the development of trust and relational capital. Personal bonds, i.e. mixed guanxi ties, create trust and reciprocity. This furthermore creates mutual understanding and acceptance of different behaviour and styles. Members of the organisation need to combine their know-how and operate as a single body (Spigarelli et al., 2013).
As the guanxi network forms a large part of Chinese business culture, it can also rub off a positive on the
sociocultural integration process in a foreign country. When looking at Hofstede’s six dimension model, it states that the Netherlands scores high on the dimension of indulgence (IVR), meaning that the Dutch like to enjoy life. The Dutch also score low on the masculinity index (MAS), reinforcing the fact that in the Netherlands culture prevails focussing on doing things that one likes as a job. As many guanxi ties are built in informal settings, the Dutch are likely to enjoy these outside the office meetings so develop informal relationships the Chinese way. Furthermore, both the Chinese and the Dutch score low at longterm orientation (LTO), meaning that both cultures are pragmatic of nature and are acceptant of societal change. Based on these two reason it is likely that the Dutch will be acceptant of different cultural aspects, and are likely to enjoy to development of guanxi ties with their new Chinese colleagues.
Based on the prior discussion, guanxi ties can serve as a tool too strengthen and enhance the integration
process in the Netherlands. Therefore, the following hypothesis is suggested:
HYPOTHESIS 3 Establishing guanxi ties is positively related to a Chinese M&A of a Dutch firm and its post-deal sociocultural integration.
Chinese Leadership and Management Style
The Chinese approach towards leadership and management is different than the Western approach. Many of the aspects that are typical for the Chinese leadership and management style found their origin in Confucianist and Doaist thinking. Key aspects of Confucianism as the societal order, hierarchy and harmony play key roles, but also the concepts deriving from Daosim as a sort of passive, harmonious, invisible kind of
leadership/management style that is so typical for the Chinese. Chinese employees focus of social status and guanxi, value ‘person’ over ‘thing’ (i.e. the virtue of yì (義) righteousness/justice), and weigh the collective over the individual (Zhu & Huang, 2007). Other Confucian virtues of rén (仁) humaneness/goodwill, lǐ (禮) proper rite, zhì (智) knowledge and finally xìn (信) integrity, further characterise the Chinese work ethics. These stress working hard in school and at work, loyalty and dedication, but also frugality, modesty and humility (Rarick, 2007).
As mentioned in the previous section Hofstede regards the East a collective culture, whereas the West are
regarded as more individually focussed. Even though Fang (2012) states that this view is too generalised and static, it is true that in Western countries the individual is valued over the collective when comparing this to China. Through the rapidly changing society and globalisation, China is ‘westernising’ and becoming less focussed on the collective. The statement of Deng Xiaoping “to get rich is glorious” symbolises a transition away from tradition, moving toward a sort of looking-out-for-number-one mindset. However, even though the transition of Chinese culture is happening, some of the cultural values are so deeply rooted that they are persistent. Meaning that the concept of collectivism is not completely faded away. Thus, in China individuals are still not regarded as important as the group, and therefore the needs of the individual may be sacrificed in order to maintain or realise group needs (Rarick, 2007).
This aspect however does have its negative consequences. Caring more for the collective rather than the
individual is acted out as a form of harmonious leadership. Maintaining the harmonious state within the firm is created among others by a sort of passive management style (Zhu & Huang, 2007). The leader of a group therefore can display ren (仁), i.e. ‘goodwill’ and being kind to employees. Traditionally, valuing kindness, loyalty and dedication over the performance of an individual (Rarick, 2007). Consequently, when Chinese are facing a certain problem in the office, they are more likely to ‘muddle through’ rather than facing the problem directly and avoiding misunderstandings (Spigarelli et al., 2013).
Furthermore, Chinese leadership and managerial approach can be classified as authoritarian with an
expectation of hardworking employees (McElhatton & Jackson, 2012). The Chinese are practical and place emphasis on the effort and education of an individual (Wong, 2015). Therefore, the general perception of the hardworking Chinese is not misplaced (Wong, 2015). Also, the interdependent relationships, guanxi, of the Chinese society provides every person with a role to fulfil in order to maintain social harmony. Within firms this concept provides a clear system of hierarchy, and differentiates from the West where the culture is more egalitarian. A Chinese manager expects each employee to fulfil this role to the best of his or her ability in order to function as best as possible for the group and in turn the organisation. The managing role is there to maintain the harmony of the group. This morality, benevolence style was balanced with an authoritarian role consisting of a absolute exercise of command and control and demand obedience from their subordinates (McElhatton & Jackson, 2012).
This leadership and managing style differs from the Dutch style. More and more Dutch organisations
become proud that their firms are non-hierarchal and pride this equality within the office. The distance between a partner and a subordinate is therefore almost non-existent in large firms as KPMG in the
Netherlands. This style of managing forms friendly relationships in the office which leads to motivating your colleagues during work. This corresponds with the femininity of Dutch culture, i.e. the will to enjoy life and work that became visible in the Hofstede six dimension model in the previous section. Furthermore, a both authoritarian and benevolent style of leadership and management will most likely not mix well with the style the Dutch are used to, as the culture is highly individual and as McElhatton and Jackson (2012) state these characteristics of Chinese leadership and management style are “an anathema to the Western liberal individualism that suffuses most leadership scholars’ worldviews”. According to the authors, the concepts of authority and benevolence are to the West not complementary as a Chinese would embrace these concepts, rather to the West these are antithetical.
Thus, when a Chinese firm acquires a/or merges with a firm in the Netherlands, these two styles of
leadership are likely to form obstacles. As discussed previously, strong leadership is needed in order to direct the organisational and cultural acclimatisation during the integration process, but also align expectations of both the Dutch and the Chinese firm (Olie, 1994). As (Stahl & Voigt, 2008) state, the integration process needs to be carefully planned and communicated to the staff. If Chinese communication style differs too much from the Dutch style, this will cause obstacles and friction which will lead to an ineffective sociocultural integration process (Spigarelli et al., 2013). Even though the leadership and management style of the Chinese is changing due to globalisation, however, this style is still evident to date (Rarick, 2007) and will form an obstacle in the Netherlands. Both countries differ too much on the dimensions on the interpretation of authority, including harmony and benevolence, as well as communication style. For this reason, the following hypothesis is proposed:
HYPOTHESIS 4 Chinese leadership/management style has a negative effect on sociocultural integration.
Method
The model displayed in figure 3 demonstrates the conceptual model that will guide the research of this study, and is composed of the four proposed hypotheses. It focuses on the outcome of M&A performance through synergy realisation and knowledge transfer. As previously discussed cultural differences can form an obstacle when the buyer wants to acquire know-how and other objectives during an M&A. Therefore, the effect of the independent variable, national cultural differences, guanxi and Chinese leadership and management style, can be either positive or negative on overall M&A performance. However, if this is mediated by a well-organised and planned sociocultural integration process, it can result in greater results in M&A performance. This effect is in turn moderated by the relatedness of both parties prior the M&A.
Figure 3 depicts this construct in a model, showing the independent variables effect on the dependent
variable through sociocultural integration, the mediator. The overall effect is moderated through the prior relatedness of both parties.
Figure 2. Hypothesised conceptual model of the influence of Chinese cultural factors on sociocultural integration and M&A performance.
Sample
This study examines the extent to which Chinese cultural factors influence the post-M&A integration and its overall performance. In order to measure this, hypotheses were developed on the basis of an in-depth literature review. A detailed online survey was designed in English to gather information on the topic (Appendix I). The data was collected through the non-probability sampling technique, i.e. convenience sampling. All data were collected in the Netherlands in 2015.
Respondents for the online survey consist mainly of individuals working for Dutch firms acquired by
Chinese organisations, as the integration process takes place on every level within the firm, from senior management level to subordinates. Each of the employees have experienced the integration process of the M&A on a different level. The experience of the integration process is therefore a subjective occurrence. In order to obtain an overall overview on whether cultural factors may be of influence on the integration process, it was necessary to include external parties in the online survey. Thus, besides members of an acquired or merged organisation, data was collected from individuals specialised in advisory of post-M&A integration processes as well as legal, consultancy and governmental organisation and associations.
Table 2. Positions of survey respondents Moderator Relatedness of firms Independent Variable: Guanxi Leadership Mediator Sociocultural Integration Dependent Variable M&A Performance +(H1) +(H2) +(H3) -(H4) Position Frequency (N=31)
Senior Management in Acquired/Merged firm 3
Middle Management in Acquired/Merged firm 3
Employee in Acquired/Merged firm 7
Lawyer in M&A deal 10
Consultant in M&A deal 4
In total, 16 Dutch firms acquired by Chinese organisations in the Netherlands from 2007 until 2014, were
invited to participate, with a response rate of 40%. A list of these firms was created on the basis of MergerMarket. Out of the 40%, 2 firms responded positively to the invitation and were sent the detailed survey regarding the influence of cultural factors on Chinese cross-border M&A. The other 2 firms of the responded that both were not willing to participate in the research. 33 consultancy and law firms and investment organisations specialised in M&A were approached, with a response rate of 48,8%. Out of this 48,8%, members of 8 organisations were willing to participate in the online survey and 8 were not. Finally, a total of 31 respondents completed the survey sufficiently, containing the minimum sample size of n = 31 that could be used for the testing of the hypotheses. Table 2 displays an overview of the positions of the participants. Most of the participants were active as lawyers during and after the M&A deal. The second largest part of the respondents were subordinates working in acquired firms. A total of 18 participants were working in a acquired or merged firm by a Chinese firms, as is visible in table 3. It also shows that 18 of these firms were active in a similar industry prior M&A. 12 of the firms had previous experience in the form of a strategic alliance, joint venture of M&A. 23 firms out of the 31 are privately owned.
Table 3. Control variables of sample N = 31
Measures
The variables in this study were measured subjectively, in order to understand their personal perception and feelings towards Chinese-Dutch acquisitions, rather than the trying to obtain data on the objective reality. When understanding behaviour and changes within a firm, it is necessary to understand the an individual’s subjective feelings as these are more influential on their according behaviour.
The dependent variable in the conceptual model to be tested are the national cultural differences, and the
yin yang derived cultural factors guanxi ties and leadership and management style. To measure guanxi, questions regarding trust, visibility of interpersonal relationship outside the office were used, based on the former studies on guanxi (Lee & Dawes, 2005; Ai 2006). Leadership and management style were measured in terms of communication ability, whether the management of the acquired firm communicated directly or indirect. Changes in hierarchy and approachability were two measures to find out whether the Confucianist Frequency (N=31)
Buyer is a State-owned company 9
Buyer is a Privately owned company 23
Employed in a by Chinese acquired/merged firm 18
Both firms active in same industry 18
leadership style had an effect on the acquired firm, but this variable was also measured in terms of a harmonious, humble and modest approach of the new management (McElhatton & Jackson, 2012).
The effect of the dependent variable ‘culture’ is mediated by the sociocultural integration. This is
measured by the extent to which the newly formed firm has been able to create a new identity and a common, shared culture (Stahl & Voigt, 2008). Questions regarding the expectation towards the integration plan milestones.
M&A performance is the independent variable in this study. Performance can be measured either
objectively, i.e. in quantitative terms, or subjectively. In this survey the subjective measures of expectations of synergy realisation outcomes were employed. Respondents were asked to what extent the desired (by the buyer) knowledge transfer was fulfilled. Thus, overall M&A performance was measured by means of were the fulfilment of expectations. These measures were based on the study by Stahl and Voigt (2008), who have measured M&A performance among others in terms of synergy realisation.
Moderator. The moderator is the relatedness of both parties. To measure this, questions were asked
regarding whether both parties were active in the same industry or in a similar industry. This measure was based on the conceptual model and moderator proposed by the study of Zaheer et. al (2013) and Stahl and Voigt (2008).
Controls. As the performance of Chinese M&A and sociocultural integration can be affected by other
variables than Chinese cultural factors, and the moderator of its relatedness. This study controlled for a series of variables that may affect the overall M&A performance and sociocultural integration process. This was done by asking questions related to how much time has passed since the M&A deal was closed. This provides knowledge on different stages of integration processes. If much time has passed since an M&A, the results of the survey will provide richer, more reliable data on the dependent variable of M&A performance. Measuring the similarity firm size by looking at the number of employees and the sales volume of both parties (Stahl & Voigt, 2008; Zaheer et al., 2013). Another control used in the survey was questioning the respondents whether the Chinese acquiring firm is state-owned or privately owned. The last variable this study controlled for was the measurement of previous experience in M&A, strategic alliances and joint venture activities of the buyer party, which provides them with experienced know-how and can enhance the integration process and overall M&A performance (Zaheer et al., 2013).
Procedure and Results
Data Preparation
The online survey was developed in a way that there were no counter-indicative items measured. However, as some of the questions were coded wrongly as values 20-25, rather than 1-5. These were therefore not
measured as counter-indicative items but merely coded in different values. Therefore, recoding needed to take place for these items in order to prepare the data for analysis.
Missing data was dealt with through replacement of the missing values based on the means of the rest of
the data for these particular items. After this, a frequency check was run so as to identify errors in the data. After the recoding was done for the data, a Cronbach’s alpha was run in order to determine whether the
questions asked for each construct were internally consistent. A total of 31 participants completed the online survey, therefore a sample of n = 31. Table 4 displays an overview of all the items and their appropriate Cronbach’s Alpha.
M&A Performance was measured by two subjective questions on a 5-point Likert scale ranging from ‘far
short of expectations’ tot ‘far exceeds expectations’. The Cronbach’s alpha was run and a score of α = 0.597 proved that the construct was measured in questionable manner. This is due to the fact that one of the two questions was asked too ambiguously. The construct of M&A performance is merely measured by means of revenue synergy realisation and knowledge transfer. Both concepts are measured in an ambiguous manner, as the question needed to be answered on a 5-point Likert scale rather than answering the question in terms of e.g. revenue categories. These questions were developed this way for two reasons, the first was to not invade on privacy of the respondents. The second reason was that knowledge transfer is difficult to measure in terms of categories. For consistency reasons the questions regarding M&A performance were therefore measured on a Likert scale, resulting in a questionable Cronbach’s alpha value. Due to the limited number of viable alternatives, the construct was continued. Yet this issue has been taken into consideration in the results.
Table 4. Constructs, Items and their Internal Validity
Sociocultural integration was too measured with a 5-point Likert scale, from ‘not at all’ to ‘above
expectations’. The construct was measured in the survey by a total of eight questions. By omitting one question, the internal level of consistency was good with an α = 0.745, as determined by the Cronbach’s alpha. By maintaining all seven question in this construct and merely omitting one question, sociocultural integration will be measured with rich fairly reliable data. In this study, this method is chosen over a higher reliability rate of the construct.
The construct of guanxi, consists of four questions regarding guanxi. Each was measured on a 5-point
Likert scale, from ‘strongly agree’ tot ‘strongly disagree’. As determined by the first run Cronbach’s alpha of
N Items Cronbach’s Alpha
Guanxi 31 4 0.759
Leadership/Management 31 4 0.505
Chinese Cultural Factors 31 11 0.645
Relatedness 31 1
-Sociocultural Integration 31 7 0.724
