Year of Graduation
The Role Cultural Distance in Cross-Border Acquisitions in Russia
Faculty of Management
Russia has a great cultural heritage and has passed through a long historical path. Most of foreign companies entering Russian market are facing a lot of difficulties due to complexity of the culture. The majority of failures in terms of mergers and acquisitions have occurred because of cultural differences and misunderstandings. Currently in Russia there are no studies existing that focus on such an important factor of acquisitions as culture. This paper will focus on the M&A determinant "cultural distance" between the country of acquiring and acquired company.The main purpose of this study is to identify the impact of cultural distance on the success of cross-border acquisitions in Russia relatively to other factors of acquisitions. Objectives of the research include examining the relationships and interdependencies between the cultural distance and other factors of cross-border M&As; defining the significance of other success determinants of transnational acquisitions in Russia; and developing the recommendations for managers of international companies, potentially considering entering the Russian market.The key method of this research is the regression analysis, which includes the determinants of cross-border acquisitions determinants as variables in regression model.The study was conducted on the sample of 94 cross-border acquisition deals in Russia for the period starting from 2011. Thomson ONE Database has been used for the data on the deals and its financials, and the results of GLOBE project have been applied to obtain the measurements of cultural distance between countries.The results of the research present that, firstly, cultural distance negatively affects the success of cross-border mergers and acquisitions in Russia. That means that cultural difference is one of the obstacles for foreign companies entering the Russian market.Secondly, it is important to note that the study has found no positive relationship between the experience of foreign acquirer on Russian market and the success of dealing with the cultural distance, which means that even experienced companies should pay considerable attention to issues of cultural integration.Thirdly, no negative effect from diversification in acquisition has been identified in the Russian market. This result once again shows the complexity of Russian culture, presenting that if the acquirer manages to deal with cultural barriers, diversification will not be such an issue.And finally, it has been found out that acquiring public companies produces greater success than acquiring private ones. It is also driven by the peculiarity of Russian business environment, as private status of organizations brings more uncertainty for the acquirer and it is almost impossible to gain any reliable information on private firm’s performance and financials.