M&A in the Nordics project describtion
Research project proposal in Nordic corporate culture and M&A Preuss, Björna 01/02/2016 a
Economics Department, Radboud University – Netherlands
Department of Int. Management and Economics, Copenhagen Business School - Denmark,
Abstract This paper aims to give the reader an overview of a research project carried out at the Radboud University, Netherlands in cooperation with the Copenhagen Business School and the University of Applied Sciences Flensburg. The research is located in the field of management, culture and corporate finance research. The outcome will be to see whether and to which extent the Nordic corporate culture supports the post-merger integration process. The sample of research will be the 30 biggest companies of each of the Nordic countries (Sweden, Denmark, Norway and Finland). Keywords: Nordic; Scandinavia; Corporate; M&A; Culture; Merger; Acquisition 1.
When talking about mergers and acquisitions (in the following also named M&A), an important part on which research has a look on is the post-merger integration. (Haspeslagh & Jemison, 1991) When it comes to the postmerger integration it is important to describe and understand this process and with that the actions in order to gain value through this process. Already Kitchning (1967) stated that the risk of the failure of mergers and acquisitions was highest when facilities of companies where put to gather in order to profit from the economies of scale. With their study, Birkinshaw et al. (2000) showed that earlier findings about the impact of organizational behavior on mergers and acquisitions (e.g. Buono & Bowditch (1989); Janson (1994); Sales & Mirvis (1984)) were © Björn Preuss (2016)
concerned. Based on a survey, Lindell & Arvonen (1996) found out that managers in the Nordics where less focused on the task but therefore more concerned about their employees. According to (Zander, 1997) respondents from the Nordics preferred a coaching model over a leadership model based on direction. Also House et al. (2004) found out in his GLOBE study that there is a similarity in corporate culture of the Scandinavian companies and a difference to the rest of Europe, especially to southern and eastern Europe. This leads to the following research question:
Does Nordic corporate culture has a positive influence on the post-merger integration process?
And the following sup-questions: 1/8
M&A in the Nordics project describtion o Does the Nordic corporate culture supports economic development? o How influences corporate culture the M&A process? o Which influence has the Nordic corporate culture in specific? o Can this corporate culture also be used outside the Nordics? This research question focuses on a business phenomenon at various companies. It is supposed to give a better understanding and should be able to be generalized. (Fisher, 2010, p.36)
equilibrium modulation to specify the main influential factors for the raised question. This technique is widely used in combination with qualitative surveys. The advantage with this ways of data collection is that the data can be collected from multiple locations. Therefore it can be better collected and is easier to be analyzed (Bryman & Bell, 2011, p.651). Furthermore the fact that culture is sth. hidden, makes this method suitable to discover differences in cultural aspects. The sample consists of large companies in Sweden, Denmark, Norway and Finland which are active
This study builds on prior research to postmerger integration studies as well as on studies about the Nordic management culture through an analysis of firms from the Nordic blue chip indices.
in various industries. As peer group the non Nordic companies of the EuroStoxx
(European blue chip index) will be used in order to show differences between the Nordic companies and the rest of Europe. Here the
focus should lay on how the culture of the
The method that is used contains an approach to collect quantitative and qualitative data.
2.1. Data Collection
who mentioned that research of culture should
The primary data will be collected by using
be close to the actual experience, this means
text mining techniques. This method will
that it is crucial for the success of the study to
enable the researcher to collect a wide amount
look directly on where the culture develops, in
of qualitative data from different sources and
this case the companies itself. In order to get a
analyze the hidden meaning of statements.
more complete view also secondary data will be
qualitative and quantitative analysis and is in the core driven by statistics. It makes it possible to discover patterns across a group or sub group of texts and with that finds cultural aspects that are in common. The approach that turns the qualitative data into quantitative data enables the researcher to use structure
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integration process. According to Geertz (1984)
To measure the impact of the cultural aspects on the economic performance of countries or the M&A activity of the companies in specific, data from data services like Bloomberg will be used. The quantification of the cultural data makes it possible to combine findings of this with
M&A in the Nordics project describtion reporting’s of M&A deals. 3.
This section will present the main concepts that will be used in order to answer the research question. In addition, core literature will be presented. 3.1. Nordic Corporate Culture When talking about the Nordic corporate culture it is important to first define what is meant by the Nordic region. In the past the term Scandinavia meant the countries Denmark, Sweden and Norway. (Nordstrom, 2000; Bondeson, 2003) In more recent definitions the term Scandinavia is used exchangeable for the term Nordic and it includes also Finland. (Bondeson, 2003) This more new definition will be used by this study. An Important impact on the Nordic corporate culture had the stakeholder theory from Freeman (1984). Corporate culture is according to Weber (1996) a system of believes, values and assumptions that are shared among the managers of an organization and that are influencing the way how the organization is managed. Gjølberg (2010) showed that in Scandinavia cultural norms and institutional structures that encourage the relationship between stakeholders and the companies are dominant. The structures in companies from the Nordics follow mainly a participative culture. (Grenness, 2003) The organizations follow an approach of a high degree of employee engagement and flat hierarchies. (Morsing, Midttun, & Palmas, 2007; Bondeson, 2003) According to Midttun et al. (2006) companies from the Nordics follow a culture of combining economic interests within a broader societal interest. Furthermore Scandinavian companies show an involvement of the © Björn Preuss (2016)
employees in the management by having participations from the employee side in the board. (Sinani et al., 2008) The whole corporate governance in the Nordics is stakeholder orientated and the corporate ownership is concentrated. (Carlsson, 2002; Carlsson, 2007) A high percentage of owners are the state (Porta et al., 1999) by foundations and families (Carlsson, 2007). Research showed furthermore that owners in this case behave not as individuals who are just hunting for the short term profit rather than having a long term interest in the company (Strand & Freeman, 2013) Mintzberg et al. (2009) showed that in the Nordics is a high conformity what theory of stakeholder management says and what is done in the practical world. Researchers like Kakabadse et al. (2005) claimed that the stakeholder approach nearly dominated the teaching at universities in Scandinavia as well as that the approach has an important status in Scandinavian management since the 1960’s. 3.2. Influence of Corporate Culture on PostMerger Integration. Today’s knowledge shows that corporate culture is a key concept for the success of mergers and acquisitions. (Weber et al., 2012; Stahl & Voigt, 2008) According to Claus (2006) post-merger integration has to focus mainly on culture, talent management and retention and adapting to local cultures in order to be successful. Brown et al. (1989) argued that failure is caused by the combination of economic and cultural factors that influence a merger. The stream of research that focused on the post-merger integration investigates mainly the cultural fit between the buying and selling firm and how this influences the success of the merger. (Weber, 1996; Vaara, Sarala, Stahl, & Björkman, 2012; Stahl & Voigt, 2008) Claus 3/8
M&A in the Nordics project describtion (2006) stated in his research that managers and scholars can’t see the post-merger process separated form each other. Instead of that there is a need for an understanding of the whole process. Haspeslagh and Jemison (1991) showed that the aspect of culture which is important should already be contained in the pre-merger process and with that in the price negotiation.
process, the research project will follow. At the end stands the answer of the research question. See for the detailed process figure 1.
3.3. Post-Merger Integration When looking at the post-merger integration process, research showed that already in the initial phase after the announcement of the merger, many connections, for the employees as well as the managers, does not exist anymore because of an organizational change. (Lauser, 2010) People in the organization can’t predict the outcome of interactions in the long run due to change. (Stacey, 1995) This leads to instability and uncertainty. By looking at mergers and acquisitions many M&A scholars stated that differences rather than similarities between merging organizations create synergies. These differences can give them access to unique and valuable resources. (Vermeulen & Barkerna, 2001) But important in order to realize this benefits is that the differences are not to huge. Otherwise the differences can harm the successful transfer of capabilities. (Björkman, Stahl, & Vaara, 2007) One reason for the arising problems can be that there is a bigger difference in culture. Cultural differences make it more likely that the different styles of management and organizational practices are not compatible and cause therefore problems in the implementation process. (Vermeulen & Barkerna, 2001; Slangen, 2006)
This section will summarize briefly the © Björn Preuss (2016)
Figure 1 Time table 4/8
M&A in the Nordics project describtion The activity number 1 will be the overall project design that focusses on screening current research as well as elaborate possible methods and journals for publication. The activities 2 deals with financing of the project and this activity will be held again during the mid of the 2nd PhD year. At third there will come the paper number one which will be core of the research until the end of 2016. It need to be mentioned that some of the work e.g. method will be able to be used in further papers as well so that this paper will take some more time to be developed. Ach paper will contain the sub steps of Literature study, data collection, analyses writing and publication whereby it is expected that the literature study will take less time in later papers. The activity 4 is named “conference” and is spread over the whole PhD project. This means that there will always be some time slots to me engaged in conferences and speaking engagements in order to present the outcome of the research to the public as well as discuss current research with other academics. Activity 5 and with that paper two will dominate the process from the end of 2016 until the mid of 2017 and will automatically lead to the work on paper 3 and 4 by which each of the later paper will need less time to be developed since it is planned that the papers build upon each other. The last activity is the final summary of the work. The process is planned with some time space if sth. does not work out as planned or if the publication process takes longer then expected.
process like described above and it might be that during the process new questions might arise that can be answered and therefore might be useful to investigate. 5.
Product of the Research
The Final product of this research will be 3 to 4 publishable paper that deal with the sub research questions aiming to describe and explain
corporate culture and M&A. Paper one will focus on the connection between the Nordic corporate culture and the effect on the economic performance of the Nordic countries. The second paper will focus on the effect that corporate culture has on post-merger integration. The last paper will deal with the specific relation that plays Nordic corporate culture when it comes to the post-merger integration. The final paper will summarize the main outcomes of the whole research project and will address further research questions.
5.2. Expected Results It can be expected that based on previous research the culture of the companies have a big impact on the success of the merger. However this study looks more on how the culture supports the post-merger integration instead of looking on how different cultures work with each other. The study is therefore more comparing the effect that different corporate cultures have on the post-merger
When reading this process it is crucial to have in mind that research is not a linear © Björn Preuss (2016)
integration process. Since the Nordic corporate 5/8
M&A in the Nordics project describtion culture is strongly influenced
stakeholder approach it can be assumed that the impact is positive and that mergers in companies with a strong peculiarity of this corporate culture have more successful mergers
Furthermore this study expects to get insight in what makes this corporate culture so successful when it comes to the post-merger integration process. It is foreseeable that the results of this study will have an impact on how companies manage their mergers and that they might try to implement the Nordic corporate culture. They might flatten the hierarchy and empower their employees in order to be more flexible when it comes to the change processes after the merger. This fact could lead to future research that should have a look on whether companies can adopt the Nordic corporate culture without facing problems
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