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Are the extent and effect of psychic distance perceptions symmetrical in cross-border M&As? Evidence from a two-country study

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Abstract

The concept of psychic distance has several entrenched assumptions that have not been put to sufficient systematic scrutiny. We address this gap by investigating the assumptions of symmetry (i.e., whether psychic distance from Country A to Country B is the same as that from Country B to Country A) and discordance (i.e., whether differences in psychic distance between two countries always lead to lack of fit) of psychic distance in cross-border mergers and acquisitions. We propose a new framework, which differentiates between the extent (i.e., the degree to which two countries are perceived to be similar/different) and effects (i.e., the degree to which distance perceptions create favorable or unfavorable attitudes and responses) of psychic distance perceptions. We argue that relative status positions affect extent and effects of psychic distance. To test our predictions, we collected data through policy-capturing studies in Sweden and China. Our findings reveal that both the extent and the effects of psychic distance perceptions are asymmetric. We also found that psychic distance perceptions create unfavorable (favorable) attitudes among Swedish (Chinese) respondents toward Chinese (Swedish) acquirers. Our follow-up examination confirms that relative status positions are a key driver of these results.

Abstract

Le concept de la distance psychique repose sur plusieurs hypothèses ancrées qui n'ont pas été suffisamment soumises à un examen systématique. Nous comblons cette lacune en étudiant les hypothèses de symétrie (c’est-à-dire, si la distance psychique du pays A au pays B est identique à celle du pays B au pays A) et de discordance (c’est-à-dire, si les différences de distance psychique entre deux pays mènent toujours à un manque d'ajustement) de la distance psychique dans les fusions et acquisitions transfrontalières. Nous proposons un nouveau cadre conceptuel qui établit une distinction entre l’étendue (c'est-à-dire, le degré auquel deux pays sont perçus somme similaires ou différents) et les effets (c’est-à-dire le degré pour lequel les perceptions de distance créent des attitudes et des réponses favorables ou défavorables) des perceptions de la distance psychique. Nous considérons que les positions relatives au statut influencent l’étendue et les effets de la distance psychique. Pour tester nos prévisions, nous avons recueilli des données au moyen d’études policy-capturing en Suède et en Chine. Nos résultats révèlent que l'étendue et les effets des perceptions de la distance psychique sont, tous les deux, asymétriques. Nous constatons également que les perceptions de la distance psychique créent des attitudes défavorables (favorables) chez les répondants suédois (chinois) envers les acquéreurs chinois (suédois). Notre étude de contrôle confirme que les positions relatives au statut sont un facteur clé de ces résultats.

Abstract

El concepto de distancia psíquica tiene muchos supuestos arraigados que no han sido puestos a un escrutinio suficiente. Abordamos esta brecha a través de investigar los supuestos de simetría (es decir, si la distancia psíquica entre el País A al País B es la misma que del País B al País A), y discordancia (es decir, si las diferencias en la distancia psíquica entre dos país siempre conllevan a la falta de ajuste) de la distancia psíquica en fusiones y adquisiciones transnacionales. Proponemos un nuevo marco, el cual diferencia entre el grado (es decir, el grado en las que percepciones de distancia crean actitudes y respuestas favorables o desfavorables) de las percepciones de distancia psíquica. Argumentamos que las posiciones relativas de estatus afectan el alcance y los efectos de la distancia psíquica. Para poner a prueba nuestras predicciones, recogimos datos mediante estudios de captura de política en Suecia y China. Nuestros hallazgos revelan que tanto el alcance como los efectos de las percepciones de distancia psíquica son asimétricos. Encontramos también que las percepciones de distancia psíquica crean actitudes desfavorables (favorables) entre los encuestados suecos (chinos) hacia adquisidores chinos (suecos). Nuestra examinación confirma que las posiciones de estatus relativo son un factor clave de estos resultados.

Abstract

O conceito de distância psíquica tem vários pressupostos arraigados que não têm sido expostos a um suficiente escrutínio sistemático. Nós abordamos essa lacuna ao investigar as hipóteses de simetria (ou seja, se a distância psíquica do país A para o país B é a mesma do país B para o país A) e discordância (ou seja, se as diferenças na distância psíquica entre dois países sempre levam a uma falta de ajuste) de distância psíquica em fusões e aquisições transfronteiriças. Propomos uma nova estrutura que diferencia percepções de distância psíquica na extensão (ou seja, o grau em que dois países são percebidos semelhantes/diferentes) e nos efeitos (ou seja, o grau em que as percepções de distância criam atitudes e respostas favoráveis ou desfavoráveis). Argumentamos que as posições de status relativo afetam a extensão e os efeitos da distância psíquica. Para testar as nossas previsões, nós coletamos dados através de estudos de captura de políticas na Suécia e na China. Nossos resultados revelam que tanto a extensão quanto os efeitos das percepções da distância psíquica são assimétricas. Nós também descobrimos que as percepções de distância psíquica criam atitudes desfavoráveis (favoráveis) entre os entrevistados suecos (chineses) em relação aos adquirentes chineses (suecos). Nosso exame de acompanhamento confirma que as posições de status relativo são um fator essencial desses resultados.

Abstract

心理距离的概念有几个根深蒂固的假设一直没进行过足够的系统性的审查。我们通过调查对称假设来解决这一差距 (即是否从A国到B国的心理距离与从B国到A国一样) 和跨国并购心理距离的不一致 (即是否两国之间心理距离的差异总是导致缺乏契合) 。我们提出了一个新框架, 将心理距离感知的程度 (即两个国家被认为相似/不同的程度) 与效应 (即距离感知产生有利或不利的态度和反应的程度) 区分开。我们认为相对的地位位置影响心理距离的程度和效应。为了测试我们的预测, 我们通过在瑞典和中国的政策捕获研究收集数据。我们的调查结果表明, 心理距离感知的程度和效应都是不对称的。我们还发现, 心理距离感知在瑞典 (中国) 针对中国 (瑞典) 并购者的受访者中产生不利 (有利) 的态度。我们的跟踪调查确认相对地位位置是这些结果的一个关键驱动因素。

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Notes

  1. By merging organizations, we refer to those firms that engage in an M&A. Thus, in cases where the transaction involves one firm taking over the other (fully or partially) and qualifies more as an acquisition than a merger, the term “merging organizations” refers to both acquirer and acquired unit.

  2. This is simply because of the fundamental contention of Social Identity Theory, which argues that individuals have the inherent inclination to maintain a favorable self-concept (Tajfel, 1982) and being identified with a similar other would not serve this purpose as long as the focal actor is similar to that other in terms of a negative self-concept or inferior social position. Based on the same logic, it is plausible to claim that a dissimilar other could be seen as more attractive insofar as s/he is dissimilar because of his/her more favorable social position and/or superior skills and capabilities.

  3. More recent studies viewing cultural differences as a “double-edged sword” in cross-border M&As consider differences a source of learning new skills and capabilities. We fully agree with this contention but would like to emphasize that this argument is based on a different conceptual foothold (i.e., learning and innovation) that operates on a different level of analysis (i.e., the organizational level).

  4. These criteria are voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law and control of corruption. Detailed information on the methodology and full data sets are available online at www.govindicators.org.

  5. The data are retrieved from http://hdr.undp.org/en/statistics/.

  6. Although there is a noticeable difference between Swedish and Chinese respondents regarding average age and work experience, we control for these variables. Their role is significant only in one of the models we will report in the next section.

  7. Both Dow and Karunaratna (2006) and Håkanson and Ambos (2010) used linguistic distance as a particular dimension of psychic distance stimuli, whereas we instead opted for using “relationships and ways of communication” to capture the extent of differences in terms of social interaction between two countries. Even though we acknowledge the value of using linguistic difference as a psychic distance stimulus (especially when secondary data are used), we believe that relationships and ways of commsunication constitute a more direct and broader measure for capturing corresponding differences regarding social interaction. It is also important to note that we decided not to include differences in terms of education (cf. classical definition provided by Johanson and Vahlne, 1977) since we believe such differences are more relevant for other IB phenomena such as international market segmentation, global talent management, and HRM practices. Thus in line with the suggestion of Zaheer et al. (2012), we preferred to keep our distance measures as germane as possible to the issues/processes we focus on the present investigation.

  8. Compared with classical repeated measures ANOVA and ANCOVA methods, LMMs are more effective in dealing with missing data, as well as handling unevenly observed repeated measurements.

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Acknowledgements

The authors would like to acknowledge the kind help of Zhongming Wang, Adis Murtic, Karin Wiström, Jack Zhou, Peilin Du, Qikun Wang, and Abby Zhou with data collection. The authors thankfully acknowledge financial support from the Jan Wallander, Tom Hedelius, and Tore Browaldh Foundation.

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Authors and Affiliations

  1. Uppsala University, Uppsala, Sweden

    H Emre Yildiz

  2. Aalto University School of Business, Helsinki, Finland

    Carl F Fey

Authors
  1. H Emre Yildiz
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  2. Carl F Fey
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Correspondence to H Emre Yildiz.

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Accepted by David C. Thomas, Area Editor, 7 April 2016. This article has been with the authors for four revisions.

Appendices

APPENDIX 1

Table A1

Table A1 Experimental design of vignettes and textual manipulations
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APPENDIX 2

Table B1

Table B1 List of items used to operationalize constructs and reliability scores
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Yildiz, H., Fey, C. Are the extent and effect of psychic distance perceptions symmetrical in cross-border M&As? Evidence from a two-country study. J Int Bus Stud 47, 830–857 (2016). https://doi.org/10.1057/jibs.2016.27

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