This document summarizes a research paper that experimentally examines how the relative size of firms involved in a merger influences merger outcomes. It begins by providing background on the growth of cross-border mergers and acquisitions between firms from developed and developing countries. It then reviews literature on organizational culture conflicts in mergers and the role of learning. The document hypothesizes that different compositions of employees from acquiring and acquired firms (unequal vs. equal sizes) will lead to different merger outcomes. It proposes that post-merger performance deterioration will be greater when the target firm is larger due to greater cultural conflicts. The purpose is to experimentally test these hypotheses about the impact of relative firm size on merger success.

1. Who's acquiring whom? — Experimental evidence of firm size effect on
B2B mergers and marketing/sales tasks
Joon-Hee Oh a,
⁎, Linda D. Peters b,1
, Wesley J. Johnston c,2
a
Department of Marketing, J. Mack Robinson College of Business, Georgia State University, 35 Broad St. NW, Atlanta, GA 30302, USA
b
Nottingham University Business School, University of Nottingham, Jubilee Campus, Wollaton Rd., Nottingham, NG8 1BB, United Kingdom
c
Center for Business and Industrial Marketing, J. Mack Robinson College of Business, Georgia State University, 35 Broad St. NW, Atlanta, GA 30302, USA
a b s t r a c ta r t i c l e i n f o
Article history:
Received 20 January 2014
Received in revised form 29 March 2014
Accepted 29 March 2014
Available online 24 May 2014
Keywords:
Mergers
Organizational culture conflict
Size effect
Experimental methodology
A recent study has revealed a marked growth in global mergers and acquisitions between firms from developed
and developing countries. Unlike previous merger waves, however, companies in emerging markets are playing
an increasingly important role. This highlights the need for greater scrutiny of more, and diverse, aspects of
mergers. In particular, the size difference between firms involved in mergers and its impact on merger outcomes
are of interest. This paper examines whether the involvement of differing numbers of employees (either from the
acquiring firm or from the acquired firm) may influence merger success. Drawing on previous work in under-
standing organizational culture and merger dynamics, we conduct a laboratory experiment that not only con-
firms the presence of learning and conflict in organizational cultures in mergers but also presents new findings
in relation to the relative size of the firms involved.
© 2014 Elsevier Inc. All rights reserved.
1. Introduction
According to A.T. Kearney's study (Rothenbuecher & Hoyningen-
Huene, 2008) of global mergers and acquisitions (M&A), deals between
developing and developed countries grew at an annual rate of 19% since.
This far exceeded the industry average, and was four times faster than
deals conducted within either developing or developed countries
alone. More interestingly, the study found that smaller companies
from developing countries such as China, India, Malaysia, Russia, the
United Arab Emirates and South Africa are snapping up larger and
established firms in developed countries at a surprising rate. In 2007 al-
most 20% of the 2168 acquisitions recorded were driven by companies
from developing countries. Furthermore, this pattern is growing by
26% annually. Thus, rising competitor firms from emerging economies
may present a greater potential threat to established companies in de-
veloped countries, and will certainly form a much greater component
of future merger activity. We therefore call for a greater scrutiny of
the diverse aspects of mergers — in particular the size difference be-
tween firms involved in mergers and its role in determining the
mergers' outcomes.
Given the dearth of M&A research which explores the organizational
culture aspects of the merger process, and criticisms of the ability to
measure and test organizational culture (Buono & Bowditch, 1989;
Cartwright & Cooper, 1990, 1995; Clougherty & Duso, 2009; Larsson &
Finkelstein, 1999; Napier, 1988; Schweiger & DeNisi, 1991; Schweiger,
Ivancevich, & Power, 1987; Vaara, 2002; Weber & Camerer, 2003), the
work of Weber and Camerer (2003) is notable because it introduces a
procedure for growing organizational culture in a laboratory environ-
ment and examines how subjects create their “homeland languages”
in organizations (Camerer & Weber, 2008). They conducted an experi-
ment where they allowed subjects in ‘firms’ to develop an organization-
al culture, and then merged two such firms. As they expected,
performance decreased following the merger. Their study provides ex-
perimental evidence that the conflict between the organizational cul-
tures of the firms involved in a merger can be a major factor for post-
merger performance deterioration.
However, despite its significant contribution in providing experi-
mental evidence of this conflict as a reason for merger failures, their re-
search does not take into consideration the effect of relative size and
employee composition in the merger, as each merger consisted of two
employees from the acquiring firm and one employee from the acquired
firm. Indeed, Weber and Camerer (2003) found that the difference in
pre-and post-merger completion times in the merger sessions is unlike-
ly to be due to a pure group-size effect (p. 410). Therefore, their
experimental investigation on the negative influence of conflict of orga-
nizational cultures on merger outcomes rests on employee composi-
tions in post-merged firms that are symmetrical (i.e. one manager
Industrial Marketing Management 43 (2014) 1035–1044
⁎ Corresponding author. Tel.: +1 765 404 9528; fax: +1 404 413 7699.
E-mail addresses: joh8@gsu.edu (J.-H. Oh), Linda.Peters@nottingham.ac.uk
(L.D. Peters), wesleyj@gsu.edu (W.J. Johnston).
1
Tel.: +44 11584 66098.
2
Tel.: +1 404 413 7851; fax: +1 404 413 7699.
http://dx.doi.org/10.1016/j.indmarman.2014.05.016
0019-8501/© 2014 Elsevier Inc. All rights reserved.
Contents lists available at ScienceDirect
Industrial Marketing Management

2. from the acquiring firm plus one employee each from the two respec-
tive firms), and fails to reflect more diverse and different employee
compositions in post-merger firms where symmetry is not present.
In reality, mergers between asymmetrical partners are the more
common phenomena (Smeets, Ierulli, & Gibbs, 2006). Moreover, in
cross-border mergers and acquisitions by emerging market firms, it is
often the case that the acquiring firm has a smaller presence than the
target firm in the local market, regardless of its global presence
(Aulakh, Kotabe, & Teegen, 2000; Cuervo-Cazurra, Maloney, &
Manrakhan, 2007; Guillén, 2002; Uhlenbruck, Rodriguez, Doh, & Eden,
2006; Vermeulen & Barkema, 2001). According to Dackert, Jackson,
Brenner, and Johansson (2003), both groups involved in the merger ex-
pect one group to be dominant after the merger and organizational
members form perceptions about their merger partner's organizational
culture and its dominance, even prior to integration. Subsequently they
use these preconceptions to structure the post-merger reality.
Cartwright and Cooper (1993) note that when an acquired firm is the
smaller merger partner, it wholly adopts the changes that are intro-
duced by the acquiring firm. Under this particular type of merger, suc-
cess depends upon displacing the organizational culture of the smaller
partner (Pikula, 1999). Then, one might wonder what the outcome
would be if the acquiring firm was smaller than the target firm, regard-
less of the superiority of the acquirer's practices or procedures as com-
pared to the acquiring firm. This is an intriguing question to answer
considering the recent trend in global M&A that will form a much great-
er component of future merger activity.
We argue that the relative firm size of the partners — an involve-
ment of a different number of employees (either from the acquiring
firm or from the acquired firm) — has a significant influence on merger
outcomes. Our objective therefore is to examine whether the involve-
ment of asymmetric numbers of employees from the acquiring firm
and from the acquired firm would result in different findings from
those of Weber and Camerer (2003). To this end, we conducted a labo-
ratory experiment to examine equal and unequal employee composi-
tions in the post-merger firms while confirming the earlier finding on
the negative influence of conflict of organizational cultures on merger
outcomes.
2. Organization culture, size difference and merger performance
Mergers and acquisitions have been used as a market growth strate-
gy (Richey, Kiessling, Tokman, & Dalela, 2008). Moreover, mergers and
acquisitions have proven to be a significant and increasingly popular
means to maintain a competitive advantage (Anderson, Havila, &
Salmi, 2001; Nahavandi & Malekzadeh, 1988; Schraeder & Self, 2003),
even though they show only a marginal success rate (Schoenberg,
2006; Weber & Dholakia, 2000). The unpleasant observation of the
many merger failures has caught the interest of researchers and practi-
tioners, whose studies have ranged from offering traditional explana-
tions of merger failure to examining the more diverse aspects of
mergers and their role in determining merger outcomes. In this section,
we explore recent studies to develop our own understanding on merger
dynamics and sets hypotheses to test based on the understanding.
2.1. Learning aspects in mergers and acquisitions
Diversity in the dynamics of M&A's has been the focus of more re-
cent research. In particular, recent researchers, such as Heimeriks,
Schijven, and Gates (2012), note a rapidly growing stream of research
which examines acquisitions from a learning perspective, supporting
the belief that prior experience is likely to be crucial in dealing with
the complexity that firms encounter during the acquisition integration
process. Schweiger and Goulet (2005) found that in relation to organi-
zational culture, deep-level learning interventions develop constructive
employee perceptions and attitudes that are believed to enhance per-
formance in acquisitions that require human integration to achieve
synergies. Feiler and Camerer (2010) conducted an experiment that ex-
amines the conflict that can occur in a merger due to a firm's use of spe-
cialized language, or “code.” This task creates simple organizational
“cultures” by requiring subjects to develop conversational norms to
quickly refer to pictures (also see Camerer & Weber, 2008; Weber &
Camerer, 2003). This codification of experience is seen as central to
M&A integration success (Heimeriks et al., 2012).
By focusing on conflict resolution in organizational cultures as a
learning process, characterized by the establishment of a shared
“code” or understanding between team members, Peters (2012)
claimed that knowledge and ideas are not things, but emergent proper-
ties of collectives that do not need to be converted into tangible form to
add value. Knowledge can be traded for more knowledge, for another
form of intangible value (e.g., a favor or benefit), or converted to a
more tangible form and then traded (Allee, 2008). Intangibles include
those extras people do to help keep things running smoothly and
build relationships (e.g., exchanges of strategic information, planning
knowledge, process knowledge, technical know-how, collaborative de-
sign work, joint planning activities, and policy development) and so are
important aspects of post-merger functionality.
It is well known that superior competitive knowledge can be a sus-
tainable advantage for a firm (Grant, 1996). However, in order for com-
petitive advantage to be attained and sustained, it is necessary to
collectively learn and develop new capabilities and adapt at an increas-
ing speed (Peters, Johnston, Pressey, & Kendrick, 2010). While such
knowledge can be developed from the learning dynamics of individual
organizational members (Nonaka, 1994), collaborative learning is a
selective learning process where members share experiences and take
on asymmetric roles (Bechky, 2003; Fiol, 1994; Mitnik, Recabarren,
Nussbaum, & Soto, 2009). Unlike individual or shared learning, collabo-
rative learning involves the capitalization of one another's resources
and skills (Chiu, 2000, 2008a) and refers to the methodologies and en-
vironments in which learners engage in a common task and where
each individual depends on and is accountable to the others (Chiu,
2008b). Within an environment where mutual dependency and ac-
countability is not obvious, therefore, this selective and mutual learning
process is not easily identified and is not necessarily present in every or-
ganization. Thus, we posits that organizational support to encourage
learning dynamics can be a critical source for developing competitive
knowledge within the organization because mutual dependence and
accountability between the organizational members are the anteced-
ents for collaborative learning (Rau & Heyl, 1990). A dynamics in devel-
oping sustainable organizational culture from collaborative learning is
presented in Fig. 1.
The learning process of individual team members shapes individual
knowledge, which is then articulated and amplified by the organization
to construct organizational knowledge (Nonaka, 1994). Organizational
culture is a composite of organizational knowledge (Crossan, Lane, &
White, 1999). Well-directed overall collaborative efforts contribute to
a successful composition of network organization (Batt & Purchase,
2004). Hence, firms that succeed in developing and promoting collabo-
rative learning among their organizational members possess a sustain-
able advantage and can surpass others in the competitive arena. If
organizational culture is distinct, and developed and sustained by the
knowledge developed through organizational learning dynamics and
embedded in the organizational members (Grant, 1991, 1996), then
post-merger organizational performance should be affected by the
different compositions (equal vs. unequal) of employees in the post-
merger firms.
2.2. Firm size difference and merger performance
Empirical investigations of the conflict in organizational cultures on
merger outcomes have had mixed findings on the impact of the differ-
ence in firm size on organizational integration. For instance, Asquith,
Bruner, and Mullins (1983) found that acquirers' abnormal returns are
1036 J.-H. Oh et al. / Industrial Marketing Management 43 (2014) 1035–1044

3. positively related to the relative size of the merger partners. Walsh
(1989) found that target company top management turnover rates are
increased with an increase in the size difference between the parent
and target companies. Chatterjee, Lubatkin, Schweiger, and Weber
(1992) noted that (after controlling for the relative size of the merging
firms) there is a strong inverse relationship between perceptions of cul-
tural differences and shareholder gains. Moeller, Schlingemann, and
Stulz (2002) found that larger firms are expected to take longer to com-
plete an acquisition than smaller firms due to regulatory issues, as these
are typically more important for large firms. We therefore find that the
creation and evolution of knowledge within an organization, which are
influenced by the relative size of those involved, is meaningful for devel-
oping sustainable organizational cultures.
Alternatively, while claiming that organizational integration is the
single most important factor in explaining synergy realization in M&A,
Larsson and Finkelstein (1999) failed to find a direct relationship be-
tween company size and organizational integration. Instead, they
found that there is a positive relationship between target size and com-
bination potential (i.e. synergy realization is a function of the similarity
and complementarity of the two merging businesses), and claimed that
bigger acquisitions do better because they offer greater synergy poten-
tial, not because managers pay more attention to the integration process
when targets are large.
Our research objective is first to determine whether or not different
employee compositions within mergers involving large vs. small target
firms have any significant influence on the post-merger firm perfor-
mance. Weber and Camerer (2003, p. 410) concluded that the differ-
ence in pre- and post-merger performance in their experimentally
manipulated mergers was unlikely to be due purely to a group-size ef-
fect. However, we claim that the success of post-merger integration
and the eventual success of the M&A may well be dependent upon the
size difference of the firms involved.
In addition, we expect that the post-merger performance deteriora-
tion due to the conflict in organizational cultures is greater in acquisi-
tions involving larger target firms than in acquisitions of smaller
target firms (see Fig. 2). This expectation is based on research examin-
ing merger dominance, which may occur when one of the firms in-
volved in the merger is smaller (Cartwright & Cooper, 1993; Dackert
et al., 2003). This expectation of dominance after the merger by one or
the other firm is culturally oriented (Dackert et al., 2003). If the expec-
tation of dominance is related to firm size difference, then we expect
that a smaller acquired firm will adopt the changes introduced by the
larger acquiring firm (Cartwright & Cooper, 1993) and that the success
of this particular merger will depend upon the larger firm displacing
the organizational culture of the smaller partner (Pikula, 1999).
Then, one might wonder what the outcome would be if the acquiring
firm was smaller than the target firm, regardless of the superiority of the
acquirer's practices or procedures as compared to the acquiring firm.
We claim that because of the possible presence of merger dominance,
acquiring a large target firm may delay post-merger integration and
eventually lead to lower post-merger firm performance when com-
pared with that of a smaller target acquisition (see Fig. 3). Therefore,
we argue that the relative firm size of the partners — an involvement
of a different number of employees (either from the acquiring firm or
from the acquired firm) — may result in different findings from those
of the Weber and Camerer (2003) experiment. While more recent
work by Weber (2006) does look at the impact of overall size in merger
integration, in which large groups achieve coordination by ‘growing’
from smaller groups, our study focuses on the size of the merger part-
ners relative to each other.
We note that the earlier experiment by Weber and Camerer (2003)
did not investigate performance differences in post-merger groups of
differing sizes. In our experiment, therefore, three different types of
post-merger groups are established and examined to determine if the
average completion time of the acquisition of larger target firms is sig-
nificantly longer than that of the acquisition of smaller target firms.
Hence, we test the following hypotheses:
Hypothesis 1. The negative impact of cultural conflict on merger
performance still holds with the involvement of a different number
of employees (either from the acquiring firm or the acquired firm)
in mergers.
Hypothesis 2. The effectiveness of merger performance for larger tar-
get acquisitions is less than that of smaller target acquisitions.
3. Method
Some scholars have argued that experimental studies are not feasi-
ble because a manipulation of a situation such as a merger is not possi-
ble (see Yin, 1994). As Rousseau (1990) observed, this is partly due to
the difficulty associated with measuring organizational culture precisely
in a field setting. In contrast, Camerer and Weber (2008) claim that
there has been little systematic empirical research regarding organiza-
tional cultures and their economic impact, and claim that groups in an
experiment are analogous to firms in the real world.
Individual
Experience
Individual
Knowledge
Individual
Learning
Organizational
Knowledge
Organizational
Culture
Shared
Learning
Individual
Individual
Individual
Collaborative
Knowledge
Collaborative
Learning
Individual
Resources/
Skills
Dependable/
Accountable
Tasks
Sustainable
Organizational
Culture
Indicates that this process is not
necessarily identified in every
experience-learning-knowledge
transfer process.
Fig. 1. Collaborative learning and merger performance.
1037J.-H. Oh et al. / Industrial Marketing Management 43 (2014) 1035–1044

4. 3.1. Experiment design
In our experiment, we replicate the experimental design of Weber
and Camerer (2003), but with two important differences. First, we
employed three subjects (one manager and two employees) for each
pre-merger group instead of the two subjects in the original experiment
by Weber and Camerer (2003). This different composition of subjects is
to create a situation where a presence of merger dominance within a
post-merger firm can be assured while requiring that all subjects build
their own organizational culture in pre-merger firms. The subjects
need to develop tacit shared knowledge (see Nonaka, 1994) creating a
common code to quickly perform the task and thus independently de-
velop organizational cultures within their pre-merger group. Then, the
groups are merged to create post-merger groups. Second, we extended
the original experimental design to include an examination of potential
size effects. To do this we created three post-merger group types
with differing relative sizes of the firms merging (i.e., merged firm
1 (MF1) — larger acquirer; merged firm 2 (MF2) — equal merger;
merged firm 3 (MF3) — smaller acquirer). Thus, we have a truly sym-
metrical merger type (MF2) which Weber and Camerer (2003) did
not. In addition, our non-symmetric merger types (MF1 and MF3) con-
tain a greater disparity between the relative size of the merged firms
(i.e. a ratio of 3:1 as opposed to the ratio of 2:1 in the Weber and
Camerer study). These were then examined for their performance dif-
ferences. We expected that within the post-merger firm, when the
presence of one firm is relatively either weaker or stronger than the
other firm (i.e., the number of employees of one firm is smaller (or larg-
er) than the number of employees of the other firm), then a size effect
(i.e. the larger firm dominates the smaller firm) will take place and
will significantly affect overall post-merger performance.
3.2. Subject recruitment and reward, stage design, and experimental task
The current experiment used a group of student volunteers who un-
dertake a role-play as either a manager or an employee of the firm. We
randomly selected undergraduate classes within a university located in
the southeastern part of the United States and asked class instructors for
student volunteers. A student subject is randomly selected from the stu-
dent volunteers to take on the role of manager within the group, and
gives instructions to his/her colleagues who are assigned as employees
in the same group. The student subjects who are randomly assigned
with an employee role listen very carefully to the manager and then
perform the task given. Employees in the same team are allowed to
talk to each other and to the manager. The time in completing the task
was measured and rewarded. The reward was calculated based on the
time taken to complete the task. The completion time was measured
up to the nearest 10 s, and the subjects earned $1 minus the completion
time divided by 300. Managers were paid for the average completion
time of their team. This reward scheme is the same as the one used in
Weber and Camerer (2003). Subjects were paid after completion of
the experiment.
There were forty 3-subject groups in stage 1 and thirty 4-subject
groups in stage 2. The subjects went through 30 rounds of tasks in
stage 1 and 20 rounds of tasks in stage 2, and changed their roles (either
Superior
Acquirer
Inferior
Target
Superior Inferior
Inferior
+
Su
per
ior
Cultural Conflict
Merger Dominance
Integration
Fig. 3. Size effect and merger performance.
Experiences Learning Knowledge Culture
Experiences Learning Knowledge Culture
Company A
Competence
Company B
Competence
Company A
Company B
Post-Merger
Combined
Competence
Pre-Merger
Combined
Competence
Merger Dominance
Cultural conflict
Fig. 2. Organizational learning dynamics, merger dominance, and post-merger integration.
1038 J.-H. Oh et al. / Industrial Marketing Management 43 (2014) 1035–1044

5. that of a manager or an employee) during the experiment. The increase
in the number of rounds in our experiment was to ensure that every
subject was able to experience both roles so that any idiosyncratic
effects of a particular manager who might be worse at developing a
language code are minimized (see Weber & Camerer, 2003, p. 406.)
The experimental task is based on studies by Clark and Wilkes-Gibbs
(1986) and Schober and Clark (1989) which addresses how shared
meaning (i.e. organizational culture) arises in language. Weber and
Camerer (2003) used this same task in their experiment to examine
the negative influence of the conflict in organizational cultures on
post-merger firm performance. While we increased both the number
of subjects in each firm and the number of the rounds that the subjects
go through in performing the task, we used the same pictures that were
used for the earlier experiment conducted by Weber and Camerer
(2003).
3.3. Stages in the experiment
Stage 1 denotes the pre-merger condition, where the subjects inde-
pendently perform tasks while developing their own organizational cul-
ture within their groups. All pre-merger groups have three members:
one manager and two employees. After a series of tasks, the groups
are merged in stage 2. In the merged groups, there are four members:
one manager and three employees. All the subjects in stage 1 remain
in the experiment at stage 2. The post-merger groups perform the
same task that they performed in the pre-merger stage (stage 1).
The objective of stage one is to allow subjects to build their own or-
ganizational cultures within their group, which is analogous to a firm in
the real world. We took the same sixteen pictures depicting office envi-
ronments used in the original experiment by Weber and Camerer
(2003) and presented them to each subject in the beginning of stage
1. While the pictures share common elements — people, furniture,
room characteristics, and so forth — each picture is unique and varies
in the number of people, their characteristics (gender, clothing, ethnic-
ity), the physical aspects of the room (high ceilings, objects on walls,
furniture), and the actions of the people (conversing with others in
the picture, talking on the telephone, working at a computer).
In each round of the experiment, the experimenter indicates 8 out of
the 16 pictures to the manager in the group in a particular order, with-
out showing them to the employees. The manager then describes each
specific picture in his/her own way to the two employees in the partic-
ular order given by the experimenter, and the employees must pick the
correct pictures in the correct sequence from the managers' description.
This task creates simple organizational “cultures” by requiring subjects
to develop conversational norms to quickly refer to pictures (Camerer
& Weber, 2008; Weber & Camerer, 2003). With this task, we also see
how the subjects develop a common “homemade” language to refer to
the pictures (Clark & Wilkes-Gibbs, 1986; Schober & Clark, 1989).
The time that it takes for the employees to pick the correct picture in
the order given by the manager is measured. Then, the round ends. After
each round, subjects switch roles (the experimenter randomly appoints
the next manager from the two employee subjects) so that they will ex-
perience both roles. All of the subjects in this stage do not know about
the future merger or about their firm's position (i.e., either acquirer or
target). These three-person groups perform the task for 30 rounds.
After stage one, any two of the subject groups are merged as in the
earlier study. One firm is randomly selected to take over the other. In
the post-merger firm, we deviated from the experimental design of
Weber and Camerer (2003) with the intention of discovering potential
size effects. Three types of post-merger groups were arranged: two
groups which are unequal (i.e., MF1 and MF3) and one group of equal
size (i.e., MF2). The new post-merger groups have four subjects.
As in stage 1, one manager is randomly designated by the experi-
menter in each post-merger group and describes the pictures to the
three employees in the order determined by the experimenter. Because
this manager previously participated with only a subset (or none) of the
three employees, we expect that the conflict in homemade languages
(i.e., organizational culture) will make it difficult for the manager to
help the employees perform the task and will thus slow down the
group's performance when the average completion times are measured.
Each manager conducts another 20 rounds with the 3 employees. All of
the subjects in a team are in the same space, as was the case in the pre-
vious study, so that the three employees can hear everything that the
manager says, and the manager is allowed to speak freely (i.e., the man-
ager could choose to address only one employee although the other two
would overhear) and the employees will complete their tasks and be
measured individually.
3.4. Performance measurement
Task completion times of the individual subjects are measured in
each round during the entire session. In addition, to support the re-
search objectives, this study employs four different time periods in com-
paring the average completion times. The first period (T1) compares the
average completion times of the last round of pre-merger stage and the
first round of post-merger stage to see if there is a significant and nega-
tive influence of the conflict in organizational cultures on post-merger
performance. To test for the persistence of any such negative influence
three additional comparison times were used. A second period (T2) ex-
tends T1 by comparing the average completion times of the last five
rounds in the pre-merger stage and the first five rounds in the post-
merger stage. A third period (T3) extends this comparison to the next
five rounds (i.e., round 6 to 10) in the post-merger stage, and the fourth
comparison period (T4) further extends this comparison to include
rounds 11–15 in the post-merger stage.
Lastly, to address our expectation of the presence of a size effect in
the integration process, we measured two additional task completion
times. First, we measured the average task completion time of the last
5-rounds of the post-merger (round 16 to 20) to address our expecta-
tion of the study on the presence of size effect in the integration process.
Unless they are initially different to each other, we expect that any sig-
nificant difference in post-merger performance between the post-
merger groups (i.e., MF1, MF2, and MF3) indicates that there exists a
possible size effect on post-merger performance. Second, we measured
the average completion time of the subjects who eventually work at the
MF1, MF2, and MF3 in the last round of the post-merger and in the first
round of the pre-merger. This enabled us to identify how individual
post-merger groups perform better (or worse) than the other post-
merger groups during the entire merger process and thus provides ad-
ditional evidence of a possible presence of size effects on post-merger
performance.
4. Results and hypothesis testing
4.1. Stage 1 (pre-merger)
As evidenced in the decreasing pattern of the task completion times
(see Fig. 4), the task promotes organizational learning and creates a sim-
ple organizational “culture” by requiring subjects to develop conversa-
tional norms (or a “homemade” language) to quickly refer to pictures
(Camerer & Weber, 2008; Weber & Camerer, 2003).
As the rounds progress, the subjects begin to use “key words,” such
as “pine tree,” “headset,” or “lonely lady,” as a concise methods for de-
scribing the pictures and to improve their performance as they work
on the task together. While the task is initially difficult because the
groups lack a common method for referring to the pictures, they be-
come much quicker once they develop a shared language. As a result,
the completion times are initially high but decrease as the groups devel-
op concise, effective and efficient ways to refer to the pictures (Argote,
1996). By the 10th round the average completion time is 32.8% of the
completion time for the initial rounds.
1039J.-H. Oh et al. / Industrial Marketing Management 43 (2014) 1035–1044

6. 4.2. Stage 2 (post-merger)
As observed in the Weber and Camerer (2003) study, the average
completion time increased once the groups are merged (see Fig. 4). In
the first time period (T1: pre-merger last round vs. post-merger first
round), the average completion time of the entire group at the first
round of the post-merger stage increased to 76.37 s from 36.83 s. This
mean change of 39.54 s in completion times is significantly different
from 0 at p b 0.01 (t29 = 7.69). The average 5-round completion time
of the post-merger groups for the second time period (T2: pre-merger
last 5 rounds vs. post-merger first 5 rounds) is 57.04 s, which increased
from 41.40 s for the last 5 rounds of the pre-merger groups in the pre-
merger. The mean change in the average completion times of 15.64 s
is also significantly different from 0 at p b 0.01 (t29 = 4.22). In addition,
this study compares the average completion times of the last 5 rounds of
the pre-merger stage with the time period covered in rounds 6–10 in
post-merger stage (T3) and found that the mean difference of 1.33 s
(=42.73 s–41.40 s) is not significantly different from 0 (t29 = 0.43).
Lastly, this study compares the average completion times of the last 5
rounds of the pre-merger stage with the time period covered in rounds
11–15 in post-merger stage (T4) and found that the mean difference of
3.88 s (=37.51 s–41.40 s) is not significantly different from 0 (t29 =
1.23). The results are reported in Table 1. Therefore, we conclude that
the negative effect of cultural difference on post-merger firm perfor-
mance is also present even with a more realistic experiment setting.
This then supports Hypothesis 1.
4.3. Post-merger group performance
Our expectation of the study was the presence of size effects in the
integration process. To address this expectation, we compared the last
5-rounds of the post-merger average task completion time of three dif-
ferent types of post-merger firms (i.e., MF1, MF2, and MF3). Results
show that the merged firms had a different trend in post-merger perfor-
mance (see the linear lines in Fig. 5). Fig. 5 shows the post-merger per-
formance of the three different types of mergers that involve a different
number of employees from either acquiring or acquired firms. And,
Table 2 summarizes the results. As Table 2 shows, MF1 is significantly
different from MF2 (Difference 1 in Table 2) and MF3 (Difference 2 in
Table 2), but MF3 is not significantly different from MF2 (Difference 3
in Table 2).
These results indicate that there exists a possible size effect on post-
merger performance. As a first step to verifying the presence of a size ef-
fect, we tested whether there is a significant difference in completion
times in the pre-merger stage when considering different employee
compositions for the post-merger firm (i.e., MF1, MF2, and MF3). We
found that their pre-merger performance showed no significant differ-
ence in completion times (F(2, 27) = 1.9878, ns), suggesting that these
groups were initially not different.
Next, we tested if there was a significant difference in their perfor-
mance immediately after the merger and found that there was no signif-
icant difference (F(2, 27) = 0.1085, ns). These results indicate that
unequal mergers (MF1 and MF3) may be different from equal mergers
(MF2) and that, within the unequal mergers, there exists a potential
dominance effect relating to the difference in firm size on merger per-
formance. The average task completion times of MF1, MF2, and MF3
during pre-and post-mergers are shown in Fig. 6.
To test Hypothesis 2, we first compared the average completion
times between the larger target acquisition and the smaller target ac-
quisition (i.e., MF1 vs. MF3) to find which has a significantly longer av-
erage completion time in the post-merger sessions. Longer average
completion times in the post-merger session indicate less effective
post-merger performance. As shown in Fig. 6, the average completion
times of MF1 and MF3 are not significantly different from each other
-
50.00
100.00
150.00
200.00
250.00
1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930 3132333435363738394041424344454647484950
Task Completion Time (second)
Round
Avg. Completion Time
Fig. 4. Average task completion time.
Table 1
Comparison of pre-and post-merger task completion times.
T1 T2 T3 T4
Pre-merger Mean 36.83 41.40 41.40 41.40
(SD) (9.33) (7.34) (7.34) (7.34)
Post-merger Mean 76.37 57.04 42.73 37.51
(SD) (27.10) (18.87) (14.96) (15.11)
t-Value 7.69⁎ 4.22⁎ 0.43 1.23
⁎ Significant at p b .01.
1040 J.-H. Oh et al. / Industrial Marketing Management 43 (2014) 1035–1044

7. immediately after the merger. That is, they are not different initially.
However, as the rounds proceed, the completion time of MF1
becomes faster than the completion time of MF3 (see the linear lines
of MF1 and MF3 in Fig. 2). We found that the difference is significant
at p b.05 level (4.41 s = 36.35–31.90, t8 = 2.07) when the last 5-
round average completion times of the two firms were compared. This
result indicates that the post-merger performance of larger target
acquisitions (MF3) is significantly different from that of smaller target
acquisitions (MF1).
We then compared the performance changes of each post-merger
group throughout the entire sessions. This enabled us to identify how
individual post-merger groups perform better (or worse) than the
other post-merger groups during the entire merger process and thus
provides additional evidence of a possible presence of size effects on
post-merger performance. From Table 3, the average completion time
of the smaller target acquisition in the first ten rounds in the post-
merger stage is faster than the larger target acquisition. This indicates
that post-merger performance deterioration due to the conflict in orga-
nizational cultures is greater in acquisitions involving larger target firms
than in acquisitions of smaller target firms. However, as the rounds fur-
ther proceeded, the average completion time of the larger target acqui-
sition became faster than the smaller target acquisition. It implies that
the firm size effect on post-merger performance deterioration is not
persistent. Therefore, this result partially supports Hypothesis 2.
5. Discussion
5.1. Conflict in organizational cultures in mergers is temporary
As expected, a negative effect of the conflict in organizational cul-
tures on post-merger performance was observed (see Fig. 1). However,
the results of the third and the last comparison case (i.e., T3 and T4)
show that the negative affect of the conflict in organizational cultures
does not persist throughout the entire post-merger session (see
Table 1). This result is different from the earlier finding in Weber and
Camerer (2003) study. We suggest that this is partly because of the dif-
ferent experimental setting we designed (i.e., more subjects and more
task rounds) which was intended to incorporate a more realistic reflec-
tion of real-world mergers and, in fact, was found to have a significant
influence on the post-merger firm's performance. In our study, more
subjects (3 subjects vs. 2 subjects) were involved in the task and more
sessions (30 rounds vs. 20 rounds) were in the pre-merger stage. This
may account for the faster task completion times in stage 1 and more
particularly in stage 2 than observed in the original experiment by
Weber and Camerer. In particular, a 50% increase in the number of
rounds (i.e., 30 rounds in stage 1) may have promoted a greater sense
of mutual dependence toward the task objective and greater
20.00
30.00
40.00
50.00
60.00
70.00
80.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Average Complet Time
Round - Stage2
MF1 MF2
MF3
Linear (MF1)
Linear (MF2) Linear (MF3)
Note:
MF1– Smaller target acquisition
MF2– Merger of equals
MF3– Larger target acquisition
Fig. 5. Comparison of merged firm's performance in stage 2.
Table 2
Comparison of average task completion time of merged firms (last 5-rounds of post-
merger).
MF1 MF2 MF3
Avg. task completion time: last 5-rounds of post-merger 36.32 29.93 31.90
(3.84) (1.87) (2.82)
Difference 1 (MF1 vs. MF2) 6.38
t-Value 3.345⁎
p-Value 0.017
Difference 2 (MF1 vs. MF3) 4.41
t-Value 2.072⁎
p-Value 0.012
Difference 3 (MF2 vs. MF3) 1.97
t-Value 1.842
p-Value 0.171
(∙∙∙∙) standard deviation.
MF1: merged firm 1 (larger acquirer).
MF2: merged firm 2 (equal merger).
MF3: merged firm 3 (smaller acquirer).
⁎ Significant at p b .05.
1041J.-H. Oh et al. / Industrial Marketing Management 43 (2014) 1035–1044

8. accountability between the subjects within a team. This allows team
members to develop diverse ways in which they may shorten the com-
pletion times. In this regard, we suggest that the earlier contention of a
persistent negative effect of conflict in organizational cultures in post-
merger performance needs to be revisited. We invite further investiga-
tion with even larger number of subjects within a group and more
rounds of tasks in future experiment studies.
5.2. The influence of collaborative learning on merger outcomes
When measured for their average task completion times, employees
who successfully developed their independent knowledge through in-
dividual and shared learning during the pre-merger stage were found
to be significantly better in post-merger performance than the em-
ployees who didn't.
This finding is significant because it provides experimental evidence
of organizational learning dynamics and is consistent with our discus-
sion of the heterogeneous distribution of valuable resources among
firms. We note that individual organizational members develop their
own organizational cultures through a learning process (Schein,
1983). Individual learning is a learning process, and can be further de-
veloped into collaborative learning through mutual dependence and
accountability between organizational members (Mitnik et al., 2009).
As discussed previously, the learning process of individual team mem-
bers is accumulated to shape individual knowledge, which is then artic-
ulated and amplified by the organization to construct organizational
knowledge (Nonaka, 1994). Organizational culture is thus a composite
of organizational knowledge (Crossan et al., 1999). As an empirical sup-
port for this explanation, Rau and Heyl (1990) found that by fostering
collaborative learning groups (i.e. building social and human capital),
students perform better on test material that is discussed in group ses-
sions, connections to classmates increased significantly, and that the
great majority of students laud the use of collaborative learning groups.
Hence, firms that succeed in developing and promoting collaborative
learning among their organizational members possess a sustainable ad-
vantage and can surpass others in the competitive arena.
This study provides experimental evidence that individual organiza-
tional members develop collaborative learning from their earlier expe-
riences and their individual learning. Moreover, this study finds that
the method and the extent for developing collaborative learning are dif-
ferent. We observed that the group members' attitude toward their in-
tention to find better ways to conduct tasks actually led them to find
agreed-upon and shared methods to achieve faster task completion.
We also noticed that greater mutual dependence on the task objective
-
50.00
100.00
150.00
200.00
250.00
1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930 3132333435363738394041424344454647484950
Task Comple on Time
Round
MF1 MF2 MF3
Fig. 6. Average task completion times of merged firms during pre-and post-mergers.
Table 3
Comparison of average task completion times of the merged firms (entire session). Unit: seconds.
Stage 1 (pre-merger) rounds Stage 2 (post-merger) rounds
R1–R5 R6–R10 R11–R20 R21–R30 R1–R5 R6–R10 R11–R20
MF1 Average 146.37
(50.06)
81.87
(12.27)
52.08
(5.12)
38.55
(2.83)
56.56
(11.81)
42.11
(4.05)
38.91
(4.34)
% change (55.9%) 35.6% 26.3% 38.6% 28.8% 26.6%
MF2 Average 143.84
(44.96)
73.15
(10.90)
50.86
(5.74)
36.17
(2.95)
56.58
(11.31)
43.52
(4.85)
32.15
(2.88)
% change 50.9% 35.4% 25.1% 39.3% 30.3% 22.4%
MF3 Average 136.74
(35.62)
79.64
(11.54)
53.55
(5.62)
40.30
(2.75)
57.98
(11.50)
42.56
(4.53)
34.29
(3.82)
% Change 58.2% 39.2% 29.5% 42.4% 31.1% 25.1%
(⋯): standard deviation.
MF1: merger firm 1 (larger acquirer).
MF2: merged firm 2 (equal merger).
MF3: merged firm 3 (smaller acquirer).
1042 J.-H. Oh et al. / Industrial Marketing Management 43 (2014) 1035–1044

9. and accountability between the subjects within a team developed di-
verse ways to shorten the completion times. Subsequently, this study
finds that the teams that succeeded in developing collaborative learning
within their organization surpassed the competition.
The heterogeneous distribution of superior human capital, devel-
oped through collaborative learning dynamics, leads to performance
differences because knowledge developed in the organizational learn-
ing process and embedded within organizational members is a source
of competitive advantage (Grant, 1996). This indicates that an organiza-
tional culture is distinct and sustainable and thus not easily duplicable
or adaptable. The ability to integrate different organizations is negative-
ly affected by this distinct and sustainable organizational culture. There-
fore, organizational performance will be affected by the level of
collaborative learning and by the subsequent development of competi-
tive knowledge within the organization. In this regard, managerial
attention should be directed toward issues of organizational culture
and dominance as this will benefit organizations involved in mergers
and acquisitions, as well as the individual organizational members
involved.
5.3. Merger dominance and firm size effect on post-merger integration
process
When the performance changes vs. the first round of the pre-merger
stage of each post-merger group are compared, we found that the small-
er target acquisitions performed better than the larger target acquisi-
tions (see Table 3). It indicates that post-merger performance
deterioration due to the conflict in organizational cultures is greater in
acquisitions involving larger target firms than in acquisitions of smaller
target firms. However, the firm size effect on post-merger performance
was not found to be persistent. Therefore, this finding partially support
our claim that acquiring a large target firm may delay post-merger inte-
gration and eventually lead to lower post-merger firm performance
when compared with that of a smaller target acquisition but confirms
the presence of merger dominance in post-merger integration process.
More importantly, this study supports our claim that different em-
ployee compositions within mergers involving large vs. small target
firms have a significant influence on the post-merger firm performance.
We found that there is a difference in completion times between the
two asymmetric groups (MF1 and MF3). This result supports the pres-
ence of firm size effect on post-merger performance. Therefore, we con-
clude that the success of post-merger integration and the eventual
success of the M&A may well be dependent upon the size difference of
the firms involved.
The findings of the current study are important for practitioners. In
addition to the confirmation of earlier findings that the conflict in orga-
nizational cultures is a major hurdle for successful merger outcomes,
this study shows that merger outcomes can also be affected by the
post-merger firm structure. As evidenced in the M&A literature, a signif-
icant amount of research has highlighted the importance of post-
merger integration for merger success. However, the focus has been
on the strategic and functional aspects of integration between the
firms involved. Although the human side of integration has been
discussed from an HR perspective, less attention has been focused on
the size effect and its influence on the human side of mergers and on
merger outcomes. Any dominant structure in the post-merger firm cre-
ates a potential and imminent risk of more serious cultural conflicts
than exists for post-merger firms with a less dominant and more
equal structure. For example, consider the scenario where the size of a
multinational firm entering into a market is smaller (i.e., weaker) than
the local target firm it merges with. It is likely that the acquiring firm
will experience difficulty in integrating the two different organizations
and will find the benefits of the merger much less than expected, re-
gardless of the greater competitive knowledge and skills accumulated
through its overseas acquisition.
6. Conclusion
While our results have been useful in confirming earlier findings re-
garding the negative impact of the conflict in organizational cultures on
post-merger firm performance, we have also established a deeper un-
derstanding of the nature of such conflict. We found that it is not a per-
manent feature, and may be related to the overall size and time period
of the merger in question. This is because we believe that collaborative
learning between employees compensates for the negative impact of
the conflict in organizational cultures on post-merger performance.
These findings indicate that the conflict in organizational cultures is
only temporarily influential in affecting post-merger performance, and
that organizational support to encourage the development of collabora-
tive learning between individual members in the organization should
be another strategic consideration for firms that want to surpass others
in competition, as well as facilitating a more successful integration that
makes the most of merger synergies. Organizational support to encour-
age the development of collaborative learning between individual orga-
nizational members should be a strategic consideration for firms that
want to surpass others in competition as well as to successfully inte-
grate different entities for merger synergies.
We found that cultural dominance originating from the distinct and
sustainable development of organizational culture is present in the
post-merger firm when the merger is composed of unequal partners.
If dominating post-merger firm structures are common in the real
world, firms should build informed strategies to manage the post-
merger integration process for successful mergers.
This study confirms that the conflict in organizational cultures can
be one of the major reasons for the post-merger firm performance dete-
rioration. More importantly, this study identifies that post-merger firm
structure also plays an important role in the merger's performance. The
firm size effect on merger performance has not been seriously discussed
in merger research and thus our findings make an important contribu-
tion to the literature.
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