Cross border acquisitions and reputation transferability: the impact of culture on product consumer perception

Existing research on the impact of cultural distance in cross-border acquisition has generally taken a firms’ viewpoint. This study hypothesizes that, in cross-border acquisitions, cultural distance between the country of the acquirer and that of the acquired firm hinders the reputation transferability from a local target to a foreign acquirer and influences consumers’ attitude and repurchase intentions toward the post-acquisition target. The tests of the hypotheses use a sample of 424 students supposed to be habitual consumers of the acquired firms. The work was conducted in Italy and compares an acquired local firm and two foreign acquiring companies: a Chinese firm (large cultural distance to Italy) and a Spanish firm (small cultural distance to Italy). The results show that the case of large cultural distance hinders the reputation transferability more than the opposite case of small cultural distance, and negative attitude toward the post-acquisition target and reluctance to repurchase its products increases when the acquired firm has large cultural distance to Italy. The research could be of value and interest because little has been written dealing with cross-border acquisitions in relation to market-based performance, particularly analyzing the consumer behavior toward a post-acquisition target.