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Volume 12 Numbers 3 & 4, 2002

Frits D. J. Grotenhuis
KPMG, Amstelveen

Abstract. This paper discusses how cultural differences affect the use of information and communication technology in Dutch-American mergers. The preliminary findings of two case studies are used to illustrate: (i) how culture shapes communication attitudes; (ii) the problems encountered with the use of computer-mediated communication in such merger processes; and (iii) problems with the integration of different information technology systems. Theoretically it was expected that culture would have a profound effect on the use of information and communication technologies, such as computer-mediated communication. First results, indeed, indicate that miscommunication via e-mail is due to cultural differences, although the impact of culture depends on the degree of integration between the merging companies. Moreover, language and also the contextual differences of the information exchanged play a role. Furthermore, the Internet and videoconferencing were more and more frequently used in the studied cases. Regarding videoconferencing, distance and time differences played a major role, as did cultural differences. In both mergers studied, the adaptation and integration of IT systems was heavily underestimated and more complicated because of cultural differences. The first results indicate that, despite all advantages of computer-mediated communication, face-to-face meetings remain necessary to prevent (culture) clashes in the long run.

1. The Development of Computer-Mediated Communication

The primary forms of organizational communications are of written and oral character. Written communication includes formal typewritten memoranda and letters, and informal hand-written notes. Similarly, oral communication takes a variety of forms, occurring primarily by telephone and through face-to-face contacts (Adler, 1991).

Not so long ago these were the only forms of communication. Nowadays, however, primary forms of communication seem to become more and more computer-mediated via the Internet. Below, the expansion of the Internet is shown (see Yetkiner and Horvath, 2001).

Table 1. Expansion of the Internet (Source: Nua Internet Surveys at www.nua.ie/)

Internet use continues to surge. Since the Internet began 30 years ago with the connection of three host computers, the Internet has grown to include more than 43.2 million hosts worldwide by January (1999), according to an annual survey conducted by Network Wizards. Second, more people are online. By every measure, Internet use continues to outpace even optimistic predictions. Research reports found 58 million Internet users worldwide at the end of 1996, 149 million at the end of (1998), and the editors project a figure of 285 million by the end of year 2000. While figures differ widely among various research companies using different methodologies, the trend is clear: the Internet is growing exponentially (Yetkiner and Horvath, 2001).

According to McKnight and Bailey (1997), probably the most frequent use of the Internet is electronic mail. Many researchers have elaborated already about the impact of culture on communication, as described in the following section. We may also expect culture to influence computer-mediated communication in similar, but maybe even in other ways, as we know that culture has an impact on the 'old' modes of communication. In the following section the impact of cultural differences on communication, and attitudes of communication in international mergers are discussed. Following the method section, the (preliminary) findings about the relationship between culture and computer-mediated communication in merger processes are described. The findings are discussed in the final section.

2. The Impact of Cultural Differences on Communication

Culture affects some aspects of human and organizational behavior. Adler et al. (1991) concluded that culture impacts organizations differentially according to the level of the organization. At the macro level, the influence of culture may be less important than variables such as technology. At the micro level of individual behavior, culture's influence takes precedence. At every level, culture profoundly influences organizational behavior.

As cultures manifest themselves in a variety of ways, Hofstede (1989) makes a distinction between the "values" and the "practices" of a culture. Values are profound and often unconscious. They represent broad feelings about good and evil, beautiful and ugly, natural and unnatural, logical and paradoxical, rational and irrational. Practices associated with culture are more superficial and usually recognized by all. They are the collective habits expressed in such visible things as dress, language and jargon, status symbols, promotion criteria, tea and coffee rituals, meeting rituals, communication styles, and a lot more.

Attention to culture has become more relevant not only for organizational level analysis, but also it has aided understanding of what goes on inside organizations when different subcultures and occupational groups must work with each other. Many problems that were once viewed simply as "communication failures" or "lack of teamwork" are now being more properly understood as a breakdown of intercultural communication (Schein, 1992; Trompenaars, (1993).).

If we seek to understand a people, we have to try to put ourselves, as far as we can, in that particular historical and cultural background...It is not easy for a person of one country to enter into the background of another country. So there is great irritation, because one fact that seems obvious to us is not immediately accepted by the other party or does not seem obvious to him at all...But that extreme irritation will go when we think ... that he is just differently conditioned and simply can't get out of that condition. One has to recognize that whatever the future may hold, countries and people differ...in their approach to life and their ways of living and thinking. In order to understand them, we have to understand their way of life and approach. If we wish to convince them, we have to use their language as far as we can, not language in the narrow sense of the word, but the language of the mind. That is one necessity. Something that goes even much further than that is not the appeal to logic and reason, but some kind of emotional awareness of other people (Jawaharlal Nehru, Visit to America, in Adler, 1991).

This quote illustrates that effective communication is about awareness and understanding of the other party. Within the international and global business environment, activities such as exchanging information and ideas, decision-making, negotiating, motivating, and leading are all based on the ability of managers from one culture to communicate successfully with managers and employees from other cultures.

Achieving effective communication is a challenge to managers world-wide even when the workforce is culturally homogeneous, but when one company includes a variety of languages and cultural backgrounds, effective two-way communication becomes even more difficult (Adler, 1991; see also Grotenhuis et al., 1998).

Boudreau et al. (1998) pinpoint clearly that the urgent need to "go global" and the use of information technology to advance the competitiveness of the virtual transnational organization implies for their managers to study other languages and cultures. Even if English is used, it carries so much cultural meaning that its use might create misunderstanding (see also Ulijn and Campbell, 1999). But what about computer-mediated communication between a variety of languages and cultural backgrounds in the case of international mergers, where two companies become integrated?

3. Attitudes of Communication in International Mergers

Research indicates that the dominant values in a national culture have a profound effect on organizations and organizational behavior. National cultures may further influence the structuring of an organization, its decision-making style and its strategy. The national culture also has a profound effect upon the organizational culture of its national organizations. This effect is achieved through the values of the organizational leaders and members that are brought into the organization. Organizations can, however, possess distinct cultures in terms of symbols, rituals and heroes within the same country. In the case of a foreign acquisition, both the companies' organizational culture, which is characteristic of the firms' identity, and elements of the host national culture are brought in. Cultural clashes will tend to be minimal when coordination is of a financial nature, but will increase when closer integration is imperative (Olie, 1990).

Haspeslagh and Jemison (1991) argue that many researchers stress the importance of culture and cultural compatibility when a decision on a merger or acquisition is made. From the cultural conflict perspective, one reason acquisitions are a conflictive process is that they are likely to involve a one-way imposition of cultural elements by a more powerful group despite the resistance of a less powerful one (Sales and Mirvis, 1985). The degree to which changes are made solely in one organization or distributed across both organizations then becomes an important variable (Bastine and Van de Ven, 1986; Napier et al., 1989).

Concerns within the acquired company center around the question of the extent to which it will retain its own identity (Sales and Mirvis, 1985). One proposed response to such cultural concerns is to foster an understanding of the elements of the two firms' cultures and mutual understanding and respect across both organizations (Sales and Mirvis, 1985). Such aspects have their effect on the attitudes of communication of the different parties involved.

During the past decade, the use of computer-mediated communication such as electronic mail has become increasingly popular. What effects will this change in modes of communication have in a context of international mergers? It would be interesting to learn how cultural differences affect the use of information and communication technology in mergers and acquisitions. This paper discusses some preliminary findings about the effect of culture on the use of information and communication technologies in two Dutch-American mergers.

4. Method

In the framework of a doctoral study into patterns of acculturation in Dutch-American mergers, two merger processes were investigated in cooperation with a Dutch technology company (see Grotenhuis, 2001). From the results, amongst others, cultural collisions related to computer-mediated communication practices were encountered. In this section the research approach and methods for data collection are discussed.

In the area of comparative management, the leading research paradigm has been that of a quantitative survey, which can be characterized as the etic approach. An etic approach is an inquiry into a culturally general phenomenon under the definition of universally law-governing explanations across cultures (Berry et al., 1992). An emic approach is an investigation into a cultural specific phenomenon under the definition within that particular culture. In order to gain insights into the dynamics of acculturation of these mergers, an emic approach was preferred.

The research strategy adopted in this study can be characterized as the case study approach. According to Yin's theory (1991) a case study is an empirical enquiry that investigates a contemporary phenomenon within its real life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used. Although the case study has a number of drawbacks, it has also a number of unique advantages. Among the drawbacks are the lack of statistical evidence from research findings and the possibility of the researcher influencing the phenomenon under study.

The case study is, however, the only way to provide an in-depth insight into the processes within complex organizations. Case studies make it possible to find answers to questions of "how" and "why" (Yin, 1991). That makes this approach very appropriate, as it will provide a profound and comprehensive insight into the dynamics of the acculturation process of American-Dutch mergers.

Furthermore, the return-rate from a survey was expected to be very low, as this research deals with highly confidential information and many respondents are placed high in the hierarchy of the company. Moreover most mergers and acquisitions have a very different history and background, and so it would be difficult to prepare one universally valid questionnaire. Because of the above mentioned reasons survey research would have been less appropriate to this study, so a case study design was preferred.

A combination of different sources was used in the data collection phase. Important data sources were archival records, reports, documents, Internet, and intranet sites, newspaper articles, annual reports, brochures and notes on the (planned) merger. These data sources were obtained from interviews with respondents, secretaries, and other informants from the acquiring organization, the acquired organization, and others who had been involved with the mergers (primary data sources), and by conducting desk research (i.e. collecting secondary data).

Interviews were the main source of information. During a period of four months, from March until June (1999), 34-interviews were held with people who had been or still were involved with the first case, both in The Netherlands and the USA. From June until November (1999), 33 interviews were held in The Netherlands and the USA regarding the second case.

The interviews were held with management team members, people working in the different departments, people from the works council, members of the board of directors, expatriates, and some external people who had been involved with the merger. Most of the interviews took more than one hour and some of them more than two hours. Most of the interaction of the Dutch and American organization takes place at higher levels, so many respondents are found high in the organization. Below, the sample of investigated cases is shown.

Table 2. Sample of American-Dutch mergers

In the next section the first findings regarding culture collisions in computer-mediated communication, and the adaptation of IT systems, in two Dutch-American mergers are described.

5. Results

Some preliminary findings about culture collisions, computer-mediated communication, and the connection of the different systems within mergers are described below. First a brief case description is given with cultural differences, followed by experiences from both Dutch and American respondents regarding computer-mediated communication and the adaptation of IT systems. These results are described from a respondent's perspective. Different quotes are used to illustrate their perceptions. Because of confidentiality reasons the American companies are indicated with [A], where the Dutch technology company and the business units involved are indicated by [D] in the different quotes.

5.1. Cultural Differences Shaping Communication Attitudes

The two American companies and Dutch [D] business units have very similar cultures: both the American acquiring companies are from Northwest America, and both Dutch acquired companies are business units from the same [D] division. As both cases are very similar, no distinction is made in the description of the findings. However, there certainly are several cultural differences between the American and Dutch companies, which have an impact on communication attitudes.

Some cultural differences mentioned were:

(i) large versus a small company:

Within [D] no bottom lines are visible, no costs, no quarterly results, everything is centralized.

In [A] they had never worked in a big organization, and are not familiar with such processes, nor are they with the implementation of such (IT) systems.

(ii) long-term orientation versus short-term orientation:

In [D], people are long-term oriented, a problem solving approach is important (process-driven). In [A], people are more short-term oriented, result-driven ('hire and fire system').

(iii) technology-driven versus business driven:

In [A] they are more business and money driven, where we in [D] are far more driven by technology. In [A] the priority is on the job: if it is necessary, people have to postpone their holiday, which in [D] is out of the question.

(iv) USA versus the Netherlands:

Stock options, and bonuses are common in the USA working system, where that is still rare in the Netherlands. However, this is slowly changing.

In the Netherlands, there is a working council, and there are trade unions, we had never heard of that.

In the USA there is a permanent process of moving, of instability. After 2-3 years people change jobs, and often have to move); in the Netherlands maybe after 18 years.

Some respondents do not recognize large cultural differences. An expatriate:

Most of the integration tasks were performed in the pre-acquisition years, during the alliance. There were bridgehead builders, communications facilitators, cultural translators -on both sides of the ocean.

A transition team was formed of Dutch and Americans liaison officers for during the alliance period to bridge gaps.

However, most other people perceived the merger as a culture shock and mention that stereotyping occurred. A Dutch respondent:

A culture shock, people had to get used to be part of an American company now.

We thought we knew each other quite well after an alliance, but that was only the case for marketing and sales.

An American:

Cultural differences were too hard to change. Language also plays a role in clashes.

American companies do not always realize the differences between European countries next to the differences between Europe and America.

5.2. Computer Mediated-Communication in Dutch-American Mergers

Several Dutch respondents regard e-mail communication clashes as a result of the way e-mail communication is used. A Dutch respondent:

Many communication problems with e-mail occurred, because sentences are often not finished but abbreviated, short and powerful. This stresses the differences between the Americans and Dutch even more.

Moreover, language and time seem to play a role in miscommunications. An expatriate manager:

The problem then is that English is not the native language for Dutch, and they (Dutch) are more direct than American. That sometimes results in 'powerful statements'. And we have nine hours time difference, which make things more complicated.

Furthermore, cultural differences have an effect on the way people communicate. A Dutch respondent:

People are more hierarchical in the USA; in Holland, when we think things do not go well, we take action, we are more direct. In the US, people are more careful. I had to adapt my e-mails, I was too direct sometimes.

Another respondent about communicating to superiors:

Honesty is not number one in the USA, but cosmetics towards the boss to impress him. It is all show. We indicate problems to our boss, if necessary, in the US they do not.

A Dutch respondent about information exchange and communication:

A communication structure was taken into account, but was not really successful. In the USA, people just inform each other at a minimum necessary, while in the Netherlands a lot more context of information is provided. Moreover in their (American) communication towards us, we are only given the minimum they think we need to know.

Next to e-mail communication, videoconferencing and the Internet, are mentioned by many respondents as being used very often. Some employees make use of videoconferencing almost every day. Moreover, once a week, Dutch and American managers meet via videoconferencing. However, even more than with e-mail communication, the different time zones between America and The Netherlands appear to be a barrier in the use of videoconferencing. Regarding the use of Internet as a medium, respondents mentioned they were working on a company-wide newsletter that would be accessible via the Intranet. In fact, respondents mentioned that more company news should be accessible for external people via the Internet in the near future.

However, computer-mediated communication, via e-mail, videoconferencing, or the Internet, did not always seem to be sufficient:

The corporate objectives were e-mailed to all employees world-wide, but the objectives should also be published on information boards, and in the newsletter.

Again, language differences appear to play an important role:

In communicating the corporate objectives and regarding other important issues, we should consider to work with a Dutch version too, as many employees at the operational levels do not master the English language.

And distance seemed to cause miscommunications and culture conflicts in computer-mediated communication:

People also need to meet face-to-face. The software manager flew to the US two times a month". And: "We organized engineering conferences to strengthen relations.

5.3. Integrating the IT Systems: A Matter of Culture Again?

The existing IT systems were different in both merging organizations, and according to some respondents the systems were adapted only after the merger:

There were different IT systems that were not tuned. The functional and technical requirements and adjustments were not taken into account on forehand. And there was no standardization in product numbers or type numbers.

Data are not accessible for each other. Within [D], the logistic system and the technical documentation system are open. Even each other's agendas can be viewed under the network internally.

Moreover the customer should be provided with one product database, while the different entities were still working with different software platforms.

Different cultural attitudes towards IT systems resulted in some problems between Dutch and Americans:

The disentangling from [D], I think that was really underestimated. To change from [D] systems to [A] systems, especially regarding information technology.

An American about this process:

The magnitude of the disentanglement of the information systems and personal practices, it took more than 6 months. During this period there was more focus on internal problems than on the business ... It was more complicated with all those languages and cultures in Europe.

A Dutch respondent:

Generally they (Americans) think that what works in the US, that will be good for Europe as well, instead of adapting to a different situation. What is good for the USA, that is not always necessarily good for Europe too.

For an American expatriate manager working in The Netherlands, the slow adaptation and implementation of systems in both organizations was a real pitfall:

For me, a turning point in the merger process was getting electronic information in [D], to get linked with the systems.

6. Conclusions and Discussion

After a description of the first findings within Dutch-American mergers, the preliminary results are discussed in this section.

6.1. Cultural Differences Shaping Communication Attitudes

During the alliance period, no real culture problems occurred, but from the time of the merger some culture clashes were experienced. Moreover, language differences played a role. At the time of the alliance both companies could remain relatively autonomous. However, with the merger, both companies were integrated, which resulted in some clashes. Stereotyping easily occurred, which had an effect on communication practices between Dutch and American people.

When two companies remain relatively autonomous, as is the case with alliances, acculturation from one culture to another culture does not take place. When the two cultures are combined, as in a merger situation, clashes may occur. The impact of culture depends on the degree of integration. Managers should play a major role in the process of creating awareness and understanding of the other party's culture.

6.2. Computer-Mediated Communication

As was expected from the theory, cultural differences also shape communication attitudes in e-mail communication. In the cases described, the use of e-mail resulted in several miscommunications, the Dutch seemed to be even more direct in their e-mail communication towards Americans: "sentences are often not finished but abbreviated, short and powerful". This stressed the cultural differences between both organizations even more.

Moreover, language and time seem to play a role in miscommunication, as English is not the native language for Dutch, and nine hours of time difference make communication more complicated. People receive replies the following day or even later.

Besides the way people communicate, the context of information provided seemed to differ between Dutch and Americans. The Dutch found that they were not well informed by Americans; they missed a lot of context around the information supplied.

Next to e-mail communication, videoconferencing and the Internet were frequently used. With the use of videoconferencing, distance and time differences seem to play a more important role than with the use of e-mail or the Internet. An e-mail message can 'wait' and be read the next day, however, for videoconferencing people need to be physically present, although people are at different locations. Furthermore, the Internet seems to become more and more widely used for both internal and external communication purposes.

However, computer-mediated communication does not always appear to be sufficient in information exchange, and developing and maintaining relations. As Hofstede mentions, practices associated with culture are more superficial and usually recognized by all, in contrast to the values of a culture; in the case of computer-mediated communication, interpretation of messages may be even more complex. Intentions and meanings may differ in the perception of sender and recipient, which can easily lead to misinterpretations and misunderstandings. This is especially the case when people from different cultures are involved. As Adler noticed, achieving effective communication is a challenge to managers worldwide, which is even more relevant in the global village of today, where computer-mediated communication is becoming the primary form of communication.

6.3. IT Systems in International Mergers

In the merger situations studied, some problems with different IT systems were encountered. Only after the merger attention was paid to adapting the systems. The disintegration from the acquired business unit from the Dutch multinational appeared to be far underestimated by the American organization. Moreover several cultural and language problems were faced with the adaptation and integration of the different systems. So, preparation and early adaptation of IT systems seem to be key factors in combining two different organizations, where cultural differences make this process even more complex.

To conclude, a final remark about these first empirical findings. Although computer-mediated communication makes international business much easier, it still seems to be necessary now and in the future - despite new information and communication technologies - to meet frequently with people face-to-face, as well as virtually. This is probably the only way to prevent misunderstandings in the long run.

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