Merger Gains and Cultural Differences
– For Cross- and In-border Mergers between Corporations from Sweden and the United States
Bachelor’s Thesis 15 hp
Department of Business Studies Uppsala University
Spring Semester of 2018
Date of Submission: 2018-08-08
Lisalina Gideskog Malmgren Michelle Grönlund
Supervisor: David Andersson
Abstract
Previous literature has stated that few mergers are successfu l and many fa il to meet the set expectat io ns. This study aims to co mpare cross -border mergers, between corporat io ns fro m Sweden and fro m t he United States o f America, wit h in-border mergers betwe en Swed ish corporat io ns to explore possible differences in synerg y gains. The synerg y gains are pro xied b y abnormal returns 80 trading -da ys post the merger co mplet io n date. The result s in t his study are not statist ically significant, however it ind icates that cross-border mergers have a negat ive average cu mulat ive abnor ma l return while in-border mergers have a posit ive average cumu lat ive abnormal return. Therefore, this stud y argues that the result could be a consequence o f greater cultural differences for cross-border mergers tha n in-border mergers and imply t hat in-border mergers could be t he better alternat ive for Swed ish corporat io ns in co mpariso n to cross -border mergers. Addit io nally, cu ltural differences should be invest igated before a merger decis io n is taken. Future research should invest igate how cu ltura l differences affect synergy gains wit h a larger sample and inc lude corporatio ns fro m more nat io ns.
Keywords: Mergers, Cult ura l differences, In -border, Cro ss-border, Sweden, the Unit ed States, the Effic iency t heory
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Table of content
1. Introduction 2
2. Theory 6
2.1 Lit eratur e r eview 6
2.2 Trust, hierarchy a nd individua lism 8
2.3 Sweden a nd t he Unit ed Stat es, cult ural differ enc es 9
2.4 The efficiency t heor y 11
2.5 Cult ural differ enc es, t he effect on syner gy ga ins 13
2.6 Hypot hesis 15
3. Data and Method 16
3.1 S elect ion of Mer ger Data and Met hod 16
3.1.1 Met hod cr it icism 19
3.2 Cult ural Data 20
4. Results and Discussion 22
4.1 R esults 22
4.1.1 R esults for Cross -Bor der Mer gers 22
4.1.2 R esults for In-Bor der Mer gers 23
4.1.3 R esults for T -t est : Pa ir ed t wo-sa mple for mea ns 24
4.2 Ana lysis 25
5. Conclusion 28
6. Further Research 29
7. References 30
8. Appendix 1 34
Trust vs distrust 34
Individua lism vs collect ivism 35
Hierarchy vs ega litaria nism 36
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1. Introduction
Mergers and acquis it io ns are a popular form o f corporate develop ment, in 2004 a total o f 30 000 acquis it io ns were co nducted worldwide and the ir total value summed up to $1,900 billio n, which is more t han the sum o f various large countries gross do mest ic pr oduct (GDP) (Cartwright and Schoenberg, 2006). The mot ives for choosing mergers and acquisit io ns as a form o f corporate deve lop ment are o ften co mplex and can be based o n different theories, such as the effic ienc y theory, the mo nopo ly theory, the valuat io n theory, the emp ire build ing theory or the process theory (Trautwein, 1990). Alt hough, it is o ft en t he case t hat not one sing le t heory can be used to expla in t he reason why mergers and acquis it io ns are used as corporate strategies (Ravenscraft and Scherer, 1987). Amo ng others, effic ienc y t heory views mergers and acquisit io ns as a strategy to achieve synerg ies, result ing in lo wer cost of cap ital, econo mics o f scale or operat ing improvement s (Trautwein, 1990; Devo s, Kadapakkam and Kr ishna murt hy, 2009).
It exist s few precise definit io ns o f what a merger is. However, McEnt ire and Bentley (1996) states that “A merger is the combining of two or more entities through the d irect acquis it io n by o ne o f the net assets o f t he other, e it her friendly or host ile, for cash or for stocks. A new corporate ent it y is created.” An acquis it io n differs fro m a merger in t he way t hat one ent it y rema ins in co ntro l after t he purchase o f t he other ent it y (Schraeder and Self, 2003).
Despite mergers and acquis it io ns striking popular it y and many mot ives, a majorit y of mergers fa il. Schraeder and Self (2003) present a failure rate as high as 55 -70%
and Weber (1996) presents a similar fa iling rate o f mergers, 50 -60%. The reaso ns why so many mergers fa il have been widely d iscussed and cultur al differences is one reaso n that has been brought up in previous literature ( Banal-Estaño l, 2011;
Weber and Camerer, 2003; Zarb and Noth, 2012.). Schraeder and Self (2003) define that a failed merger is when t he merger does not meet up to expectat io ns and when t he share price drops as a resu lt.
Ahern, Daminelli and Fracass i (2012) br ings up culture as an extra important aspect when it co mes to cross-border mergers and as an important factor when making fundamental eco no mic decisio ns, which are so me o f t he most important
3 dec is io ns a corporat io n makes. Cultural cla shes are a document ed pheno meno n in previous mergers, for examp le in the merger between the German Daimler, and the American Chr ys ler.
At the beginning, t he Daimler and Chr ys ler merger was at the beginning seen as a merger o f equals, however t he merger was o nly sustained for two years. The conclusio n o f the case study o f DaimlerChr ys ler, done by Badrtalei and Bates (2007) stated that cult ure p layed an important ro le in the failure. Therefore, the cult ure o f t he country o f origin for t he corporatio n invo lved in the merger should be studied and evaluated in advance. The authors also po inted at the importance of blending the two different cult ures co mpared to changing t he cult ure o f two corporatio ns into one. But what ro le does culture pla y in the high fa ilure rate o f mergers? And does a higher cultura l difference between two merging corporat io ns increase the possibilit y o f fa ilure? Not much previous research has been co nducted in t his area.
Ahern et al. (2015) pro vides so me of the first evidence that clearly sho ws that cult ure and cultural differences have a great impact on mergers. They view cultur e as t he explaining factor to where mergers occur and how well culture could exp lain potent ial merger ga ins. They measure the cult ural differences between different co mpanies by examining variables such as trust, hierarchy and ind ividualis m.
Their findings show t hat a greater dist ance in cult ures, measured by t he he lp o f the ment io ned variables, resu lt s in f ewer cross-border mergers and s malle r synerg y gains. Does this mean t hat mergers are a better corporate strategy fo r develo pment when they are not done o ver borders? And what imp licat io ns would this have for corporat io ns in sma ller countries like Sweden? P erhaps it is better for corporations to consider doing “in-border” mergers as an alternative to cross- border mergers.
The aim o f this stud y is to invest igate whether the synerg y gains are greater for in-border mergers between Swedish corporat io ns, where t he est imated cult ura l differences are low co mpared to Swedish cross -border mergers wit h corporatio ns fro m the Unit ed States, where the est imated cult ural differences are higher.
Synergy gains are proxied by t he abnorma l returns 80 trading -days fo llow ing th e
4 co mp let io n date o f the merger. The cross -border mergers are represented b y mergers between corporat io ns listed in Sweden and corporat io ns listed in the Unit ed States and the in-border mergers are represented by mergers between listed corporatio ns in Sweden.
Considering the result s fro m t he World Value Survey (WVS) so me important differences between Sweden and the Unit ed States have been o bserved. In the dimens io n o f trust, there is a lower leve l o f trust in t he US populat io n t han in the Swed ish populat io n. Espec ially int erest ing is the quest io n about trusting people wit h different nat io na lit ies, where the Swedish popu lat io n got a higher level o f trust than the US popu lat io n. The second selected cultural dimens io n is individualis m. The US populat io n is mo re individualist ic t han t he Swedis h populat io n according to the World Value Survey, in Sweden there is more focus on the group and t he goals o f the group t han in the United States. The last cultural dimens io n is hierarchy and also here a significant cult ur al difference is observed.
In the United States you respect authorit ies more than yo u do in Sweden. In Sweden, hierarchy is not cons idered as good compared to the des irable status it has in t he United States. Against t his background, the research quest io n o f this study is t he fo llo wing; Do S wedish in-border mergers result in greater synergy gains compared to cross-border mergers between corporations from United States and S weden during the years 2000 to 2018?
The result s o f this study show that cross-border mergers between Swed ish corporatio ns and corporat io ns fro m t he United States experience less synerg y gains during the 80 trading -da ys fo llowing the co mplet io n o f the merger in co mpariso n to in-border mergers between Swed ish corporat io ns. Cross -border mergers have a mean cumulat ive abnorma l return (CAR) of -0,382% and in-border mergers have a mean cumulat ive abnorma l return o f 0,627%. This is ho wever not stat ist ically s ignificant on a 5% level. The conclus io n o f t his paper is t hat cult ura l differences p lay a ro le for synergy gains in mergers and t hat less cultura l differences is benefic ia l. However, this study has so me limit at io ns and further research should be do ne to reinforce this conclusio n.
5 The distribut io n o f this paper is as fo llo wing: se ct io n two present s a lit erature review concerning the topic o f cultura l differences effect on mergers, as well a s presents the re levant theories, inc luding a hypothesis. Sect io n three present s t he data samples and the chosen met hod. Sect ion fo ur co ntains t he result s o f t he stud y and an analys is o f t he result s in co mparis on to the theories, which have bee n previously presented in sect io n two. Last ly, sect io n 5 and 6 provides the conclusio n recept ively t he limit at io ns and the suggest io ns for future research.
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2. Theory
2.1 Literature review
Schraeder and Se lf (2003) state that mergers and acqu is it io ns are more o ften used as a strategy to achieve and ma intain a compet it ive advantage even though the y have a high fa iling rate. They a lso state that previously to 2003, litt le research has been do ne on the cultural effect on the success o f the mergers and acquis it io ns and they t herefore choose to examine t he pre - and post mergers and acquis it io ns success fro m an organizat io nal cult ure perspect ive. In t he pre -event study, t he y find a significant lack o f effort to measure and examine t he cu ltural fit o f t he two co mpanies co ns idered for t he merger or acqu is it io n. The post -event stud y reinforces that culture differences should be examined before a merger or acquis it io n. This since cultures are not meant to be changed and therefore t he blending and integrat io n o f two corporatio ns wit h similar values and cultures will be easier and more success w ill fo llo w. The authors came to the co nclus io n that more attent io n should be paid to cultural differences and sug gest that a culture due diligence should be incorporated into the evaluat io n process leading up to a merger or acquis it io n (Schraeder and Self, 2003).
Weber (1996) states t hat mergers and acquis it io ns have beco me a more w idely spread and increasing pheno meno n and t he primar y mot ive is achieving synergies by co mbining two corporat ions into one and by do ing so increase t he co mpet it ive advantage. However, the success rate o f mergers and acquis it io ns are not high and cult ure factors have frequent ly been ment io ned as a potent ial factor contribut ing to the failures. He therefore aims to examine the ro le o f cult ural differences in mergers and acquis it io ns wit h a fairly large samp le. Co ntradictory to many studies, he finds that mergers may be successful in a finan cia l perspect ive desp it e cult ural differences. However, cult ura l differences have negat ive effects, such a s a less effect ive int egrat io n process and it is therefore a possibilit y t hat merger s wit h a higher cult ural co mpat ibilit y will out perform t hose merge rs o f corporat io ns with lower cultural compatibilit ies. Weber’s (1996) conclusion is that the manage ment o f the buying fir ms should pay cu lture at least as much attent io n,
7 both in a pre- and post-merger stage, at least as much as they do to financ ial and strategic factors.
Ahern et al. (2015) po int s out that culture values have a great impact on financ ia l outcomes and financ ial decis io n making, as we ll as an impact on cross -border mergers. This is due to the fact that invo lve d decis io n makers can have a h ard t ime coordinat ing because o f different cultural backgrounds. Previous research in this area has been do ne, however not to a large extent and this even though t he vo lume of cross-border mergers almo st doubled from t he year o f 1998 to 2007. According to the aut hors there also exist s evidence o f cult ural values being an important fail or success factor for cross-border and in-border mergers. Ahern et al. (2015) findings suggest that when cult ural differences between countries are greater, the vo lume o f mer gers is lower. And a greater cultural difference also leads to les s synerg y gains, pro xied by t he co mbined announcement returns. The y conclude t hat cult ure matters when it co mes to mergers and co ntribute to a costly frict io n.
Lodorfors and Boateng (2006 ) state simila r to Weber (1996) that mergers have beco me a widely spread glo bal pheno menon and a popu lar strategic cho ice fo r growth and expans io n, even though mergers co me wit h a high failing rate. The y highlight the importance o f the examinat io n of human and cultural factors and not only financ ial factors, since they can contribute to the fa ilure o f mergers.
Lodorfors and Boateng (2006) try to extend the exist ing research by looking at cases in t he chemical industry. They find that cult ural differences be twee n merging corporat io ns have an impact on the effect iveness o f t he integrat io n process and an impact on t he fo llo wing success (or failure) o f the merger. The conclusio n is t hat attent io n should be pa id to potent ia l cult ural differences in all stages o f a merger, espec ially in t he pre -stage when the planning o f integrat io n strategies are formu lated. If attent io n is paid to cultura l differences in the pre - stages o f a merger, it could contribute to a higher success rate and a greater va lue creat io n and synergy gain.
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2.2 Trust, hierarchy and individualism
Ahern et al. (2015) po int out three nat io nal cult ure key factors that can affect the success and gain fro m a merger; trust, hierarchy and ind ividualis m. Trust has a big cultural impact on corporations’ de cision whether to go through with a merger or not. A corporat io n in a cult ure wit h more trust has a higher probabilit y to go through wit h a merger t han a corporat io n in a culture wit h a lower amo unt o f trust.
Trust also has an impact on the possible amount of ga in fro m the merger, since a cult ure w it h more trust will ease the fusio n of t he corporat ions after the merger is co mp leted. However, if a corporat io n operates in a high -trust culture, a merger is not alwa ys necessar y to achieve t he goa ls aimed at and a business co ntract could be enough or even preferred o ver a merger. Therefore, it could be the case that there are fewer mergers in countries wit h a cult ure t hat have a higher amo unt o f trust, although the gain o f mergers in a cu lt ure wit h higher trust c ould be greater.
According to Brett and Okumura (1998) in hierarchica l cult ures there exist s a preference o f which social status to fo llo w orders fro m, s ince social status is equa l to social power in mult iple c ircu mstances, for examp le in negot iat io ns. I n ega lit arian cult ures, differences in socia l status also exist and have a meaning, however it is less important and therefore socia l status would not have as muc h power in for exa mple negot iat io n sit uat io ns as in hierarchical cultures. This leads to emplo yees be ing more keen on fo llo wing instruct io ns fro m a co -worker wit h higher socia l status than a coworker w it h lower socia l status, in a hierarch y cult ure. On t he co ntrary, in an egalit arian culture, emplo yees think o f themse lve s as equal to the leaders an d are more likely to think for themse lves than to strict ly fo llo w orders fro m so meo ne w it h a higher social status or rank. Ahern et al. (2015) find in t heir study t hat when t he differences in hierarchy wit hin t he corporat ions invo lved in t he merger are gre ater, there will be less ga ins fro m the merger. This due to fo llo wing post -merger proble ms as for examp le co mmunicat io n pro ble ms, the like liness o f fo llow ing orders wit hout just ificat io ns and due to the fact that ega lit arian bosses will not be respected by hierarchical co -workers. These t ype s of problems w ill create fr ict io n between emplo yees and result in a less successfu l merger and sma ller gains.
9 The last ke y factor is ind ividua lism. In an individualist ic cult ure, an individua l defines him- or herse lf as a separate and independent individual and not as a me mber o f a group. On the contrary, in a collect ivist culture an individual define s him- or herse lf as a group me mber and t he membership o f t he working group is important. This results in t he goal sett ing being different for t he two different t ypes o f cultures. In a more ind ividualist ic cult ure, your goals are independent fro m t he group and in a more co llect ivist ic cult ure your goals depend more on the group and socia l o bligat io ns (Brett and Okumura, 1998 ). This leads to more individualist ic emp lo yees preferring not working wit h co llect ivist ic e mplo yees.
Therefore, a merger between two corporations wit h emplo yees who have a s imila r individual or collect ive think ing will be more successful in co mpariso n to a merger between two corporatio ns wit h a greater difference in t he attitude towards individualis m and co llect ivis m (Ahern et al, 2015).
2.3 Sweden and the United States, cultural differences
Ma lt seva (2014a) studies the cross -cult ural differences between t he Swed ish populat io n and t he populat io n o f t he United States, more specific the study look s at the individual and t he co llect ivist ic values that can be found in the two different cult ures. It is determined in the study that so me o f the mo st important co llect ivist ic va lues in Sweden are just ice, equalit y, safet y and avo idance o f war.
Whereas, so me o f the most important co llectivist ic values in t he Unit ed States are freedom, independence, success, ambition and following one’s dream. Maltseva (2014a) addit io nally fo und t hat the co lle ct ivist ic values are co ns idered more important in Sweden than in the Unit ed States, and the reverse for ind ividua l values. One co nclus io n being that the populat io n in t he Unit ed States have more fo cus o n perso na l priorit ies. The st udy also examined o ver lapping va lues and fo und that, amo ng ten va lues, two o f t he overlapping values were “be ing lo ya l to my country” and “having strong traditions”. Based on this theory by Maltseva (2014a) it is reaso nable to state that Sweden and the Uni t ed States differs when it co mes to cultural values, both for co llect ivis tic and individualist ic values . It could also be t hat the des ire o f the people fro m both countries to be lo ya l to its ow n country and to have strong tradit io ns, could make a potent ial merger co llaborat io n harder and enhance cult ural differences. That makes t hese two countries suitable
10 to use in this study in order to examine t he effect of cu ltural difference on the success o f mergers.
Addit io nally, Maltseva (2014b) studies t he culture, specific for Swedes, clo ser and co mes to the co nclus io n that welfare benefit s, educat io n, just ice, cooperat ive spir it and sharing are important. Moreover, the ideal Swedish perso n is so meo ne ho nest, helpfu l, car ing, empat het ic, generous and, according to cultural standards, a Swede should be a perso n wit h litt le difference in status. The descript io n o f a bad Swede is mirroring the idea l Swede by t he characterist ics as greed y, o nly fo cusing o n o neself and not caring about what happens to fellow people. So , based on these findings by Maltseva (2014b) it can be stated t hat the culture in Swede n is permeated by ega lit arianis m and co llectivis m, which stand in co ntrast to the cult ure in t he Unit ed States. The answers o n the World Value Surve y (World Valu e Surve y Associat io n, 2015) makes it c lear that the cult ure in the United States is more individualist ic and permeated by a hierarchy t hink ing co mpared to the Swed ish cult ure, which makes these cult ures different and usefu l as subjects in this study. Furthermore, the quest io ns and the corresponding resu lt s fro m the World Value Survey Association’s (2015) study, found in Appendix 1, also show that hierarchy is co nsidered to be a more important characterist ic in t he United States and that authorit ies are associated w ith more respect. A cultura l d ifferenc e between t he United States and Sweden can t herefore also be stated when it co mes to hierarchy vs egalitar ianis m.
Another area co vered w it h t he quest io ns fo und in Appendix 1, is co ncerning individualis m and co llect ivis m. Overa ll, the populat io n o f the United States are more ind ividualist ic than Swed ish populat ion, where people are more fo cused o n the group. These answers are similar to the differences in t he quest io ns co ncerning trust, where answers o f the quest io ns co nsidering trust ind icates that there is a difference in trust between the Swedish populat io n and the populat io n o f t he Unit ed States. In general, people in Sweden are more trust ful. The Swedish people, for examp le, have more trust when engag ing in act ivit ies wit h people o f a different nat io na lit y.
11 These stated cult ural differences in trust, hierarchy and co llect ivis m contribute s to an o verall large cult ural dist ance which make Sweden and t he United States suitable subjects for this study.
2.4 The efficiency theory
The efficienc y t heory views mergers as a strategy and plan to achieve s ynergies.
Gaughan (2014) defines a synergy as “a type of reaction that occur when two substances or factors co mbine to produce a greater effect together t han t hat whic h the sum o f t he two operat ing independent ly could account for.” This can also be understood wit h the formula
NAV = VA B - (VA + VB) - P - E (1)
Where NAV is the net acquis it io n value, VA B is the co mbined corporat ion va lue, VA and VB are t he stand alo ne corporat ion values, P is the pre mium paid fo r corporatio n B and E are t he expenses o f t he acquis it io n process.
Gaughan (2014) states, in line w it h equatio n o ne, t hat a synerg y allows t he acquis it io n or merger to have costs and expense s because the jo int value o f t he corporatio ns will have a value t hat exceeds these costs and expenses o f the merger.
Trauwein (1990) presents three different ways a synergy can be created. First, it can be created by lower cost of cap ita l because a corpo rat io n o f larger s ize can be seen as less risky by an investor co mpared to a corporatio n o f a s maller size. A larger corporat ion is also more likely to have a greater int erna l market, which is a preferred and cheaper wa y o f financ ing invest ment according t o the pecking order theory (Myers, 1984). Lower cost of capit al can also be a result whe n co mpanies get more diversified t hrough a merger, due to the fact that unrelated bus inesses have less co mmo n risks. Seco ndly, synerg ies can stem fro m co mbining operat ing forces (eg. jo int sales forces) which w ill result in knowledge transfer s or econo mics o f scale. Operat ing synergies could mean t hat the product io n cost or business unit s cost will be lower for the invo lved corporat io ns. Third, manageria l synerg ies can arise when the acquirer has superior manage ment skills and ca n
12 contribute to a more effic ient operat ing o f the target that will lead to a better performance (Trauwein, 1990).
Gaughan (2014) only presents two different ways a s ynergy can be created, by being an operat ing synerg y or a financia l synerg y. An operat ing synergy is when the revenues are enhanced or when the costs are reduced, which is more or less the same as the seco nd way a synergy can be created presented abo ve by Trauwein (1990). A financia l s ynerg y refers to the possibilit y t hat the cost of capit al can be lower, which is also in line wit h what is presented by Trauwe in (1990). However, Gaughan (2014) leaves out the potent ial ma nageria l synerg y fro m his d iscussio n, but addit io nally t hen argues t hat revenue enhancements are harder to achieve t ha n cost reduct io ns. Moreover, that revenue enhancement s are more difficult to quant ify and put a value to, which leads to cost synerg y be ing t he s ynergy t hat is often highlighted in a pre-merger state or use d when arguing for a merger.
Revenue enhancement s could stem fro m shared market opportunit ies by cross - marketing of each merger partner’s products or services, for example a corporatio n wit h a well-known brand name could improve t he sales o f products and services for a corporat ion wit h a less known brand name. Cost reduct io ns are o ften a n effect of econo mies o f sca le, when the unit product io n costs are lowered as a result of a larger size or scale o f a corporat ion's operat io ns, for exa mple by spreading the fixed cost over a bigger vo lume (Gaughan, 2014). When it co mes to financ ia l synerg ies, Gaughan (2014) brings up debt co insurance as o ne o f t he reaso ns wh y cost of capit al could be reduced. Debt coinsurance implies t hat two co mbined corporatio ns which have two different inco me streams are less risky and have a lower expected bankruptcy rate co mpared to two (or one) corporat ions wit h perfect posit ive ly correlated inco me streams, the lowered risk would in t his case co me wit h a lo wer cost of cap ita l.
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2.5 Cultural differences, the effect on synergy gains
Based on t he effic ienc y theory a merger can create value by synerg ies, eit her by operat io na l or financ ia l synergies. However, for this to happen, tea mwork and integrat io n o f t he two separate emp lo yee groups ar e vit al, since wit hout teamwork and an int egrat io n process t he two groups o f emp lo yees would st ill work as separate units (alt hough under t he same o wnership) and no synergy gains are like ly to be rea lized. Considering emplo ye es to be the core o f success fo r many mergers, t he cu ltural belie fs and values are especia lly important and can have a significant impact on their abilit y to cooperate and work together (Ahern et al., 2015). This is reinforced by Schraeder and Self (2003) when t he y state that
“culture is to an organization what personalit y is for an individual” and changing one's personalit y (culture) is not something that is done wit h ease. Greater cultura l difference between two merg ing corporat ions can therefore co me wit h higher integrat io n co st and more responsibilit y for the top management team to take these cult ural d ifferences into considerat io n in the int egrat io n process (Ahern et al., 2015; Schraeder and Self, 2003). Alt hough, Stahl and Vo igt (2008) state that it is not the actual cult ural d iffer ence o f the merging corporat ions that will cause a success or failure, it is the integrat io n o f the two cultures that will affect the merger outcome. They conclude t hat the key factor for success in a merger is a well-planned and well co mp leted integrat io n process.
However, other researchers state that cult ural differences a mo ng t he e mplo yees o f the merging corporat ions could actually be the source o f success. For examp le, Page (2007) state that cu ltural differences are the key o f success in mergers.
Because when a co mpany has emp lo yees wit h different cu ltural backgrounds, there will be an advantage in decisio n making, problem so lving and predict io ns making. This due to the fact that people wit h different exper iences in life and different educat io ns ma y hav e divergent approaches o f vario us problems t hat ca n occur in a co mpany which w ill be benefic ia l in the s ituat io n o f a merger. Ely and Tho mas (2001) also find in t he ir research that cult ura l differences are a potent ia l valuable resource that the corporat io n could use as an advantage. For exa mple, cult ural differences could be used to gain access to niche markets, which have not been w it hin reach before or it could be used to rethink, or re -plan t he way a
14 corporatio n's ever yda y tasks are done. Similar to the study co nducted by Page (2007), cultura l differences are assu med to be t he source o f different life experiences and knowledge. Last ly, Ely and Tho mas (2001) ment io n t hat cultura l differences can be used to ensure equal opportunit ies, fair treat ments and th at it could even help to put an end to discr imina tio n w it hin corporat io ns.
Like previously brought up studies (Lodorfors and Boateng, 2006; Schraeder and Self, 2003; Weber, 1996), Morosini, Shane and Singh (1998) a lso state that nat io na l cu ltural differences shou ld be inco rporated into the decis io n whether to go through wit h a merger or not. Alt hough on the conflict ing side, they argued that this should be do ne because greater cult ural differences could co me w it h benefit s and greater post -merger performance. More specific, t hey link cult ure to routines and reperto ires and mergers between corporat ions wit h different culture s (routines and reperto ires) will exper ience an impro ved invent iveness, inno vat io n and decis io n- making. Invent iveness, inno vat io n and decis io n -making are in turn related to performance and a merger between corpora t io ns w it h cultura l differences will therefore experience benefit s that will lead to a better post -merger performance.
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2.6 Hypothesis
According to the effic ienc y theory, the purpose wit h a merger is to create a synerg y and a po sit ive net acqu is it io n value (NAV) by e it her an operat io na l synerg y or a financ ial synerg y. This can only be achieved if t he premiu m, cost and expenses associated w it h the merger do not exceed the co mbined value o f the two corporatio ns invo lved in t he merger. The lit erature review suggests that cult ure differences co mes wit h more d ifficult ies in t he integrat io n process and less effect iveness. It is therefore likely t hat greater cultural d ifferences o f t he merging corporat io ns will make t he int egratio n process and coordinat io n harder, which will lead to an increase o f administratio n costs and therefore a reduct io n o f the net acquis it io n value/s ynergy gain. A sma ller s ynergy gain, proxied by t he abnormal returns 80 trading -days after the co mplet io n date, for cross-border mergers co mpared to in-border mergers would t herefore be expected. Against this background, t he hypotheses are as fo llo wing;
H0: There is no difference in synergy gains bet ween in -border and cross- border mergers.
H1: There is a difference in synergy gains bet ween in-border and cross- border mergers.
16
3. Data and Method
3.1 Selection of Merger Data and Method
Our init ia l samp le o f merger data inc luded all co mpleted mergers between public ly list ed corporat ions w it hin Sweden and between corporat io ns in Sweden and corporatio ns in the Unit ed States, wit h a co mp let io n date fro m t he first o f January 2000 unt il t he first of Januar y 2018. Using 18 years for co llect ing data is mot ivated by t he availabilit y o f data, fewer years would have generated a n insuffic ient amo unt of data. Using a lo nger perio d o f t ime is also benefic ia l in the aspect of avo iding correlat ing trends between t he Swedish financ ial market and the financ ia l market o f the United States. An add it io na l requirement for the mergers, were that 50 per cent or more o f the target had to be acquired to be included in t he samp le.
The data filter yie lded a sa mple o f 101 mergers. However, the samp le was reduced to 52 mergers, o ften due to inco mp lete data or because the acquirer had eit her gone private or had been delist ed and no data was available. 26 of the 52 mergers were cross-border mergers and t he other 26 mergers were in -border mergers. The cross-border mergers were both when the acquirer was fro m Unit ed States and the target was fro m Sweden respect ivel y t he acquirer was fro m Sweden and the target was fro m t he United States. Most of the 52 corporatio ns belo ng to the healt hcare, pharmaceut ical, techno logica l or the IT industry. This concerns both t he cross - border and in-border mergers. In the case of the cross-border mergers, when t he acquirer ca me fro m Sweden, t he turno ver of the acqu irer was fro m 17,986 billio n SEK to 223,043 billio n SEK. When the acquirer came fro m the Unit ed States t he turno ver o f the acquirer was fro m 1,7 billion USD to 79,14 billio n USD. For the in-border mergers, the turno ver o f the acquirers were fro m 1,626 billio n SEK to 46,486 billio n SEK.
In this study, the acquirers’ abnormal return for the 80 trading -days after the co mp let io n date was used as a pro xy for the synergy gain o f th e merger. In the beginning data for 120 days, including no n-trading-days, was retrieved. However, since the nu mber o f trading -days t hen var ied between t he mergers, only t he 80
17 first trading-days were used to get the resu lts. In order to calculate t he abnor ma l returns, the da ily returns for each acqu irer during 80 da ys after t he co mp let io n date, were retrieved using t he database Tho mso n Reuters Eiko n. The mot ivat io n for using 80 trad ing-da ys as the data-co llecting period, is t hat a lo nger perio d o f time would make t he poss ibilit y o f external circumst ances, having an effect o n the abnorma l returns more like ly. A shorter t ime period t han 80 trading -days would not be giving t he merger and potent ial cu ltural differences enough t ime to have an effect on the abnorma l returns.
The returns o f OMXS30 and S&P500 were used as proxies for t he market return when the abnormal returns were calculated. OMXS30 and S&P500 includes 30 large corporatio ns on the Swedish stock market respect ive ly 500 large corporatio ns on t he Amer ican stock market, the mot ivat io n for using t hese indexes is t hat according to the European Co mmis sio n t he corporat ions inc luded in t his study are classified as large. The European Co mmiss io n only class ifies co mpanies wit h an annual turnover belo w 50 millio n euros as medium-sized, co mpanies w it h a greater annua l turnover must therefore be classified as large (Europea n Co mmiss io n, 2018). The corporat ions in t his study has a range o f turnover, whe n calculat ed in euros, fro m 158 millio n euros to 67,5 billio n e uros which class ifie s them as large corporat io ns and mak ing OMXS30 and S&P500 su itable indexes.
18 The variables Alpha and Beta were est imat ed by us ing the co llected merger data, the data fro m OMXS30 and by the data co lle cted about S&P500. The formu la used was retrieved fro m MacKinla y (1997).
(2)
Table 9.
Variable Explanat io n
ARit The abnorma l return
Rit The return o f the corporat io n
αi The est imated intercept in t he
mode l and the excess return (Alpha)
βi The est imated incline in the mo del
and syst emat ic risk (Beta)
Rm t The market return
Source: MacKinla y (1997)
After the da ily abnormal returns were calc ulated, a co mbined average abnor ma l return for each day, aft er t he co mplet io n date, was ca lcu lated separately for t he cross-border merger and for in-border mergers. The average cu mulat ive abnor ma l returns were t hen ca lcu lated by summing the abnorma l return. The formula was retrieved fro m MacKinla y (1997). Cumu lat ive abnormal return (CAR) is t he difference between expected return and actual return (Nasdaq, 2018). Since t his study uses t he indexes OMXS30 and S&P500 as t he proxies for actual return, CAR is an int erest ing measurement. This because it generates a resu lt that makes it possible to see how the returns o f the merged corporat ions, so me w it h great cult ural differences, d iffers fro m t he returns o f the market and the market it self consist s o f a substant ia l part o f unmerged corporatio ns.
(3)
The significance of the result was tested by using a two -samp le T-test, which is a stat ist ical procedure to determine if t here is a difference between two sets of
19 observat io ns. In t his study t he average cumulat ive abnormal returns for the cross - border merger respect ive ly t he average cumu lat ive abnorma l returns for t he in - border mergers were used as pa ired subjects for the test. The two -samp le T-test has two contradictory hypotheses, one null hypothesis and alt ernat ive hypot hesis, where the null hypot hesis alwa ys state that there is zero differences between t he means o f the paired subjects. The alternat ive hypothesis in a two -samp le T-test can be formu lated in a number o f ways, depending o n what outcome is expected, eit her as a upper-tailed, lower-tailed or two -tailed hypothesis. This study aims to expose potent ial d ifferences in synergy gains between t he two paired subject, which are cross- and in-border mergers, therefore the two -tailed t ype o f hypothesis is used, read furt her under sect ion 2.5 hypot hesis.
The hypothesis test ing is performed w it h a significance level o f 5 %.
Descript ive stat ist ics are used in t his stud y to handle t he raw data, this due to the large amo unt of data and in order to easily present key features o f t he data.
The descript ive stat ist ics o f the raw data are co llected by using the progra m Excel.
3.1.1 Method criticis m
The decis io n to exclude mergers between no n -public corporat io ns is mot ivated by the impo ss ibilit y to collect daily return-data for no n-list ed corporat io ns and the ana lysis would therefore not be possible to go through wit h, wit h the cho sen met hod. This could however, cause the results to be inaccurate since many mergers are do ne between no n-list ed corporatio ns.
The decis io n to focus on mu lt ip le industries is due to the limited availabilit y o f data o f s ingular industries. However, much o f the data includes corporat ions wit hin the healt hcare, pharmaceut ical, techno lo gical and IT industry. Not having a broader select io n o f corporat ion and indust ries could potent ially make t he result s less accurate. This stud y so le ly fo cus o n mergers between corporat ions fro m Sweden and the Unit ed States and mergers between corporat ions wit hin S weden, due to t ime restrict io ns. It could therefore be hard to use this study to draw conclusio ns about more worldwide mergers.
20 Anot her crit ic is m to this study is t hat the acquirers in the in -border mergers were substant ially s ma ller, co nsidering t he reve nues, than the acquirers in the cross - border mergers. This could have an implicat io n o n the performance o f the corporatio ns and t herefore o n t he result o f the study, since sma ller corporat io ns so met imes experience more difficu lt ies in capit al markets which could affect working capital strategies and financ ial structure pro files and lead to a deviant performance (Ernst and Pett y, 1978). A corporatio n o f bigger size can also be see n as less risky to invest in co mpared to a corporat ion o f a sma ller s ize (Trautwe in, 1990).
Last ly, one limitat io n o f this paper is t he size o f t he data samp le. Due to var iou s reasons, data fro m only 52 co mpanies could be used which is o n the s mall side.
Mult iple corporat io n were delisted or had gone pr ivate and t he da ily r eturn could not be co llected. Anot her limitat io n o f t his study is that many mergers are betwee n no n-list ed corporat io ns and t his study o nly inc luded mergers between public corporatio ns, due to the ava ilabilit y o f data. A potent ia l incu lcat io n of merger s between no n-list ed corporat io ns could have changed the result.
3.2 Cultural Data
To be able to measure culture and cultura l values the World Value Survey (WVS) was used, which is a worldwide study t hat is conducted in almo st 100 countrie s and co vers 90 percent o f the world’s populat io n. The aim o f the survey is to exa mine t he changing values and their impacts on socia l and po lit ica l life in different countries. The survey co vers a w ide range o f glo bal variat io ns, fro m ver y poor countries to rich countries in many different kinds o f cultura l areas (World Values Survey Associat io n, 2018b). The survey is conducted in different t ime waves, the latest fully co mplet ed survey, als o called t he 6th wave, was co mmenced in 2010 and fina lized in 2014. This part icular sur vey co ntains a quest io nnaire o f 249 quest io ns and is the surve y used fo r this study. (World Values Surve y Associat io n, 2018a). Fro m t his survey t he most relevant quest io ns and answers concerning trust, individualism and hierarchy are selected to determine a cu ltura l difference between Sweden and the United States. In total , 8 quest io ns are used
21 and can be fo und in Appendix 1. These questio ns are used in the theory sect io n to co mp lement t he mot ivat io n for select ing Sweden and the Unit ed States as subject s to this study.
The quest io ns fro m the World Value Survey Associat io n (2015) are found in Appendix 1, however fo llo wing is a summery up o f t he se lected quest io ns.
According to the answers in t he se lected quest io ns about hierarchy, hierarchy is considered as a more important characterist ic in t he United States than in Sweden.
Also in line wit h t hat, authorit ies are associated wit h more respect in the United States. A t hird o bserved and important cultural d ifference, is t hat obedience is preferred in t he United States and can be seen as a desirable characterist ic.
Therefore, it can be stated that the Swed ish populat io n is more egalitar ian tha n the populat io n o f t he Unit ed States.
Anot her area covered wit h t he quest io ns found in Appendix 1, is ind ividualis m and co llect ivis m. Overall, t he popu lat io n o f t he United States are more individualist ic t han t he Swedish populat io n, where people in general are more fo cused on the group. The answers are similar to the difference in the quest io ns concerning trust and distrust. Where answers o f the selected quest io ns co ns ider ing trust, indicates that there is a d ifference in trust between t he Swedish populat io n and t he populat io ns o f the Unit ed States. In general, people fro m Sweden for exa mple, have more trust for people wit h different nat io nalit y than themse lves.
The abo ve stated cultural differences in these areas co ntributes to an o verall cult ural difference and difference between Sweden and t he Unit ed States.
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4. Results and Discussion
4.1 Results
4.1.1 Results for Cross-Border Mergers Chart 1. Average CAR for cross-border mergers
Ch ar t 1: Aver age cumulati ve a bn or mal r eturn per da y for cr oss - bor der mer ger s, 80 da ys p ost mer ger completi on .
Table 10. Descript ive stat ist ics for t he cro ss -border mergers.
Chart 1 shows no s ignificant pattern in average cumulat ive abnor mal return per day for cross-border mergers. The cumu lat ive abnorma l return is both posit ive and negat ive, wit h a maximu m cumu lat ive abno rmal return o f 0,866% o n day 46 and
23 a minimu m cumu lat ive abnor mal return o f -1,27% on day 76. Equat io n 1 and 2 were used to get the result s in chart 1.
Table 10 is displa ys descr ipt ive stat ist ics of the raw data for the cross -border mergers in t his stud y. The mean for t he raw data is -0,00948%, which ind icates a sma ll negat ive average abnorma l return for cross border mergers.
4.1.2 Results for In-Border Mergers Chart 2. Average CAR for in -border mergers
Ch ar t 2: Aver age cumulati ve a bn or mal r eturn per da y for in -bor der mer ger s, 80 da ys p ost mer ger completi on .
Table 11. Descript ive stat ist ics for t he in -border mergers.
Chart 2 shows no significant pattern in t he average abnorma l return per day fo r in-border mergers. The cumu lat ive abnorma l return is both posit ive and negat ive, wit h a maximu m cu mulat ive abnorma l retur n o f 2,09% o n day 49 and a minimu m
24 cumu lat ive abnorma l return o f -0,808% on day 60. The maximum in t his case is like ly to be an extre me value, since it is significant ly higher t han mo st other values. Equat io n 1 and 2 were used to get this resu lt. Table 11 d ispla ys descript ive stat ist ics of t he raw data for the in -border merger in t his study and similar to chart 2, the range o f abnorma l returns are wide and goes fro m a value o f 47,4% to - 15,7%. Since t he mean is -0,0135%, the wide range ind icates t hat extre m e value s have not been remo ved.
4.1.3 Results for T-test: Paired two-sample for means Chart 3. T-test: paired two samp le for means.
Ch ar t 3: Th e r esults wer e cal culated u sin g th e data of cumulative a bn or mal r eturn s per cor p or ation for cr oss- bor d er ver sus in -bor d er mer ger s.
Chart 3 shows that cross-border mergers have a mean cumu lat ive abnorma l retur n of -0,382% and t hat in-border mergers have a mean cu mulat ive abnorma l retur n of 0,627%. This is however not stat ist ically significant o n a 5% level and t herefore the null hypothesis can not be re jected. The Pearson -correlat io n is negat ive but clo se to 0, which means there exist s o nly a sm a ll negat ive relat io n between t he cross-border and in-border mergers.
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4.2 Analysis
The results for the average cumu lat ive abno rmal return (CAR) per trading day for in-border and cross-border mergers show no significant pattern and it ca n therefore not be used to draw any conclusio ns fro m. The paired two samp le t -Test for means ind icates that cross-border mergers have a sma ll but negat ive mean CAR of -0,382% and in-border merges have a sma ll but, in t his case, posit ive mea n CAR o f 0,627%. This is in line w it h our o ne hypothesis, “there is a difference in synergy gains bet ween in-border and cross-border mergers”. However, the paired two sample t -Test also shows that the result is not stat ist ica lly significant o n a 5
% leve l and the null hypothes is can not be rejected.
As presented in the theory, the effic ienc y theory views mergers as a pla n or strategy to achieve synergies and synergies can only ar ise when the co mbine d value o f the two corporations are bigger than the costs and expenses associated wit h t he merger, which equat io n 1 shows (Gaughan, 2014; Trautwein, 1990). We find in our stud y t hat the synergy gains are posit ive for in -border mergers and negat ive for cross-border mergers. The synergy gains are pro xied by the abnorma l returns 80 trading -days po st the merger co mp let io n and the abnorma l returns are calculat ed by equat io n 2. This t heory does imp ly that the co sts associat ed w it h cross-border mergers are higher co mpared to the costs a corporat io n experience s when preceeding an in-border merger. And as the theory has po int ed out, cultura l differences can co me wit h more costs and co mp li cat io ns. More specific, greater cult ural differences o ften co me wit h integrat io n pro ble ms which leads to higher integrat io n costs. (Ahern et al., 2015; Stahl and Vo igt, 2008; Schraeder and Se lf, 2003)
Our study invest igates the ga ins o f cross -border mergers between Swedis h corporatio ns and corporat io ns fro m t he United States and before the data was co llected, a culture d ifference between t he two countries was determined w it h the help o f the World Value Surve y. In Sweden the cult ure is permeated by more tr ust, eglitarism and co llect ivism co mpared to the culture in t he Unit ed States. More trust implicates that people fro m Sweden have an easier t ime to trust new people than people fro m the United States have. One specific quest io n in the WVS asks
26 about how much o ne trusts people wit h a different nat io nalit y and the percentage answering “Do not trust very much” is a substantially higher in the United States.
This especia lly could be challeng ing in t he situat io n o f a cross -border merger.
Eglitar ism imp lies in it s turn, t hat Swedish people do not put as much va lue to socia l status and power as people fro m the Unit ed States do. Last ly, co llect ivis m contributes to group goals being more imp ortant co mpared to ind ividua l goals.
Since the people fro m t he United States co me fro m a culture wit h more distrust, hierarchy and individualist ic think ing, the integrat io n process in a cross -border merger between the two, could co me wit h more d ifficult ies. For example, getting emplo yees to trust each other and sett ing mutual goals could possibly be t he source of challenges. This could be a reaso n to why t he resu lt s showed lower synerg y gains for cross-border mergers and leads to the conclusio n that mergers wit h greater cultura l differences are less beneficial for corporatio ns in t he aspect o f synerg y ga ins.
In co ntrast there are previous studies t hat argue that cultural differences in a merger could be benefic ia l and co me w it h more synergy gains. Many o f these studies suggest that cultura l differences could be a valuable resource when it co mes to proble m so lving, rethinking o f strategic plans, invent iveness, inno vat io n and dec is io n mak ing (Ely and Tho mas, 2001; Morosini et al., 1998; Page, 2007).
Therefore, cult ura l differences could contribute to a better post -merger performance, imp lying t hat cross-border mergers shou ld have better s ynergy gains co mpared to in-border mergers. This is ho wever not hing we can reinforce wit h our study since t he result s po int at the counter argument - greater cultural d ifferences co me wit h lower syner g y gains. However, since the result was not significant o n a 5% level, t he conclusio n o f this study can o nly be used as an ind icat io n o f cult ural differences co ntribut ing to less s ynergy gains and not as a fact.
In addit io n, t here are so me uncertaint ies in this study t hat could make the result s and co nclusio n less correct. For exa mple, the sa mple o f t he in -border mergers was between corporat io ns o f a much sma ller siz e than t he cro ss -border mergers and as Trautwein (1990) state, corporat io ns o f smaller siz e can be seen as riskier. And more risk, according to the tradit io nal finance theory, can generate higher returns.
It could in this case therefore be t hat the in -border mergers show a greater synerg y
27 gain, as proxied by abnorma l return, because they are ri skier due to their sma ller size.
Subsequent ly, Ahern et al. (2015) also state that in cu ltures wit h more trust a merger is not always necessary to achieve the strategy goals a corporat io n has, because when there is more trust a contract could be enough, and a merger could actually co me w it h unnecessary costs and expenses. This could affect and skew our resu lt s and could be a reason to why t he sa mple o f in -border mergers included sma ller corporat io n co mpared to the cross -border mergers. The bigger corporat io ns in Sweden ma y choose to only use co ntracts inst ead o f mergers, if they instead would choose to go through wit h mergers, the result o f this stud y could have been different. This study does not eit her rule out that there are other driving factors, then cult ural differences, contribut ing to a difference in synerg y gains between in-border and cross-border mergers. For exa mple, it could have been t he case t hat the who le financia l market in Sweden was experiencing a ris e during the data co llect io n perio d co mpared to the financ ia l market in t he United States. This would mean t hat half o f t he cross -border mergers, the o nes wit h a n acquirer fro m the Unit ed States, would have experienced lo wer abnorma l retur n which is used as the proxy for synergy gains, only bec ause the financia l market in the Unit ed States increased less than t he Swed ish financ ial market.
The Pearso n-correlat io n in our study was -0,171, which is clo se to zero but slight ly negat ive. We can therefore state that there is almost no relat io n betwee n cross-border and in-border mergers. If a re lat io nship between t he two would have exist ed, it could have been seen as a glo bal trend on the financ ia l markets or a trend amo ng t he Swedish and t he US market. The Pearso n-Correlat io n o nly validates our hypothesis and research questio n further, on t he grounds t hat a lo w correlat io n means that there is no glo bal trend affect ing the cumulat ive abnorma l returns, which is used as the proxy for syne rgy gains. An abso lute nu mber clo ser to one for the Pearson-correlat io n would have meant that the cu mulat ive abnorma l returns for in-border and cro ss-border mergers would have been mo ved in the same direct io n. A higher synergy ga in for in -border mergers is therefore not thought to be caused by a glo ba l trend, but due to ot her driving factors as for exa mple les s cult ural differences, which reinforces our result.
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5. Conclusion
The research quest io n was as the fo llo wing: Do S wedish in-border mergers result in greater synergy gains compared to cross -border mergers between corporation s from United States and S weden during the years 2000 to 2018?
Our find ings show that in-border mergers do result in greater synerg y gains co mpared to cross-border mergers between corporatio ns fro m United State and Sweden. Due to a clear cult ural difference between Sweden and the Unit ed States, the co nc lusio n is t hat less cult ural d ifferences work in favor o f merging corporatio ns and co ntribute to greater synergy gains. This resu lt is ho wever not stat ist ically s ignificant o n a 5% leve l and the conclusio n can therefore o nly be seen as an ind icat io n and not as a fact.
The implicat io n o f the conclusio n is as fo llo wing, Swedish corporat io ns should i n most cases recognize in-border mergers as t he better alt ernat ive co mpared to cross-border mergers. This under t he assumpt ion that synerg y gains are t he desired goals.
A seco nd imp licat io n o f this study is t hat cult ural d ifferences is so mething t hat should be analysed carefu lly before two corporat ions dec ide to go through wit h a merger. It is so met hing that is eas ily o verlooked and forgotten in the pre -merger state. The analys is o f cult ural difference is important because it could have consequences for t he post-merger performance, as po int ed to in t his stud y. A thorough analys is could therefore allow the invo lved corporat io ns to make better merger and int egrat io n decis io ns.
29
6. Further Research
One future research suggest io n is to enlarge the samp le size and to include more corporatio ns fro m different countries. If mo re countries were to be inc luded, the n the effect o f different d istances in cult ure could be examined. This stud y only co mpared in-border mergers for Swedis h corporatio ns wit h cross -border merger s between corporat io ns fro m the United States and fro m Sweden.
Future studies could also use another source t han t he World Va lue Survey fo r defining cultura l difference. For this study the cultural d ifferences in trust, hierarchy and individualis m between Sweden and the Unit ed States were interpreted fro m quest io ns inc luded in t he World Value Surve y. However, since the purpose when these quest io ns were written may not have been to determine potent ial cultural differences, another source wit h t his s pec ific purpose could be used.
30
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34
8. Appendix 1
Note, that because o f only t he mo st relevant answers fro m t he Unit ed States and Sweden are presented to the quest io ns beneath, t he total percentage will not su m up to 100%.
Trust vs distrust
1. “Generally speaking would you say that most people can be trusted or that you need to be very careful in dealing with people? ”
Table 1. Selected answers to quest io n one about trust and distrust
1. 2. US 3. Sweden
Most people can be trusted
4. 34,8% 5. 60,1%
Need to be very careful
6. 64,3% 7. 37,2%
Source: World Va lue Surve y Associatio n, 2015.
2. “I ‘d like to ask you how much you trust people from various groups. Could you tell me for each whether you trust people from this group completely, somewhat, not very much or not at all? People you meet for the f irst time”.
Table 2. Selected answers to quest io n two about trust and distrust.
US Sweden
Trust so mewhat 34,4% 52,2%
Do not trust very much 47,6% 29,6%
Source: World Value Surve y Assoc iat io n, 2015.
35 3. “I ‘d like to ask you ho w much you trust people from various groups. Could you tell me for each whether you trust people from this group completely, some what, not very much or not at all? People of another nationality ”.
1. Table 3. Selected answers to quest io n three about trust and distr ust
US Sweden
Do not trust very much 26,1% 11,0%
Source: World Va lue Survey Associatio n, 2015
Individualism vs collectivis m
1.“Now I am going to read off a list of voluntary organizations. For each organization, could you tell me whether you are an active member, an inactive member or not a member of that type of organization?: Labour union ”.
Table 4. Selected answers to quest io n one about individualis m and co llect ivis m
US Sweden
Not a member 82,6% 50,5%
Source: World Value Surve y Assoc iat io n, 2015.
2.“Now I'd like you to tell me your views on various issues. How would you place your vie ws on this scale? 1 means you agree completely with the statement on the left; 10 means you agree completely with the statement on the right; and if you r vie ws fall some where in between, you can choose any number in bet ween. Where
"Private o wnership of business and industry should be increased" is 1 and
"Government o wnership of business and industry should be increased " is 10.
Table 5. Selected answers to quest io n two about individualis m and co llect ivis m
US Sweden
Marked t he answer alt. 1
22,6% 6,4%
Source: World Value Surve y Assoc iat io n, 2015.
