International financial management
Literature review
Mergers and Acquisitions
Mergers and Acquisitions (M&A) is a corporate plan that entails the integration of two firms with a particular mechanism in a certain area of business, which results in a huge capitalization of the companies in the market economy (Aswath 2008). M&A is undertaken with aim of gaining financial aid and other forms of assistance, as well as influencing the company’s finances in an industry, that is growing rapidly and thus making it unnecessary to form a new firm from scratch. The combining of two separate firms to form one company increases the prospects available in that particular market.
In the case of an acquisition, the ownership may be fully or partially transferred. Despite the two terms, Merger and acquisition being different, it is often difficult to distinguish them since they usually overlap (Merket & Morrell 2012). For example, an acquisition may be termed as a merger for financial reasons or to perk up the image of the acquirer to the acquired company’s staff (Zolo & Singh 2004). An acquisition may differ from a merger depending on whether the purchase of the target firm is hostile of friendly and the manner in which it is announced. A merger in most instances is announced in a manner that is friendly and cooperative. Acquisitions are usually communicated in a hostile manner. According to Aswath (2008), despite the existing gap between the terms mergers and acquisitions, most literature uses the two terms interchangeably.
Mergers and Acquisitions can either be friendly or hostile. In the case of friendly M&A, the two firms engage in negotiations to matters related to the merger, whereas, in the case of M&A that are hostile, the target company is usually unwilling to sell its shares to the bidder. In addition, a hostile M&A is usually a complex process that involves a proxy (Chakrabarti, Gupta-Mukherjee & Jayaraman 2009). The role of the proxy is to influence the shareholders of the target firm, as well as playing an active role, in the buying the target firm’s shares. Mergers occur when the two firms combine their obligations, as well as assets, leading to one of the firms ceasing to exist in a legal sense. In addition, a merger may be formed through the dissolution of both firms culminating in the creation of a new firm. Acquisitions, on the other hand, entail the transfer of ownership from one company, that is the acquired or target organization to the acquirer.
Cross-border mergers and acquisitions
Cross-border M&A occurs when a firm in one country obtains an entity from another country. The local company being acquired may be a state corporation, a private or even a public company. The cross-border M&A, when undertaken by foreign investors, leads to the transfer of both the authority and management of the merged or acquired company. Oehlen (2010) draws the conclusion that, cross-border M&A is an action in which a larger corporation from a foreign nation takes control of a local corporation.
According to Chakrabarti, Gupta-Murkherjee and Jayaraman (2009), the expansion of globalization has led to a swell in the number of cross-border acquisitions and mergers in recent decades. In addition, cross border mergers and acquisitions are a result of financial policies being liberalized, policies on the part of the government and agreements within regions. Cross-border M&As are a strategic tool used by companies to expand and gain entry into new markets across countries. However, various negative impacts have been experienced by the organizations, as well as their employees, in the form of a clash of culture and alienation in the workplace. Cross-border acquisitions and mergers have been used by western firms to gain access to the Chinese market (Su 2013). For example, in 2004, Tesco PLC merged with Le Gao shopping.
Cross-border M&As are transactions usually undertaken between foreign firms and domestic companies in the country being targeted. Cross-border M&As have largely been facilitated by opening up of the economies of various countries across the globe, as well as liberal economic policies being pursued across the globe (Neary 2007). In addition, the saturation of investment in China and the indecisiveness of politicians in Indian have led to cross-border mergers moving to emerging economies in Latin America and Africa. Rapid economic growth in Africa and Latin America has served to attract cross-border M&A.
The growth witnessed in cross-border M&A especially by Chinese organizations is tremendous and has grown over time from 470 million US dollars in 2007 to 111.9 billion dollars as at 2015 (Aybar, & Ficici 2009). This has allowed for Chinese firms to expand to other countries across the globe. Chinese companies often engage in cross-border M&As in order to enter a foreign market, as well as boost the economy of their country which has been slowing down in recent times. The Chinese government has been one of the facilitating forces in the cross-border M&A by Chinese companies.
Factors facilitating cross-border M&A
Cross-border M&A is a product of incentives, in that both the foreign firm and its domestic partner must profit from the deal. Due to the fact that domestic firms have the tendency to overstate their capabilities so as to attract M&A, foreign companies have a duty to look into the situation of the firm. This is done through investment banks and consultancies dealing in management (Calipha, Tarba & Brock 2010). Mergers and Acquisitions that involve companies from different countries are usually faced with risks which are social, political, general and economic. A risk matrix is thus used by the foreign firm to determine whether they should go on with the merger and acquisition or pull back. What is more, the firms need approval, politically and regulation wise. This is because the approval facilitates the M&A, without which the merger and acquisition would not be possible.
M&A across borders usually face stiff opposition as has been experienced by Chinese oil firms seeking to enter the United States Markets. Major Chinese oil companies faced opposition from the Senate. The opposition was prompted due to issues of security ownership patterns of the firms (Heiman, Li, Chan & Aceves 2008). Cross-border M&A often face resistance and support and thus makes companies wary of engaging in M&A across borders. This is often the result of a lack of structure and standardized process across the globe.
Studies conducted by Head and Ries (2007) and Di Giovanni (2005) reveal that, the proximity of the countries of the two firms engaged in the merger and acquisition, both geographically and culturally are important determinants of the cumulative mergers and acquisitions. In emerging markets, cross-border M&As have faced opposition from the civil society due to the benefits, benefiting only a small group of elites and the anger by the public due to the crony associated with capitalism. This thus draws attention to the need for scrutiny of regulations on patterns of ownership, as well as the structures of holding.
The gains in terms of efficiency occur as a result of takeovers which increase the economies of scale, as well as synergies, like considerations in regard to taxes and acquisition of funds. Strategic achievements in cross-border M&As occur when the structure of the market is changed by the cross-border M&A, resulting in the company gaining a better position in terms of competition, as well as profit level, due to the formation of oligopolies and monopolies (Deng 2009).
Overall the motives behind M&As are to develop the market, gains in terms of efficiency and power, enhancing the firm’s revenue and finally reduction of costs (Gubbi et al. 2010). Cross-border acquisitions and mergers are usually used by companies that have been successful in their national markets and who seek to expand their revenue as well as profit. Cross-border M&As allow firms to utilize the know-how that is specific to a given country that is possessed by the target firm. In addition, the foreign firm is able to make use of the staff and the distribution network of the acquired firm.
In the European Union, the regulations that have been put in place to reduce barriers across different countries led to a swell in cross border mergers and acquisitions in the region. However, some countries in the Asian market have shied away from cross-border dealings. This is attributed to some countries having resistance to foreign acquirers. However, the situation in Asian countries is rapidly changing.
The roles that distance in a cultural sense plays in the cross-border acquisitions and mergers in performance are dependent on the level of experience on an acquisition that an acquirer has. This is attributed to the fact that acquirers with more experiences are more aware of the pitfall they are likely to experience. In addition, acquirers with more experience tend to be more skilled at resolving any disputes that may arise in the course of the M&A (Bennett 2005). For a cross-border merger and acquisition between culturally distant firms to be successful, an anti-conflict plan of action that is culturally sensitive must be put in place. This allows the two firms to benefit fully from the cultural distance between them. A benefit that is likely to accrue as a consequence of cross-border acquisitions and mergers is an increase in the stock market value of the shares of the firms as well as the wealth of the two firms’ shareholders.
Types of M&A
Mergers and acquisitions can be classified into various groups depending on their functions. Horizontal Mergers and acquisitions usually involve two firms competing in the same industry. These firms usually have undergone rapid growth and through combining their resources the companies, seek to have greater value in terms of their combined assets, as well as a greater power in the market (Gubbi, Aulakh, Ray, Sarkar, & Chittoor 2010). These types of M&A are common in the petroleum, automotive and pharmaceutical industries. Vertical mergers and acquisitions usually occur in firms that have a client-supplier relationship, as well as a buyer-seller relationship. This type of M&A is undertaken with the aim of reducing both the cost of transactions and uncertainty of operations. This M&A mainly occurs in the automobile manufacturing industry and the final electronic company between the clients and component makers. Conglomerate M&As is a type of M&A which occurs between companies who engage in activities that are unrelated. This is done with the aim of risk diversification, as well as deepening the range of economies.
Challenges of cross-border mergers
Differences in culture between the two firms involved in cross-border M&As can bring about confusion, distrust as well as hostility among the employees of the firms (Barkema, Shenkar, Vermuelen & Bell 2007). This, in turn, affects the operations of the cross-border M&A firms. Firms engaged in cross-cultural mergers and acquisitions must, therefore, take into consideration the host country’s culture.
The main reasons why firms engaged in cross-border M&As fail are having a strategy that is unclear, due diligence and differences in culture, thus prevent successful integration of the two firms and lack of adequate competence from a professional standpoint (Hofstede, Hofstede, & Minkov 2010). An unclear plan of action means that the acquiring company does not take the time to understand synergies and the reason behind their acquisition of a firm. In addition, some firms tend to rely too much on investment banks and intermediaries in the acquisition of information about the target company. This means that the important duty of identifying the target company and important data on the target firm is left to a third party.
A lack of both the due diligence and the international experience in understanding the legal environment of the target company’s country as well as the profit model of the business means that the acquirer is clueless about what they are doing and thus increasing the chances of failure of the cross-border M&A. The disparities in culture may result in the performance of the cross-border acquisitions and mergers being affected in the long run (Hofstede 2010). The staff that is used to target and acquire a firm is usually from a foreign country and thus is likely to run into problems related to the language barrier, customs, and values, conception among other problems. What is more, failure to understand the important components related to the cross-border merger and acquisition means that the acquiring firm cannot adapt socially to the new environment of the host country.
Emerging economies have been more involved in cross-border mergers and acquisitions due to their high potential for growth along with policies on the part of the government that favour the implementation of a system of free market and liberalization of the economy. Cross-border M&A, whereby the acquirers are from emerging markets have mainly been prompted by strategic resources that they can access overseas through the merger and acquisition (Deng 2009). These strategic resources include: talent, channels of distribution, new technology, the need to avoid constraints by institutions that are present in their home country among other resources.
Firms that engage in activities abroad face other problems which consequently lead to a spike in the costs incurred. Distance is an important aspect to look at when analyzing the costs that a company is likely to incur as a result of doing business abroad. The greater the geographical distance between firms engaged in a cross-border acquisition and merger, the greater the costs in managing the value chain worldwide (Berry, Guillen & Zhou 2010). In addition, the distance between two firms does not always have to be geographical. Distance can be in terms of culture, institutions, economies, administration as well as regulations.
Another challenge that is faced by organizations in cross-border M&A during the process of integration is how to minimize the negative effects that the process of acquisition has on the employees acquired. In order for the cross-border M&A firm to be victorious, it must socialize the acquired staff effectively. The effective socialization of the acquired employees will result in an effective cooperation between the employed acquiring and those that are acquired. It is also important that the role of managers as agents of change are understood. Managers are important in the implementation of values, practices as well as system which allow organizational change to take place faster and in a thorough manner. This, in turn, enhances the ability of the firm to use its structures and institutions in an effective manner.
Social adaptations of firm to cross-border M&As
Firms adapt to social differences between the acquiring and target organizations in cross-border acquisitions and mergers in a number of ways. Organizational learning helps the organization, more so the acquiring firm in building systems of knowledge (Deng & Yang 2015). The process entails supplementing the firm’s knowledge, corporate culture as well as day-to-day routines within the organization. The social adaptations usually involve the employee’s skills through the process of cross-border merging and acquisition. For example, since the countries are from different countries with different languages, the employees’ skills in the language of the host nation of the target firm may prove critical in the M&A. In addition, the employees’ skills may include the culture of the target firm’s host country, which is important in the integration of the two firms. According to Lin and Liu (2013), organization learning is important in the integration of the two firms. Differences in the corporate culture of the two firms involved in the cross-border M&A may hinder the process of organizational learning which is important in the firms, more so the acquiring firm adapting socially to the cross-border M&A. This is a consequence affects the acquirer’s capacity to integrate resources, as well as advantages with the target firm.
Culture is an important part of social factors in a cross-border M&A. According to James (2015), culture is a social realm that places emphasis on material expressions, practice, and dialogue. These over the duration of time express both discontinuities and continuities on the common social meaning of life. Culture may also be defined as the programming of minds in a manner that is collective which distinguishes one group of people from another.
The main dimensions of culture that organizations engaged in cross-border mergers and acquisition must adapt to are: power distance, concepts of masculinity and femininity, indulgence, collectivism, and individualism. Culture in most cases entails culture which has the ability to affect the culture of an organization (Zhu & Huang 2007). The difference in the corporate culture of two firms involves in cross-border M&A have s negative relationships to the performance of the acquisition. The national culture affected by 50 percent the beliefs, values, and attitudes of the managers in firms engaged in cross-border M&A. This means that the bigger national distance culturally between two firms, the larger the corporate cultural distance.
The cultural distance between firms serves to increase the level of difficulty of communication as well as the ability of mutual trust among the management as well as the staff of the companies engaged in cross-border M&A. The most unpleasant effects of the cultural distance of firms involved in mergers and acquisitions are that they have a profound effect on people (Bennett). This, in turn, results in problems related to information and the ability for any collaboration to take. This thus leads to poor performance of the firms. Suspicion and hostility are also likely to arise when there is no mutual trust among the people in the firms involved in the cross-border merger and acquisition. The acquirer company suffers the most since the people in the target firm are likely to fight against it. This may lead to the breakdown of the M&A entirely.
Li, Li and Wang (2016) argue that absorptive as well as learning capabilities are important in ensuring that firms are not affected by the cultural distance between them in cross-border M&A. This thus allows the acquiring and target firms to adapt to social factors that may have otherwise have hindered the M&A. Absorptive capability entails to the capability to identify the worth possessed in new data, assimilating it in a manner that is beneficial commercially. Furthermore, Reus and Lamont (2009) found that the capability for absorption plays a significant position in the creation of value for the cross-border merger and acquisition. Overall, firms that have a higher degree of absorptive capacity tend to be better suited in overcoming the difficulties resulting from cultural differences and distances between the two companies involved in the cross-border M&A.
In emerging markets, the acquirer adapt socially to cross-border M&As by reconfiguring resources at their disposal and learning. This allows the firms to augment their dynamic potential. This entails the transfer of a significant amount of knowledge. A large amount of this knowledge is in the hands of society and well as people of the host country. In order to acquire knowledge about the market, culture and other aspects of the host country, it is essential that the acquirer uses employees from the host country. This allows the cross-border merger and acquisition to be successful by adapting to social factors.
Firms engaged in cross-border acquisitions and mergers seek to retain the core employees of the target firm since they are a strategic asset which affects the performance of the M&A firm (Deng 2009). This is a strategy that is used in cross-border M&A in adapting to the social factors, more so in emerging markets. The acquirer firm thus ensures that the employees of the target company are willing to cooperate as well as participate in the M&A firm.
Dynamic capability theory
The theory of firms’ dynamic capability places emphasis on the ability of firms to reconfigure the resources at their disposal and learning. Cross-border M&As entail the exploitation of assets as well as the acquisition of strategic assets, which allow for the repositioning of the firm in a market that is continually becoming globalized. In the process of cross-border M&A, information on the local government, customers, partners, and suppliers is important. This type of information cannot be transferred by transactions in the market. However, cross-border M&A allows firms to overcome these inadequacies. Bjorkman, Stahl and Vaara (2007) have argued that the greater the degree of absorptive capability, the likely the integration of the two firms involved in cross-border M&A is expected to be. What is more, the overall performance of the firm is probably for the better.
Resource dependence theory
The chief argument behind the resource dependence theory is that, firms take into consideration their environment, which means that they can and do make use of several strategies to overcome any external constraints. This allows them to procure resources that are critical to them (Pfeffer & Salncik 2003). The actions of firms are further dependent on the concept of power, which enables them to exercise control over important resources. Firms engage in mergers and acquisitions so as to minimize uncertainty in the environment and manage the level of uncertainty in the environment. The resource dependency theory argues that through mergers and acquisition, constraints are fully absorbed and thus enabling the firm to acquire target firms that control the resource need by the acquirer firm. This ensures that the acquirer firm in the M&A has the relative power in comparison to other firms.
The resource dependence theory is applicable to cross-border M&As in that, a firm facing constraints in its external environment may seek to invest overseas with the aim of increasing its power. The power is increased through the acquisition of alternative sources of resources. The logic behind M&A argues that the level of dependence of firms in emerging markets, on their host nations is decided by the degree to which the prospective firms to be acquired control assets or markets that are need by firms from emerging markets.
Methodology
Introduction
This chapter looks into the methods, philosophy, as well as strategy used in the gathering of data for the function of this study. Furthermore, the techniques used in the examination of the data are also discussed in this chapter. What is more, the ethical considerations for this study are discussed along with the reliability and data validity for the research. This section of the research will also provide valuable insight into the approaches, strategies and philosophies and how they are relevant to the study. What is more, this part of the research serves as a guideline to how data for the principle of this study will be collected. Additionally, the methodology also offers the process of data-gathering, analysis and drawing conclusions from the information. This chapter also justifies the use of the various strategies, philosophies and methods in the gathering as well as analysis of data. The figure below represents a research onion which is a representation of how the research process and methodology was formed (Saunders 2012).
Figure 1.0 shows a research onion (Saunders 2012)
A research onion is used in creating a link between the philosophy, strategy and method used in the study. The outermost ring represents the philosophies that may used in the guiding the entire research process. The second outermost ring represents the strategies that are used alongside the various research philosophies. Next is the design or approach used. This design may be qualitative, quantitative and mixed. The design used in the course of the study is influenced by the research philosophy chosen. Furthermore, the various research designs and philosophies are linked to various theories that inform the research process. In addition, the research philosophy also influences the tools that used in the collection of data for the study (Saunders 2012). The research onion also looks into the use of cross-sectional or longitudinal methods. At the core of the research onion is the data-gathering and analysis. These two components are at the centre of the research onion since they are not only vital to the research but also allow the researcher to answer the question and the topic being investigated.
Research philosophy
Saunders (2012) refers to research philosophy as, a structure of assumptions, as well as beliefs, that are made in the process of developing knowledge. Research philosophy is important in ensuring that data is gathered in a manner that is scientific. There are several philosophies that can be used in the course of a research. These include: positivism, realism, interpretivism and pragmatism. In this case, the research makes uses of a positivism research philosophy to establish the reality on, the social adaptation of cross-border mergers and acquisition in markets that are emerging. Through the use of positivism research philosophy, the study is able to justify the use of quantitative methods of data gathering. This thus allows for the gathering of data in an objective and unbiased manner (Chambliss & Schutt 2012). In addition, the use of a positivism research philosophy also allows the researcher to formulate a hypothesis, which will guide the process of carrying out the research. The use of positivism means that the researcher will look for correlations in the data that is gathered and come up with generalizations which enable the researcher to come to a conclusion. The positivism research philosophy allows for use of relevant literature of the topic being investigated.
Research strategy
A research strategy refers to the manner in which a researcher goes about in the answering of the questions in the study (Saunders 2012).The collection and scrutiny of data for the study is closely linked to the research philosophy as well as the research strategy used (Denzin and Lincoln 2011). The researcher, in this case, collects qualitative data through the case study, as well as quantitative data through the interviews. Creswell (2013) argues that, the use of the case study alongside typological theories in research allows the researcher to explore many aspects that lead to the social adaptation of firms in emerging market in their cross-border M&A. Case studies represent aspects of a period in history which is well defined and thus is useful in answering the research question. Furthermore, case studies generate perceptions that are both in-depth and intensive which lead to the development of a theory. The use of more than one case study allows the researcher to have a platform for comparison of the data gathered on the ways in which organizations involved in cross-border M&A in emerging markets adapt socially.
Research design
The study makes use of a mixed research, which allows for the use of both qualitative and quantitative methods of gathering data (Jick 2009). The mixed research design allows the researcher to rise above the shortcomings of using a single method (Creswell 2013). In addition, both deductive and inductive methods of data gathering are used. The use of inductive methods allows for the use and integration of academic theories as well as literature in the research. This allows the study to come to a general conclusion. The inductive approach allows for the researcher to explore the phenomena being investigated as well as recognizing patterns and themes. In addition, the researcher is able to gain additional knowledge on how cross-border acquisitions and mergers of firms in markets that are emerging have adapted socially. Inductive methods also allow for the testing of hypothesis against literature as well as theories that are already in existence. This means that the researcher when analyzing the social adaptations of cross-border mergers and acquisitions in emerging markets will relate the data gathered to theories which have been researched. Deductive methods, on the other hand, ensure that the data gathered is in line with the objectives of the research (Bryman 2015). In addition, deductive methods mean allow the researcher to explain the relationship between cross-border M&A in emerging markets and social adaptation to the mergers and acquisitions. The use of deductive methods allows for the use of data that is quantitative in testing the hypothesis. The use of several sources of data means improves the overall quality of the research by offering a multitude of sources on the research topic. This serves to increase the degree of validity of both the findings and results.
The study makes use of a cross-sectional study which focuses on the analysing data at a specific point in time (Bryman 2015). In this case, the study focused on data on social adaptations of firms engaged in mergers and acquisitions across borders in markets that are emerging and the specific point that allows for cross-sectional study to be used in markets that are emerging. The cross-sectional study allows for the use of interviews which collect data for a short period of time unlike in longitudinal study where the data is collected on multiple occasions over time. The use of case studies established points of comparison of data. A cross-sectional study is usually descriptive in nature and thus allows for the use of qualitative data sources (Bryman 2015). The use of a cross-sectional study also allows the researcher to look at several phenomena at one time. In this research, there are three phenomena that are being investigated: Cross-border acquisitions, markets that are emerging and social adaptations of firms.
Data collection
In the course of the research, the researcher gathers data that is from both primary and secondary sources. According to Saunders (2012), primary data is data which has been gathered for the purpose of the research that is being undertaken. On the contrary, secondary data refers to data which has been gathered by other people for different purposes other than answering the research question the researcher is investigating. However, the secondary data can be reused to answer the question in the study.
The research makes use of primary and secondary data which is useful in overcoming the shortcomings of anyone method. In addition, the two sources of data serve to complement each other. The utilization of secondary data serves to reinforce the findings of the primary data on the social adaptations of cross-border acquisitions and mergers in the emerging market. The secondary data from the already existing literature will help in the development of the argument presented in this study (Saunders 2012). In addition, the data gathering will take the form of case studies of firms that have engaged in cross-border M&As in the markets that are emerging. The case study will entail the use of academic journals, newspaper cuttings, and articles as well as sources that are deemed as trusted.
The research also makes use of interviews which is a method used in the collection of qualitative data. Saunders (2012) refers to qualitative data as data that is no-numeric and that cannot be quantified. A qualitative research is conducted with the aim of forming a relationship which in turn leads to the expansion of a theory. The research makes use of qualitative research in examining the relationship between social adaptation and firms engaged in cross-border acquisitions and mergers in developing countries. In addition, the research makes use of qualitative data through comparing firms in cross-border M&A in markets that are emerging and how they relate to theories that already exist. The interviews were recorded with an audio device for the purpose of clarity and for easier filling in of the interview questions after the interview. Additionally, the utilization of the audio recorder helped save time. Field notes were also utilized in recording the responses of the interviewees. According to Chambliss and Schutt (2010), the method used for data recording should be left to the researcher to decide. This is simply due to the fact that whichever method is used has its strength and weaknesses.
Data sources
The study makes use of both secondary and primary sources which is vital in gathering data on the social adaptations of acquisitions and mergers in cross-border dealings. The use of sources that are primary and secondary in nature, serves to increase the reliability of the findings and results (Bamberger 2008). The secondary sources used in the study are both online and offline books and journal. In addition, reputable sources are used in the data-gathering process. Primary data is obtained from interviews with professionals in the financial sector who have worked with companies engaging in cross-border acquisitions and mergers. In addition, the data is also gathered from case studies of four cross-border M&As of both successful and unsuccessful companies.
The interview method of gathering data entailed interviewing of 20 respondents. The use of interview method of data gathering enabled the respondents to be clear and offer explanations to their answers and thus no misunderstandings, contradictions, and ambiguity in the data gathered. According to Bamberger (2008), interviews are regarded as one of the best methods of data gathering since they offer the respondents the opportunity to offer explanations which in turn leads to clarity as well as more insight. Furthermore, the interviewer is able to pick up non-verbal cues and body language which are critical in determining the credibility of the respondents. This is especially the case when the interview questions are administered face to face. Furthermore, the study allowed for the establishment of rapport between the interviewer and the respondents leading to the respondents feeling more comfortable and thus free to air their views. In addition, the interview questions were both semi-structured and open-ended, which allowed the researcher to give explanations on their responses and thus clarity. What is more, the interview questions were formulated based on the objectives of the study.
Basis for the methodology
In order to ensure that the social adaptations of cross-border M&A in markets that are emerging are fully discussed, there is need to use a variety of methods. This makes it necessary to use interviews and case studies as the main methods of data collection. In addition, this necessitates the use of both sources that are primary and secondary (Saunders, Lewis & Thornhill 2009). The review of the literature was important in coming up with high-quality results as a result of generalization on the ways in which cross-border mergers and acquisitions have socially adapted to the emerging markets. What is more, the use of interview allowed for analysis in an in-depth manner of the reality on cross-border M&A in markets that are emerging and their social adaptations. On the contrary, the use of interviews may compromise the reliability as well as the quality of the data, since the interviewees give their perspectives on the subject being investigated. The literature reviewed, however, serves to validate the respondent’s answers and opinions on the social adaptation of cross-border acquisitions and mergers in markets that are emerging.
Sampling technique
The sampling techniques used in the selection of the participants for the interview was purposive sampling. This is since it was important for the respondents to have an in-depth appreciation of the social adaptations of companies involved in cross-border M&A, in markets that are emerging. Twenty respondents with knowledge on cross-border M&A were selected for the study. This sample size that was selected was not too large and thus allowed the researcher to be able to cope with the constraints put on both time and resources (Saunders, Lewis & Thornhill 2009). Furthermore, the firms identified for the purpose of this study were drawn from various academic literature. In addition, the firms were drawn from several parts of the world where the economies are emerging. What is more, the firms were either acquirer of target companies or target firms in emerging markets. The firms have in the past been involved in cross-border acquisitions and mergers. What is more, the firms used in the case study have been both successful and unsuccessful in their respective cross-border M&As in nations where they venture into.
Limitations of the research methodology
The use of secondary data in the research means that the data from the previous studies used may be inaccurate or biased which interferes with the accuracy as well as the reliability of the data and results (Kaya 2013). In addition, the use of secondary sources was time-consuming. This is attributed to the large quantity of academic literature available on the topic of cross-border acquisitions and mergers. Due to the constraints of time and resources, the sample size used in the interviews was relatively small and thus may interfere with the credibility of the results and the conclusions drawn.
Due to the use of qualitative methods of data collection, the findings of the study may not translate to the entire populace or in this case other firms involved in cross-border M&As. According to Kaya (2013), the data gathered that is qualitative is in most instances not standardized and this makes it difficult to arrive at a conclusion. In addition, the participants of the study may feel uncomfortable and thus may not give an honest opinion of the social adaptations of firms involved in cross-border M&A in markets that are emerging.
Data analysis
Due to the fact that the researcher incorporates both data that is quantitative and qualitative in nature, the data is first converted to textual and statistical forms. This allows the researcher to fully grasp the implications of the data. The scrutiny of the data collected is conducted through of SPSS software. SPSS software will allow for the analysis of the data (Muijs 2004). What is more, the data will be embodied in the form of charts and graphs. This will allow for easier interpretation of the findings of the research. The data is represented in an arithmetic manner which facilitates easier conversions that are statistical. In addition, the analysis process entails describing as well as summarizing the data. What is more, the relationship between social adaptation and cross-border M&As in markets that are emerging is identified. A comparison of the variables is also undertaken and the differences between the variable are identified. The researcher is also able to forecast an outcome through analysis of the data gathered. Furthermore, the qualitative and quantitative data is coded. This allows for the analysis process to take place smoothly.
Data validity and reliability
Reliability refers to the ability to come up with findings that are similar while validity means that the overall credibility of the data and entire research process is attained (Creswell 2013). The soundness of the research is ensured in that the respondents to the interview questions were served with letters of consent prior to the commencement of the research. This ensured that the interviewees were willing to take part in the study. However, the respondents reserved the rights to depart from the research at any instance and devoid of having to offer an explanation to the interviewer. The study also ensured that the interviewees were conversant with the topic of cross-border acquisitions and mergers. The identities of the respondents would be kept confidential as agreed upon between the respondents and the researcher (Jick 2009).
The interviews were carried out by one individual. This served to ensure that the interviews were held under similar conditions. This also served to limit the probability of bias (Saunders 2012). The questions used in the interview were in line with the study objectives which served to prevent the occurrence of misunderstandings. What is more, the interviewer paraphrased the respondents’ answers to the questions and read them aloud to the respondent, so as to ensure that was the respondent meant was what was recorded in the field notes. In addition, this resulted in clarity of the data recorded.
Ethical considerations
An introduction of the subject, the objectives, and guidelines of the study were issued to the respondents in an oral manner. This was done with the goal of preventing and curbing deception, not only in the collection of data but also in throughout the study (Kimmel 2009). This serves to ensure that the data itself, the findings and conclusions reached are both valid and credible. What is more, written copies of the goals, guidelines, as well as consent letters, were issued to the respondents of the study prior to the commencement of the study. This was done so as to inspire the confidence of the participants in the researcher. In addition, this process prevented the occurrence of misunderstandings and arguments in the gathering of the data and throughout the study. Through inspiring the confidence of the participants in the study, the respondents felt free and confident to air their honest opinion about the topic being investigated.
The participation of the respondents in this study was on a purely voluntary basis which according to Kimmel (2009) is an important part of the ethical considerations of any study. The respondents were issued with consent forms which they were required to sign stating they agreed to partake in the study. This meant that the participants were not coerced in any manner to participate in the research. The data from the respondents was stored in a manner that was secure. This ensured that ethics were upheld in the gathering of data. The integrity of the gathered data was ensured through the collection of data in a manner that was both fair and safe.
The personal details of the participants could not be shared with third parties. This served to protect their identity and they could, therefore, offer their honest opinion on the social adaptation of firms in cross-border acquisitions and mergers. In addition, the participants of the study have the right to walk away from the research and data collection process at any point in time without offering any explanations for their exit. The research process did not have any hazards or risks to the participants and thus there was no reason to give the respondents any protection (Kimmel 2009). The study was also not harmful to the physical as well as mental health of the respondents since the questions asked were neither personal nor sensitive in nature. Ethical issues arising from the use of secondary data is dealt with through ensuring that the data is referenced in a proper manner.
Summary
This section of the study looked at the different methods, philosophies, approaches, and design, as well as the ethical considerations, along with the issues of validity and reliability of the data. In addition, the study as stated earlier, makes use of a positivism research philosophy with the use of case studies and interviews in the examination of the social adaptations of cross-border acquisitions and mergers in markets that are emerging. This chapter justified the use of the positivism philosophy as well as other methods in the gathering as well as analysis of data. The section also looked into the limitations that constrained the researcher in the course of the study. The study also makes use of a cross-sectional study and thus allowed for the use of qualitative data.
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