Cultural Conflict and Merger Failure: An Experimental Approach

Abstract:     
We use laboratory experiments to explore merger failure due to conflicting organizational cultures. We introduce a laboratory paradigm for studying organizational culture that captures several key elements of the phenomenon. In our experiments, we allow subjects in "firms" to develop a culture and then merge two firms. As expected, performance decreases following the merging of two laboratory firms. In addition, subjects over-estimate the performance of the merged firm and attribute the decrease in performance to other subjects rather than to situational difficulties created by conflicting culture.

Working Paper Series