"Cross Border Merger: Guarantee of Failure? The Cases of Renault-Nissan and Air France-KLM"

Since the 1960s, mergers and acquisitions – and especially cross border alliances - have been associated with lowered productivity, higher absenteeism, worse strike records and lower innovation power rather than higher profitability (Kitching 1967; Cartwright and Cooper 1996; Renneboog 2019). Some economists even argued that 50 to 80 percent of all cross border mergers and acquisitions are considered to be financially unsuccessful and do not create any value (Schenk 2008). Nevertheless, the numbers of international alliances, mergers and acquisitions remained and are still high (UNCTAD data 2019).
Many economists and other social scientists have tried to fathom this paradox. Why are so few international alliances efficacious and valuable for different stakeholders? In particular, mergers between firms that originate in different business systems were more complicated than the amalgamation of firms with similar institutional and cultural background (Van Oss 2009). In most cases, these recipes did not result in a major breakthrough in the success-failure ratio of cross border alliances or to a decrease of the number of international contracts closed.
This paper compares two cross border alliances (of firms operating in different cultural and institutional settings) that were rather successful. Instead of looking at failure, we analyze two cross border alliances that were at the beginning efficacious. Unfortunately, the companies were not able to continue their success and, over time, tensions between the partners arose that had even the potential to jeopardize the cooperation. The first case deals with the alliance of the French automobile producer Renault and its Japanese competitor Nissan that came about in 1999. The second case highlights the merger of Air France and Royal Dutch Airlines, the first international merger in the airline industry in 2004. What went wrong?