By Katie Shonk
Cultural mismatches, especially between “tight” and “loose” organizational norms, can derail even the most promising business partnerships. Here, Katie Shonk explores the importance of addressing these cultural differences early in the negotiation process and offers a practical framework for navigating cultural divides and building more resilient, successful collaborations.
When negotiating a new business partnership, from a product collaboration to a sales agreement to a corporate merger, organizations often approach negotiations with optimism about their strategic complementarity. Enthusiasm about the prospect of creating synergy through combined strengths spurs the belief that each side will overcome its weaknesses and begin anew.
Unfortunately, this focus on strategy often completely overlooks the importance of assessing cultural complementarity—that is, how well the organizations’ cultures are likely to mesh. That’s a significant oversight, as a culture clash—specifically, between “tight” and “loose” organizational cultures—is often to blame for partnerships that fall apart during the implementation stage, Stanford professor Michele Gelfand and her colleagues have found in their research. Recent negotiation case studies illustrate why cross-cultural partnerships are often bumpy and offer clues on how to avoid such pitfalls.
Troubled from the start
In 2022, online game engine Unity Technologies announced it had negotiated to purchase Israeli app-monetization platform IronSource for $4.4 billion. San Francisco-based Unity is known for democratizing game development—giving game designers at all levels, including beginners, the tools to bring their creative vision to (virtual) life. IronSource, by contrast, works to ensure that companies like Unity succeed financially through analytics, monetization, and other tools. By teaming up with IronSource, Unity aimed to grow and offer users new opportunities to market and profit from their games.
The tie-up remained troubled as reports of a debilitating culture clash emerged.
That might sound like a recipe for a win-win agreement, but many longtime Unity customers were upset by the news. They were suspicious of IronSource’s past ties to malicious adware and accused Unity of moving in a more corporate, bottom-line direction that betrayed its core audience. Shares of Unity fell 18 percent 1 at the announcement.
Two years later, the tie-up remained troubled as reports of a debilitating culture clash emerged. “Unity’s working culture is slower and messier than the fast, aggressive way IronSource staff do business,” mobilegamer.biz reported.2 Some Unity personnel perceived IronSource managers as bullies who didn’t tolerate disagreement.
Attempting to course-correct, Unity cut ties3 with IronSource’s founders in early 2024. Unity was “moving to a flatter, more functional structure,” but the change was also “cultural,” interim president and CEO Jim Whitehurst wrote in an email to his team: “Across the entire organization, we will need to come together and intentionally think through what type of team we want to be in order to reach our full potential.”
Though significant, the changes and soul-searching may have been insufficient. Many months later, IronSource middle managers were still clashing with Unity staffers, and morale remained low, sources told mobilegamer.biz.2
The Tight–Loose Divide
While there were doubtless numerous reasons for which the merger struggled, inattention to obvious cultural differences between Unity and IronSource during the negotiation phase and early days of the partnership stand out.
In their work, Gelfand and her colleagues have identified a cultural difference that helps to explain the misunderstandings and conflict so often found in cross-cultural partnerships and other interactions: the relative “tightness” or “looseness” of cultures’ social norms.
Social norms are the behaviors that a culture—whether a nation, a company, or a family—prescribes to be acceptable. Is jaywalking common or a punishable offense? Do meetings begin on time or start 10 minutes late? Are you expected to get straight As or to simply do your best? From childhood, we passively absorb the social norms of the cultures we belong to and often adhere to these norms unthinkingly throughout our lives.
In a survey of about 7,000 people from 33 countries,4 Gelfand and her team found national variation in the relative tightness of social norms. Some cultures, such as Japan, India, and Turkey, lean tight. In these countries, people are expected to adhere closely to laws, rules, and norms, and punishment for norm violations can be severe. Other cultures, including the United States, Brazil, and the Netherlands, fall on the loose end of the spectrum. In these countries, people face fewer constraints on their behavior. Still other countries fall in different points on the spectrum between tight and loose.
These cultural differences appear to have evolved over centuries in response to the level of threat in the environment. Countries and regions that have faced repeated threats to their survival, such as disease outbreaks, invasions, and natural disasters, developed strong social norms that promoted collaboration and an efficient response, writes Gelfand. By contrast, regions that have faced few threats have had less need for strong social norms and thus evolved to be looser.
These norm expectations shape the thoughts, preferences, and behaviors of a culture’s members. Generally speaking, people from tight cultures tend to be rule followers. They are often organized, self-controlled, resistant to new ideas and experiences, and rigid. By comparison, people from loose cultures tend to be more comfortable breaking rules. They are more likely to be disorganized, impulsive, open to new ideas, and creative.
Differences in Organizational Culture
Just as nations evolve to be relatively tight or loose, so do organizations, as well as industries and professions. Organizations such as hospitals, nuclear power plants, airlines, police departments, construction, and the military are usually tight; they are rule driven, formal, and hierarchical. Because mistakes within these organizations can cost lives, there’s little room for error, and a need for tight social norms that promote safety.
By contrast, organizations that thrive on creative thinking, flexibility, and innovation, including technology, design, and entertainment firms, tend to lean loose. In these organizations, risks can lead to big payoffs, and mistakes are often useful learning opportunities rather than devastating disasters.
More subtle tight–loose variations can be found within fields. While Unity and IronSource are both tech firms, Unity developed a loose culture in keeping with its mission of promoting creativity and innovation; by contrast, IronSource, with its focus on efficiency and the bottom line, established a tighter, more disciplined, and more hierarchical culture.
Big Differences, Big Problems
In a study5 of nearly 4,700 international $10 million-plus M&A deals from 1989 to 2013, Gelfand and colleague Chengguang Li found that companies with significant cultural differences experienced poorer long-term financial performance than those with more similar cultures. Mergers between companies with very different cultures “took longer to negotiate and finalize, had lower stock prices following the deal, and yielded much lower returns for the buyer in the deal,” writes Gelfand in her book Rule Makers, Rule Breakers.6 For typical deals, such cultural gaps were associated with the equivalent of $245 million in reduced net income over three years.
One prime example is the $36 billion merger in 1998 between automakers Daimler-Benz and Chrysler. Strategically, the DaimlerChrysler match seemed heaven-sent, enabling Germany-based Daimler to enter the lower-priced car market and U.S.-based Chrysler to make headway in Europe. The combined company’s share price soared on its debut.
But when staff came together at their shared headquarters in Stuttgart, Daimler’s tight, hierarchical German culture and Chrysler’s loose, egalitarian American culture didn’t mix well, explains Gelfand. To take one example, the Germans engaged in intensive prep work for team meetings and followed a strict agenda, while the Americans showed up expecting loose brainstorming sessions. As problems and conflict mounted, Daimler responded by taking over U.S. operations and laying off thousands of Chrysler employees. After years of low morale and stock price declines, the companies admitted defeat in 2007 and divorced.
Now consider the merger of two American companies from different industries: Amazon’s 2017 $13.7 billion acquisition of Whole Foods. Hopes were high7 that it would enable Amazon to expand beyond its online business and Whole Foods to lower prices and correct a sales slump.
But combining the loose, value-oriented culture of teamwork at Whole Foods and Amazon’s culture of tight, efficient business practices hasn’t been easy. Whole Foods employees were demoralized by Amazon practices they deemed heavy-handed, such as compliance scorecards that could lead to punishment and termination. Amazon has failed to capture a significant portion of the grocery market, and in January 2025, a Philadelphia store became the first in the grocery chain to unionize. In June, an Amazon reorganization plan leaked8 that included a new leadership team for Whole Foods and closer oversight of its corporate staff.
Negotiate Effectively Across Cultural Divides
As we have seen, partnerships between organizations with very different social norms are unlikely to succeed without a thorough consideration of their cultures. Here are four steps you and your organization can take to avoid a tight–loose culture clash and make the most of your contrasting strengths.
1. Identify differences
“Culture is like an iceberg,” writes Gelfand in Rule Makers, Rule Breakers. “Because organizational norms aren’t always visible, diagnosing a company’s relative tightness or looseness requires a deep dive to understand its practices, its people, and above all, its leaders.”
When negotiating a new business partnership, we often become so focused on negotiating financial terms and business goals that we neglect to carry out this kind of cultural comparison. Yet it’s an essential step in setting the deal up for long-term success.
Partnerships between organizations with very different social norms are unlikely to succeed without a thorough consideration of their cultures.
You might start by taking note of seemingly small differences in negotiating style. A negotiator from a tight culture might prefer to build trust gradually before getting down to business, whereas someone from a loose culture may be more open from the start—and less patient with trust-building niceties such as small talk and shared meals. When behavior seems puzzling, think about whether it might reflect unfamiliar but adaptive social norms.
2. Discuss preferences and values
Once you’ve identified cross-cultural differences, it’s time to address them directly. Gelfand recommends a “cultural assessment to understand how people, practices, and management reflect tightness or looseness in both companies.”
The aim should be to discuss not only the possible synergies of a cross-cultural partnership but also core values and potential challenges. For example, in its merger talks with IronSource, Unity leadership might have emphasized the value it places on inspiring creative thinking among its staff and users, as well as how its looser style manifests day to day in the organization. How were employees accustomed to being managed? How were they likely to respond to a more hierarchical management style?
IronSource negotiators, in turn, could have shared what management practices worked best for them and how they expected to lead. This information exchange could open up a frank consideration of what might go wrong and how culture clashes could be avoided and addressed.
3. Plan for success
After you have identified differences and complementarities between cultures, it’s time to come up with a plan to integrate them. Discuss whether this will be an equal partnership or whether one organization will take control. What areas of the combined business might benefit from greater tightness? Greater looseness?
Consider enshrining your core values and expectations in writing. When Disney purchased animation studio Pixar in 2006, Disney CEO Robert Iger agreed to ground rules aimed at protecting Pixar’s looser culture, according to Gelfand. Deal terms ranged from not requiring Pixar staff to sign Disney employment contracts to continuing Pixar’s annual paper airplane contest.
4. Address the disconnect
When cultures clash during the deal implantation stage, one side will often try to wrest control and impose its culture unilaterally. As we have seen, such power plays can exacerbate problems.
DaimlerChrysler was conceived as a “merger of equals”; when Daimler executives instead fell back on a tighter, unilateral decision-making style, they lost the trust of Chrysler employees. At Unity, replacing IronSource leadership didn’t address the underlying cultural disconnect. As Amazon imposes stronger managerial control on Whole Foods, it risks further employee backlash.
What works better? The careful, deliberate work of integrating the best of both cultures into the partnership. That might mean making projects more collaborative while adopting the efficient practices of the tighter culture. Above all, business partners should strive to address conflict head-on and try to appreciate what each side brings to the table.
