What is the impact of Server collation on databases? We have dev and production environments on different server collations, is there a risk having these different server collations?
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Well sure there is. Your sorting and all comparisions may not be the same (For example, one may be case sensative, one may not). The collation handles how character comparisions are done. See here for more details.
You should make sure they are the same. There is no reason for it to be otherwise.