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Institutional impacts on ownership decisions by emerging and advanced market MNCs

Institutional impacts on ownership decisions by emerging and advanced market MNCs <jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>Emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions (M&amp;As) to acquire strategic assets that compensate for their resource deficiencies. Therefore, developed markets have become important destinations for EMNCs. Institutional distance constitutes a major source of competitive disadvantage for foreign firms competing with indigenous firms. The purpose of this paper is to examine the ownership pattern of cross-border M&amp;As in the USA, and determine if EMNCs respond to institutional distance differently than advanced-market multinational companies (AMNCs).</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>Based on the extant literature in institutional theory as well as internationalization strategy, a quantitative study was carried out. Hypotheses were proposed and tested using fixed effects panel regressions.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>This paper finds that both AMNCs and EMNCs take smaller ownership positions when there is greater cognitive and normative distance. The negative association is stronger for AMNCs than for EMNCs. Further, the larger the regulative distance in the positive direction, meaning a higher level of development in the host market than in the home market, the more AMNCs and EMNCs are led to opt for a higher ownership position, with EMNCs being less influenced by regulative distance.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Research limitations/implications</jats:title> <jats:p>Though findings are robust and stable, this study is limited to observations that only have US target firms.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>By integrating the literature from institutional theory and strategy, this paper offers a clearer understanding and distinction of the acquisition decisions made by EMNCs and AMNCs.</jats:p> </jats:sec> http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Cross Cultural & Strategic Management CrossRef

Institutional impacts on ownership decisions by emerging and advanced market MNCs

Cross Cultural & Strategic Management , Volume 24 (3): 454-481 – Aug 7, 2017

Institutional impacts on ownership decisions by emerging and advanced market MNCs


Abstract

<jats:sec>
<jats:title content-type="abstract-subheading">Purpose</jats:title>
<jats:p>Emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions (M&amp;As) to acquire strategic assets that compensate for their resource deficiencies. Therefore, developed markets have become important destinations for EMNCs. Institutional distance constitutes a major source of competitive disadvantage for foreign firms competing with indigenous firms. The purpose of this paper is to examine the ownership pattern of cross-border M&amp;As in the USA, and determine if EMNCs respond to institutional distance differently than advanced-market multinational companies (AMNCs).</jats:p>
</jats:sec>
<jats:sec>
<jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title>
<jats:p>Based on the extant literature in institutional theory as well as internationalization strategy, a quantitative study was carried out. Hypotheses were proposed and tested using fixed effects panel regressions.</jats:p>
</jats:sec>
<jats:sec>
<jats:title content-type="abstract-subheading">Findings</jats:title>
<jats:p>This paper finds that both AMNCs and EMNCs take smaller ownership positions when there is greater cognitive and normative distance. The negative association is stronger for AMNCs than for EMNCs. Further, the larger the regulative distance in the positive direction, meaning a higher level of development in the host market than in the home market, the more AMNCs and EMNCs are led to opt for a higher ownership position, with EMNCs being less influenced by regulative distance.</jats:p>
</jats:sec>
<jats:sec>
<jats:title content-type="abstract-subheading">Research limitations/implications</jats:title>
<jats:p>Though findings are robust and stable, this study is limited to observations that only have US target firms.</jats:p>
</jats:sec>
<jats:sec>
<jats:title content-type="abstract-subheading">Originality/value</jats:title>
<jats:p>By integrating the literature from institutional theory and strategy, this paper offers a clearer understanding and distinction of the acquisition decisions made by EMNCs and AMNCs.</jats:p>
</jats:sec>

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Publisher
CrossRef
ISSN
2059-5794
DOI
10.1108/ccsm-07-2014-0087
Publisher site
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Abstract

<jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>Emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions (M&amp;As) to acquire strategic assets that compensate for their resource deficiencies. Therefore, developed markets have become important destinations for EMNCs. Institutional distance constitutes a major source of competitive disadvantage for foreign firms competing with indigenous firms. The purpose of this paper is to examine the ownership pattern of cross-border M&amp;As in the USA, and determine if EMNCs respond to institutional distance differently than advanced-market multinational companies (AMNCs).</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>Based on the extant literature in institutional theory as well as internationalization strategy, a quantitative study was carried out. Hypotheses were proposed and tested using fixed effects panel regressions.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>This paper finds that both AMNCs and EMNCs take smaller ownership positions when there is greater cognitive and normative distance. The negative association is stronger for AMNCs than for EMNCs. Further, the larger the regulative distance in the positive direction, meaning a higher level of development in the host market than in the home market, the more AMNCs and EMNCs are led to opt for a higher ownership position, with EMNCs being less influenced by regulative distance.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Research limitations/implications</jats:title> <jats:p>Though findings are robust and stable, this study is limited to observations that only have US target firms.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>By integrating the literature from institutional theory and strategy, this paper offers a clearer understanding and distinction of the acquisition decisions made by EMNCs and AMNCs.</jats:p> </jats:sec>

Journal

Cross Cultural & Strategic ManagementCrossRef

Published: Aug 7, 2017

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