What is in a name? Cross-national distances and subsidiary’s corporate visual identity change in emerging-market firms’ cross-border acquisitions

2018 ◽  
Vol 35 (2) ◽  
pp. 301-319 ◽  
Author(s):  
Ru-Shiun Liou ◽  
Rekha Rao-Nicholson ◽  
David Sarpong
Keyword(s):  
Cultural Distance ◽  
Emerging Market ◽  
Institutional Distance ◽  
Foreign Subsidiaries ◽  
Content Type ◽  
Cross Border ◽  
Economic Distance ◽  
Visual Identity ◽  
Emerging Market Firms ◽  
Cross National

Purpose Addressing the unique challenge facing emerging-market firms (EMFs) of branding and marketing in their foreign subsidiaries, the purpose of this paper is to evaluate the foreign subsidiary’s corporate visual identity (CVI) transitions during the post-acquisition period. Design/methodology/approach Data on 330 cross-border acquisitions from five emerging markets, namely, Brazil, Russia, India, China and South Africa (BRICS) are used. The cross-sectional multivariate analyses are used to test the hypotheses. Findings Utilizing a sample of worldwide acquisitions conducted by EMFs originated from BRICS, this study establishes that various cross-national distances do not consistently cause the targets to take on the parent’s CVI. While economic distance and formal institutional distance increase the likelihood of an acquired subsidiary’s CVI change, cultural distance decreases the likelihood of CVI change. Practical implications Lacking international experience and shaped by national differences between the host and home markets, EMFs often grant foreign subsidiaries substantial autonomy to respond to diverse stakeholder demands in subsidiary branding. Contrary to extant literature, the findings show that some distances are more pertinent to CVI transformation in the subsidiaries than others in the context of the EMFs. Originality/value This research shows that the formal institutional distance and economic distance will increase the likelihood of CVI changes in the subsidiaries, whereas, the cultural distance requiring soft skills like the cultural adaptability from the EMFs will decrease the CVI change possibility. The findings presented in the paper have significant implications for future research and strategic application.

Ownership participation of cross-border mergers and acquisitions by emerging market firms

2015 ◽  
Vol 53 (1) ◽  
pp. 221-246 ◽  
Author(s):  
Monica Yang
Keyword(s):  
Mergers And Acquisitions ◽  
Cultural Distance ◽  
Emerging Market ◽  
Foreign Market ◽  
Foreign Market Entry ◽  
Firm Level ◽  
Content Type ◽  
Cross Border ◽  
Emerging Market Firms ◽  
The Relationship

Purpose – The purpose of this paper is to adopt a multi-level approach to investigate what factors shape the content of emerging market firms’ foreign market entry decisions, particularly the ownership participation in cross-border mergers and acquisitions (M&As). In addition, the author would like to know if companies from emerging markets that possess higher (or lower) ownership in cross-border M&As receive higher valuation in the market. Design/methodology/approach – Using panel data of cross-border M&As by emerging market firms from 2000 to 2012, the author tests the hypothesized effects of the independent variables on the level of ownership participation; and uses a standard event study methodology to assess the market reaction of a particular cross-border M&A deal. Findings – The author finds that a country-level factor (institutional distance), an industry-level factor (industry unrelatedness) and a firm-level factor (board concentration) have significant impact on ownership participation in cross-border M&As. The author also finds that investors do give high valuation to those emerging market firms that chose high ownership participation in cross-border M&As. However, the author did not finds the support for the relationship between ownership participation and cultural distance. Neither did the author finds the support for the relationship between ownership participation and board independence. Originality/value – This study enhances the understanding of conditions under which the level of ownership participation in cross-border M&As would increase (decrease) and how the market reacts to high (low) ownership participation of cross-border M&As by emerging market firms.

Post-acquisition control strategy and cross-border acquisition performance of Chinese MNEs: a fsQCA approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Qi Yue ◽  
Ping Deng ◽  
Yanyan Cao ◽  
Xing Hua
Keyword(s):  
Fuzzy Set ◽  
Control Strategy ◽  
Multinational Enterprises ◽  
Cultural Distance ◽  
Emerging Market ◽  
Complex Nature ◽  
Acquisition Performance ◽  
Content Type ◽  
Cross Border ◽  
Chinese Mnes

PurposePost-acquisition control is a crucial factor affecting acquisition performance. We investigate how post-acquisition control strategy affects cross-border acquisition performance of Chinese multinational enterprises (MNEs) through a configurational perspective.Design/methodology/approachBased on 70 cross-border acquisition cases by Chinese MNEs, we adopt fuzzy-set qualitative comparative analysis (fsQCA) to study the combined effects of strategic control, operational control, institutional distance, cultural distance, relative capacity and business relatedness on the cross-border acquisition performance.FindingsOn the basis of fuzzy set analysis of multiple interdependent factors, we identify six configurations that are conductive to achieving high cross-border acquisition performance and two configurations that relate to the absence of high performance, thus shedding light on the casually complex nature of performance drivers of acquisitions.Originality/valueThis study provides a holistic, configurational approach to investigating cross-border acquisition performance by emerging market firms. Our results provide some compelling evidence that accounts for the causal complexity of post-acquisition control strategies and acquisition outcomes in the context of emerging economies.

The joint effect of investment motives and institutional context on Russian international acquisitions

2016 ◽  
Vol 11 (4) ◽  
pp. 674-692 ◽  
Author(s):  
Desislava Dikova ◽  
Andrei Panibratov ◽  
Anna Veselova ◽  
Lyubov Ermolaeva
Keyword(s):  
Negative Binomial ◽  
Cultural Distance ◽  
Institutional Distance ◽  
Future Research ◽  
Foreign Direct Investments ◽  
Outward Fdi ◽  
Foreign Investments ◽  
Data Set ◽  
Content Type ◽  
Cross Border

Purpose The purpose of this paper is to advance knowledge about factors that influence the location of Russian foreign direct investments. In particular, it focusses on the role of institutional distance (represented by corruption perception distance, political distance and cultural distance) as a moderator of the relationships between traditional investment motives and the number of M&A deals made by Russian companies in a specific country. Design/methodology/approach The analysis is conducted on panel data of Russian cross-border M&As launched in 46 countries during the period 2007-2013. The final data set includes 322 observations. Due to the nature of dependent variable and the results of pre-tests, negative binomial regression is used in the main analysis. Findings The key finding of the study reveals the importance of institutional distance, in particular, the moderating effect of different dimensions of institutional distance on the relationships between internationalization motives and the number of Russian M&As. Corruption, political and cultural differences show different effects in terms of both direction and strength, but all three were found to be significant. Research limitations/implications The major concern stems from the type of secondary data used in the paper. This indicates the necessity to improve data collection methods which could allow for better transparency of Russian foreign investments, would facilitate more sophisticated research and probably more accurate business forecasts. Originality/value By conducting a systematic examination of Russian cross-border M&As the authors contribute to the literature on emerging markets firms by addressing the important yet under-researched domain of Russian foreign direct investments. Building on the macroeconomic and institutional logic proposed in this study, future research on Russian cross-border activities could add to the understanding by providing more generalizable and critical evidence. The study provides a point of departure from prior studies on Russian outward FDI which the authors hope to inspire future research to further analyze the drivers of Russian M&As and foreign investments in general.

International strategies of Chinese tourism MNEs: the impact of the belt and Road Initiative and state ownership

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Diego Quer ◽  
Rosario Andreu
Keyword(s):  
Institutional Theory ◽  
Emerging Market ◽  
State Ownership ◽  
Institutional Distance ◽  
Belt And Road Initiative ◽  
Content Type ◽  
Cross Border ◽  
Belt And Road ◽  
International Strategies ◽  
The Belt And Road

PurposeThe Belt and Road Initiative (BRI), an ambitious plan led by the Chinese government aiming to reach a close integration between countries, is reshaping the global institutional landscape. Chinese state-owned enterprises (SOEs) play a leading role in the BRI and they usually follow an unconventional behavior derived from the institutional influence of their home government. Prior research reports that institutional distance between home and host countries has an impact on multinational enterprises’ (MNEs’) ownership level in their foreign subsidiaries. Therefore, our aim is to investigate how institutional distance, the BRI and state ownership affect Chinese tourism MNEs' ownership level in their cross-border acquisitions.Design/methodology/approachDrawing on the institutional theory, this study develops several hypotheses that are tested using a sample of Chinese MNEs from accommodation, travel agencies, transport and leisure/entertainment industries.FindingsThe results show that the idiosyncratic characteristics of being an emerging-market MNE belonging to a soft-service industry is associated with a positive relationship between institutional distance and a high ownership level in cross-border acquisitions. They also indicate that targeting a country included in the BRI and being an SOE negatively moderates that relationship.Originality/valueThis study extends institutional theory in the case of tourism firms from an emerging economy. It also addresses an under-research topic in the literature, namely, how the BRI is leading Chinese tourism MNEs to redesign their international strategies.

scholarly journals Institutional distance, establishment mode choice and international experience: the case of Indian MNCs

2018 ◽  
Vol 12 (1) ◽  
pp. 60-80 ◽  
Author(s):  
Laura Rienda ◽  
Enrique Claver ◽  
Diego Quer
Keyword(s):  
Multinational Corporations ◽  
Cultural Distance ◽  
Emerging Market ◽  
Mode Choice ◽  
Political Risk ◽  
International Experience ◽  
Institutional Distance ◽  
Foreign Direct Investments ◽  
Content Type ◽  
Establishment Mode

Purpose Focusing on the growing importance of Indian multinational corporations in the past decades, this paper aims to understand how establishment mode decisions in a foreign market can differ depending on a series of factors. Specifically, the authors examine how institutional distance, including cultural distance and political risk, could affect these decisions, and how international acquisition experience could moderate this relationship. Design/methodology/approach The authors test their hypotheses using data from 114 outward foreign direct investments between 2000 and 2010. Findings The findings suggest that experience in international acquisitions increases the likelihood of subsequent acquisitions in high-risk and culturally distant countries. Originality/value By considering that the country of origin also matters, some differences among emerging-market multinational corporations (MNCs) may arise. Besides, since empirical research focusing on emerging-market MNCs is scarce, more empirical studies are needed to analyze the influence of cultural distance and political risk on some decisions. In the case of India, there are also additional motivations for analyzing those institutional factors. First, since this is a country with significant linkages to Western countries, it is interesting to know if the influence of cultural distance is similar or not. Second, there is a lack of empirical evidence on the relationship between political risk and establishment mode choice in the case of Indian MNCs. To fill this gap, the first aim of this paper is to analyze how cultural distance and political risk affect the establishment mode choice of Indian MNCs. Moreover, recognizing international experience to be an important factor in explaining international expansion, we focus on international experience interactions with sources of uncertainty inherent in the host market.

Institutional impacts on ownership decisions by emerging and advanced market MNCs

2017 ◽  
Vol 24 (3) ◽  
pp. 454-481 ◽  
Author(s):  
Rushiun Liou ◽  
Kevin Lee ◽  
Scott Miller
Keyword(s):  
Institutional Theory ◽  
Fixed Effects ◽  
Emerging Market ◽  
Multinational Companies ◽  
Institutional Distance ◽  
Foreign Firms ◽  
Positive Direction ◽  
Content Type ◽  
Cross Border ◽  
The Usa

Purpose Emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions (M&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&As in the USA, and determine if EMNCs respond to institutional distance differently than advanced-market multinational companies (AMNCs). Design/methodology/approach 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. Findings 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. Research limitations/implications Though findings are robust and stable, this study is limited to observations that only have US target firms. Originality/value 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.

The impact of institutional distance on sustainable investment: evidence from China’s Belt and Road Initiative

2020 ◽  
Vol 11 (4) ◽  
pp. 485-505
Author(s):  
Heshan Sameera Kankanam Pathiranage ◽  
Huilin Xiao ◽  
Weifeng Li
Keyword(s):  
Sustainable Development ◽  
Cultural Distance ◽  
Emerging Market ◽  
Institutional Distance ◽  
Foreign Direct Investments ◽  
Belt And Road Initiative ◽  
Content Type ◽  
Belt And Road ◽  
The Impact ◽  
The Belt And Road

Purpose In an attempt to satisfy the desire to become a global economic leader, China is working on a series of ambitious deals with several countries. As a major country in a region considered as an emerging market, the immense infrastructure gap that is curtailing trade and accessibility for economic growth has led to major changes in economic policy. The past few decades have seen China invest billions of dollars not only in the developing countries of Africa and Asia but also in other world economic giants of Europe and the USA. China has embarked on a rigorous global effort to close the infrastructure gap through the Belt and Road Initiative (BRI) in partnership with multilateral development banks. China’s BRI brings together several countries in East Asia and the Eurasian mainland into close proximity with China, thereby promoting inland trade between the countries. The investments in this project are estimated to reach US$1tn over a span of ten years. However, the volume of outward foreign direct investments (OFDI) from China to the host countries is determined by several factors. Several previous researchers have studied various issues affecting the business activities of China and the given countries. First, the cultural organization, policy approaches and objectives of China as a country create trade barriers with countries involved in the BRI plan. This paper aims to provide a comparative overview of how the institutional distance of the Belt and Road countries from China affects their sustainable development. Design/methodology/approach Data on the nature, success and challenges of the BRI (such as the volume of bilateral trade and OFDIs and its financial implications) were extracted from various published studies. The impact of cultural distance and internationalization of the BRI enterprise was analyzed through a comparative research methodology. Findings A significant relationship exists between institutional distance and sustainable development of the Belt and Road countries. However, the barriers – for example, inhospitable culture and regulations for organizations in participating countries – could become pillars of success once resolved. Originality/value Previous studies lacked a standard framework to investigate how institutional distance is related to China’s outbound trade with the Belt and Road countries. The comparative analysis methodology adopted in this study fills this gap.

Do cross-border acquisitions involving emerging market firms create value

2014 ◽  
Vol 52 (8) ◽  
pp. 1451-1473 ◽  
Author(s):  
P.C. Narayan ◽  
M. Thenmozhi
Keyword(s):  
Emerging Markets ◽  
Value Creation ◽  
Emerging Market ◽  
Operating Performance ◽  
Relative Size ◽  
Rank Test ◽  
Content Type ◽  
Cross Border ◽  
Emerging Market Firms ◽  
The Impact

Purpose – The purpose of this paper is to contribute to M&A literature by explicitly investigating whether cross-border acquisitions involving emerging markets, either as acquirers or as targets, create value and how is the performance outcome in such acquisitions impacted by deal-specific characteristics. Design/methodology/approach – This study uses industry-adjusted operating performance to measure acquisition gains, the Wilcoxon signed rank test to examine value creation potential and OLS regression to evaluate the impact of deal characteristics on acquisition gains. Findings – The authors find very pronounced value destruction when emerging market firms acquire targets in developed markets, the adverse outcome being further aggravated when the mode of acquisition is “tender offer” rather than a “negotiated deal”. On the other hand, when developed market firms acquire targets from emerging markets, there is an even chance of value creation, the outcome being favourably influenced by the pre-acquisition performance of the two firms, relative size of the target and cash (not stock-swap) as the mode of payment. Originality/value – The findings from this paper offer an important, statistically significant explanation on the value creation potential and the impact of deal characteristics on post-acquisition operating performance in cross-border acquisitions involving emerging market firms. This finding assumes immense significance, given the rapidly changing landscape of global M&A, witnessed through a continuous rise in the volume and value of cross-border acquisitions involving emerging market firms.

Cross-national Distance: Concepts, Measures and Relationships

2012 ◽  
Vol 13 (2) ◽  
pp. 37-59
Author(s):  
Karen Newman
Keyword(s):  
International Business ◽  
Cultural Distance ◽  
Institutional Distance ◽  
Business Practices ◽  
Psychic Distance ◽  
Business Decisions ◽  
Competing Models ◽  
Objective Indicators ◽  
Cross National

Cross-national distances between national cultures and national institutions have been studied extensively in the last two decades, particularly with respect to their effects on the conduct of international business. Yet varying levels of analysis, inconsistent definitions, and different operationalizations of cross-national distances inhibit theoretical and empirical advances. Three approaches to non-geographic cross-national distance permeate the literature: psychic distance, national cultural distance, and institutional distance. The meaning of psychic distance has become muddied by evolving operationalizations, from objective indicators to individual perceptions. National cultural distance has been confused with both psychic distance and institutional distance. Various and inconsistent institutional arrangements and business practices are used as measures of institutional distance. This article reviews overlaps, inconsistencies, and ambiguities in the definitions and measurements of psychic, national cultural and institutional distance; suggests a way to rationalize the three constructs; and offers two competing models to explain the role of all three distances in international business decisions.

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