Political animosity in cross-border acquisitions: EMNCs’ market and nonmarket strategy in a developed market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ru-Shiun Liou ◽  
Lee Warren Brown ◽  
Dinesh Hasija
Keyword(s):  
Multinational Corporations ◽  
Emerging Market ◽  
International Strategy ◽  
Tobit Regression ◽  
Target Firm ◽  
Market Strategy ◽  
Content Type ◽  
Nonmarket Strategy ◽  
Developed Markets ◽  
Cross Border

Purpose Many multinational corporations that originate from emerging economies (emerging market multinational corporations (EMNCs)) opt for acquiring a target firm in a developed market to expediently upgrade their strategic capabilities. To successfully achieve their strategic goals in the developed markets, EMNCs may use market actions and nonmarket actions to mitigate the potential risk derived from the national political differences between their home emerging economy and host developed economy. This paper aims to extend the legitimacy-based view of political risk to study the influence of political animosity – defined as misalignment of the host-home countries’ national interests – on the EMNCs’ market and nonmarket strategy in a developed market. Design/methodology/approach In this paper, we examine all EMNCs that made cross-border acquisitions of the USA targets from 2005 to 2011. The final sample consists of 252 acquisitions originating from 25 emerging markets. This paper used Tobit regression analysis to test the direct and moderating hypotheses. Findings Facing a high level of political animosity between their home country and the host developed economy, EMNCs use a market strategy by acquiring less ownership stake in the developed market, as well as engage in a nonmarket strategy by increasing lobbying activities. In addition, because of the heightened legitimacy concerns of developed market shareholders, cross-listed EMNCs have a greater tendency than non-cross-listed EMNCs to improve their legitimacy through their market and nonmarket strategy. Originality/value The current paper sheds light on EMNCs’ international strategy in developed markets by examining both market and nonmarket actions. EMNCs are shown to be strongly motivated to engage in acquisitions in developed markets so they can acquire invaluable strategic resources, such as brands and distribution channels, to compete with the developed market multinationals. A sophisticated ownership strategy and corporate political activities are invaluable for EMNCs to catch up with developed market multinationals.

Alpha Tech: a Brazilian software firm goes international

2014 ◽  
Vol 52 (9) ◽  
pp. 1680-1702 ◽  
Author(s):  
Sylvia T.A. Moraes ◽  
Angela da Rocha
Keyword(s):  
Multinational Corporations ◽  
Low Cost ◽  
Emerging Market ◽  
International Markets ◽  
International Strategy ◽  
Internationalization Process ◽  
Sources Of Information ◽  
Content Type ◽  
Software Firms ◽  
Software Firm

Purpose – This strategy-learning case traces the growth of AlphaTech, a publicly traded company in Brazil that is a management software company. The purpose of this paper is to debate whether or not the firm should give more emphasis to internationalization, given its high market share in Brazil, where further gains may be very expensive and difficult. The case is intended to serve as a vehicle to discuss the internationalization process of a software firm from an emerging economy. Design/methodology/approach – The case was built using several sources of information, including interviews with two executives in charge of the firm's internationalization process, articles in business newspapers and magazines, a book written by the firm co-founders, reports, and information gathered in the internet. Findings – The main issues posed by this case study are: first, the difficulties faced by an emerging market firm to get a sustainable position in international markets; second, the challenges of competing with powerful global multinational corporations (such as SAP and Oracle) in the international marketplace; and third, the need to adapt the firm's international strategy to new threats and opportunities. Originality/value – The Brazilian context differs from other BRICS, since Brazilian software firms do not have access to low-cost labor and therefore cannot adopt a low price strategy to compete effectively in international markets, but rather need to build unique capabilities to overcome liabilities of foreignness.

Empirical analysis on corporate environmental performance and environmental disclosure in an emerging market context

2020 ◽  
Vol 15 (6) ◽  
pp. 1061-1082 ◽  
Author(s):  
Merve Acar ◽  
Hüseyin Temiz
Keyword(s):  
Environmental Performance ◽  
Emerging Market ◽  
Positive Association ◽  
Corporate Environmental Performance ◽  
Tobit Regression ◽  
Environmental Reporting ◽  
Environmental Disclosure ◽  
Significant Positive Association ◽  
Content Type ◽  
Environmental Disclosures

PurposeThe purpose of this study is to investigate the association between environmental performance of firms and the level of voluntary environmental disclosure in emerging markets.Design/methodology/approachWe used tobit regression OLS and t-test methods to reveal the association between environmental performance and the level of voluntary environmental disclosure.FindingsWe find a significant positive association between the level of discretionary environmental disclosures and corporate environmental performance. The result is in line with the arguments of economics disclosure theory that argues environmentally good performers disclose more.Practical implicationsMany of the environmentally good firms in Turkey are also listed in the “BIST Sustainability Index,” and this situation can be the result of the relative power of external regulations. Accordingly, it can be suggested to increase the community and governmental pressures for environmental reporting but also gives importance to increase intrinsic motivations for companies to engage in disclosure practices.Originality/valueThis study shed light on relation between environmental performance and environmental disclosure in an emerging market context. Also, it is revisited that the relation between environmental performance and the level of environmental disclosure by testing two different predictions on the level of environmental disclosures.

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.

Debt financing puzzle and internationalization

2019 ◽  
Vol 13 (1) ◽  
pp. 33-56 ◽  
Author(s):  
Karren Lee-Hwei Khaw
Keyword(s):  
Multinational Corporations ◽  
Emerging Market ◽  
International Perspective ◽  
Debt Financing ◽  
Primary Concern ◽  
Firm Risk ◽  
Content Type ◽  
Financial Decisions ◽  
Business Operations

PurposeThis study aims to examine the relation between long-term debt and internationalization in the presence of the agency costs of debt and business risk.Design/methodology/approachSample firms consist of 517 non-financial listed firms in Malaysia, with 4,197 firm-year observations from the year 2000 to 2014. This study uses panel data regressions and a series of robustness tests to examine the hypotheses.FindingsThe results show that multinational corporations (MNCs) are more likely to sustain less long-term debt than domestic corporations (DCs) to mitigate the costs related to agency problem and firm risk. Meanwhile, foreign-based MNCs maintain less long-term debt than local-based firms, and the finding is more significant at a higher degree of internationalization. Robustness tests confirm the negative relations.Research limitations/implicationsThe findings indicate that the ongoing debate on the debt financing puzzle can be explained by internationalization. Moreover, the findings suggest that in addition to the systematic differences between MNCs and DCs, studies on the debt financing and internationalization should also account for the systematic differences among MNCs such as the local-based MNCs, foreign-based MNCs and DCs that later expand their business operations abroad.Practical implicationsMNCs have to be responsive to the diverse institutional environments as they diversify their business operations geographically. When the adverse effects of internationalization outweigh the benefits, MNCs could use the long-term debt financing decision to mitigate the costs of doing business abroad. This is because debt financing is also a primary concern in the corporate financial decisions for the maximization of shareholders’ wealth.Originality/valueThis study contributes to the debt financing literature from the international perspective by providing evidence from an emerging market. In addition, this study highlights the importance of recognizing firms by their firm-specific characteristics, such as internationalization, given the systematic differences among firms.

The causes and consequences of delayed/abandoned cross-border merger & acquisition transactions

2016 ◽  
Vol 29 (6) ◽  
pp. 917-962 ◽  
Author(s):  
K.S. Reddy ◽  
En Xie ◽  
Yuanyuan Huang
Keyword(s):  
Oil And Gas ◽  
Case Analysis ◽  
Telecommunications Industry ◽  
Government Control ◽  
Target Firm ◽  
Content Type ◽  
Poor Countries ◽  
Oil And Gas Exploration ◽  
Cross Border ◽  
Cross Case Analysis

Purpose Drawing attention to the significant number of unsuccessful (abandoned) cross-border merger and acquisition (M&A) transactions in recent years, the purpose of this paper is to analyze three litigated cross-border inbound acquisitions that associated with an emerging economy – India, such as Vodafone-Hutchison and Bharti Airtel-MTN deals in the telecommunications industry, and Vedanta-Cairn India deal in the oil and gas exploration industry. The study intends to explore how do institutional and political environments in the host country affect the completion likelihood of cross-border acquisition negotiations. Design/methodology/approach Nested within the interdisciplinary framework, the study adopts a legitimate method in qualitative research, that is, case study method, and performs a unit of analysis and cross-case analysis of sample cases. Findings The critical analysis suggests that government officials’ erratic nature and ruling political party intervention have detrimental effects on the success of Indian-hosted cross-border deals with higher bid value, listed target firm, cash payment, and stronger government control in the target industry. The findings emerge from the cross-case analysis of sample cases contribute to the Lucas paradox – why does not capital flow from rich to poor countries and interdisciplinary M&A literature on the completion likelihood of international takeovers. Practical implications The findings have several implications for multinational managers who typically involve in cross-border negotiations. The causes and consequences of sample cases would help develop economy firms who intend to invest in emerging economies. The study also offers some implications of M&A for telecommunications and extractive industries. Originality/value Although a huge amount of extant research investigates why M&A fail to create value to the shareholders during the public announcement and post-merger stages, there is a significant dearth of research on the causes and consequences of delayed or abandoned national and international deals. The paper fills this knowledge gap by discussing an in-depth cross-case analysis of Indian-hosted cross-border acquisitions.

Cultural and organizational integration in cross-border M&A deals

2017 ◽  
Vol 30 (7) ◽  
pp. 1109-1135 ◽  
Author(s):  
Andrei Panibratov
Keyword(s):  
Case Studies ◽  
Multinational Enterprises ◽  
Emerging Market ◽  
Strong Support ◽  
Annual Reports ◽  
Integration Process ◽  
Key Factors ◽  
Content Type ◽  
Cross Border ◽  
Organizational Integration

Purpose The purpose of this paper is to identify key factors that influence the integration process in cross-border mergers and acquisitions (M&A) deals of emerging multinational enterprises (EMNEs). The research questions are: how national and organizational culture coupled with other organizational characteristics influence M&A deals of EMNEs? Which factors influence the process of cultural and organizational integration in cross-border M&A deals, initiated by EMNEs? What is the effect and consequences that different integration factors have on cross-border M&A deals by EMNEs? Design/methodology/approach The paper is based on a multiple case study research, considering cross-border deals of Chinese and Russian firms separately. Each block consists of two cases, describing M&A integration of companies operating in two sectors: high technology and finance. The authors obtained the data for case studies from companies’ official websites, annual reports, press releases, other official documents where companies were mentioned, business-media sources (newspapers and magazines), published interviews, documented speeches, letters, laws, as well as through blogs and social networks. The authors have also used the published information from articles, books, databases, and previously conducted case studies. Findings The authors have identified the factors influencing deals’ results of Chinese and Russian MNEs, with explanation based on case studies’ analysis. The full list of factors is presented in Table IV in the manuscript. The authors have also identified the set of elements that were derived from the case studies’ analysis only, without having any strong support in the literature, such as changes at a senior management level, educational and business exchanges, CSR policy, and the government involvement. Originality/value The authors have identified the key factors that influence integration of emerging market firms in cross-border M&A deal. The list of factors was adjusted and actualized in accordance with the results of four cases of cross-border M&A deals of Chinese or Russian companies. As a result, the authors founded the combination of characteristics of cultural and organizational integration process of firms from China and Russia.

The influence of global uncertainty on the cross-border performance appraisal

2014 ◽  
Vol 43 (1) ◽  
pp. 19-40 ◽  
Author(s):  
Jane Maley ◽  
Robin Kramer
Keyword(s):  
Real Options ◽  
Performance Management ◽  
Performance Appraisal ◽  
Multinational Corporations ◽  
Content Type ◽  
Real Options Theory ◽  
Cross Border ◽  
Global Uncertainty ◽  
Profit Maximisation ◽  
Options Theory

Purpose – The aim of this paper is to examine the practice of performance management in a cross-border context in times of global uncertainty. Design/methodology/approach – This is a conceptual paper. Findings – The findings expose global uncertainty to be wielding a significant influence on performance management. Practical implications – A practical framework is developed using real options theory. This approach offers suggestions for multinational corporations to increase the effectiveness of their performance management while at the same time focusing on profit-maximisation. Originality/value – This paper enhances international management research by recognizing that real options theory can effectively be applied to improve the effectiveness of performance management in global uncertainty.

Determinants of stock market reaction to cross-border acquisitions: evidence from emerging economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Samta Jain ◽  
Smita Kashiramka ◽  
P. K. Jain
Keyword(s):  
Emerging Economies ◽  
Value Creation ◽  
Global Economy ◽  
Emerging Market ◽  
Research Work ◽  
Abnormal Returns ◽  
Content Type ◽  
Cross Border ◽  
Country Level ◽  
Acquiring Firms

PurposeThe global economy has witnessed an exponential increase in cross-border acquisitions (CBAs) by emerging market companies (EMCs), demanding a relook at their internationalization strategy. The purpose of the study is to investigate whether the announcement of CBAs by EMCs creates value for the equity-holders of acquiring firms and identify factors affecting the valuation of acquiring companies.Design/methodology/approachThe paper investigates the announcement impact of CBAs of CNX Nifty 500 Indian and SSE 380 Chinese companies. The event study analysis of 553 Indian and 125 Chinese acquisitions supports the contention that CBAs are indeed a strategic choice of EMCs for value creation.FindingsCBAs generate positive and statistically significant abnormal returns for shareholders of both Indian and Chinese acquirers. The markets, however, differ in terms of their motivations; country-level factors have been observed to exert significant influence on the returns of Indian acquirers. Indian companies experience larger value creation on acquiring firms established in developed, institutionally closer and/or economically distant markets. The findings support the asset-seeking motive of Indian companies.Originality/valueThe research work contributes to the evolving stream of CBAs literature with a focus on the globalization strategies of EMCs. The present study is a modest attempt to lay the foundation for a new theoretical framework (asset-seeking perspective) of overseas acquisitions from emerging economies. The existing studies on emerging economies have emphasized, in isolation, either Indian CBAs or international acquisitions by Chinese firms. Being so, the study is unique and original in the sense that it is a comparative study of India and China.

IKEA Inc.: the India way

2020 ◽  
Vol 10 (1) ◽  
pp. 1-9
Author(s):  
Neetu Yadav
Keyword(s):  
Emerging Markets ◽  
Competitive Advantage ◽  
Learning Outcomes ◽  
Emerging Market ◽  
Local Environment ◽  
Global Strategy ◽  
International Strategy ◽  
Content Type ◽  
Academic Level

Learning outcomes Learning outcomes are as follows: to learn about the application of Bartlett and Ghoshal’s model of international strategy; to compare and contrast the global strategy of IKEA in India and China; and to understand how adaptability can create a new competitive advantage in emerging markets. Case overview/synopsis The case study enables discussion about the global strategy of a well-established multi-national company, IKEA in an emerging market. IKEA is a well-established and well-known brand in the international market in furniture retailing. It has decided to make a debut in India in 2017 with its first store in Hyderabad. However, it was yet to open it in 2018. The case emphasizes upon understanding the global strategy of IKEA, positioning itself in the fragmented Indian furniture industry, managing differences in emerging markets and adapting to the local environment of the particular country. The case highlights how adaptability can create a new competitive advantage in managing global strategy in different countries of emerging markets. Complexity academic level This case study is developed for post-graduate management programs as an MBA, Executive MBA and executive development programs. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 11: Strategy.

Added cultural distance and ownership in cross-border acquisitions

2020 ◽  
Vol 27 (3) ◽  
pp. 487-510 ◽  
Author(s):  
Hyun Gon Kim ◽  
Ajai S. Gaur ◽  
Debmalya Mukherjee
Keyword(s):  
Cultural Distance ◽  
Geographic Distance ◽  
Target Firm ◽  
Content Type ◽  
Cross Border ◽  
Focal Firm ◽  
Final Sample ◽  
The Relationship ◽  
Financial Securities ◽  
Different Sources

PurposeAs multinational companies enter different countries, the extent of cultural unfamiliarity they face depends on their most recent entry. We examine this pattern of added cultural distance between a newly entered target country and the closest previous one and its effect on ownership decisions in each cross-border acquisition (CBA). We also examine the combined effect of added cultural distance and time between successive acquisitions on such decisions.Design/methodology/approachThe sample came from the Thomson Financial Securities Data Corporation (SDC) Platinum database, which spans different source and target countries for a 25-year period (1980–2014). We collected firm- (acquirer and target), industry-, country-, and transaction-level variables from SDC. After merging information from the different sources, the final sample comprised 10,423 CBA observations from 138 target countries.FindingsOur findings reveal that the ownership share decision is affected negatively by added cultural distance but positively by the time between two successive acquisitions. In addition, prior ownership and geographic distance moderate the relationship between added cultural distance and ownership in CBAs.Practical implicationsOur findings suggest that MNCs' managers who consider CBAs need to carefully examine closest previous target information and CBA experience, rather than focusing on direct cultural distance between the focal firm and target firm. Additionally, they should also consider the relevance of key contingency factors.Originality/valueWe disentangle the effects of added cultural distance on CBA ownership decisions and explore the boundary conditions of this relationship.

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