scholarly journals The Relative Effects of Institutions on Ownership in Acquisitions

2021 ◽  
Author(s):  
◽  
Camille Cochrane
Keyword(s):  
International Business ◽  
Institutional Environment ◽  
Uncertainty Avoidance ◽  
Institutional Distance ◽  
Relative Influence ◽  
Host Countries ◽  
Cognitive Distance ◽  
Cross Border ◽  
Market Experience ◽  
Managerial Implications

<p>Purpose - Globalization has increased competition to an international level. However, limited market experience causes uncertainty, affecting how firms strategize their entry. Institutional distance can be a dominant cause of such environmental uncertainty. The institutional environment incorporates three institutional pillars; the regulatory pillar, the normative pillar and the cognitive pillar. Institutions are shaped by culture and desires to protect domestic business, meaning institutions differ between countries. This is known as institutional distance. There is, however, a research gap concerning the relative influence of institutional pillars on cross-border acquisition ownership, when institutional distance is present. This thesis seeks to research the influential effect of all three institutional pillars on acquisition ownership, when firms are faced with institutional distance.  Theory - Institutional theory was the fundamental theory used in this research, applying the sociology perspective of Scott (1995). Firstly, investigations were conducted on individual pillars to see how each pillar influenced acquisition ownership. Secondly, individual pillar findings were then combined and compared, to illustrate their relative influence on acquisition ownership. Such simultaneous acknowledgement of all three institutional pillars, provided new insight on the relative effects of institutions on acquisition ownership.  Methodology - This study implemented a single method approach, using quantitative analysis. Archival data was gathered focusing on firms from three industries in eleven selected countries who conduct cross-border acquisitions (CBAs). CBAs were chosen due to their popular use as a research construct in imitation research. Cognitive distance, normative distance and regulatory distance were then used to measure institutional distance. Cognitive distance effects were measured using frequency based imitation. Normative distance was measured using two of Hofstede’s (1980) cultural value dimensions: uncertainty avoidance and collectivism. Regulatory distance was measured using World Bank Governance Indicators. Thus, it was important to strategically choose home countries to ensure a variety of dimension and indicator values with which to conduct a reliable study. Logistic regression, conducted with STATA, was then used to analyze relationships between institutions and acquisition ownership.  Key Findings – The findings illustrate that all three institutional pillars have an influential effect on acquisition ownership decisions. This reinforces the emerging belief, that studies must include all three institutional pillars in research. This finding adds to this scant research. Analyzing the comprehensive institutional environment produces more reliable results.  The findings suggest that institutional pillars form an institutional hierarchy when institutional distance exists between the home and host countries. Regulatory distance have the strongest influence on acquisition ownership. Severe regulatory sanctions threaten illegitimate behaviours, forcing foreign entrants to prioritize compliance to regulatory institutions. Normative distance has the second strongest impact on acquisition ownership. Its tacit nature camouflages dysfunctional cultural complexities that disrupt strategy implementation, which can cause a firm to relocate. Lastly, cognitive distance has the third strongest influence on acquisition ownership. Its lack of severe repercussions facilitates the prioritization of the previous two pillars. However, cognitive distance acknowledgement is important as it illustrates how host participants interpret stimuli from their environment, which informs foreign entrants of appropriate cross-national responsive behaviour.  Contributions - This study contributes to international business research by illustrating the hierarchical formation of the influence of institutional pillars on cross-border acquisition ownership, where institutional distance is present. This contribution has managerial implications. Managers are strongly encouraged to consider all of regulatory pillar, normative pillar and cognitive pillar when venturing abroad. Further, managers must acknowledge the institutional pillar hierarchy and prioritize responses accordingly, to avoid crippling outcomes that could lead to poor acquisition outcomes. Lastly, this thesis contributes to literature by highlighting the need to include collectivism as a research construct in ownership studies. Prior studies have narrowly focused on uncertainty avoidance and power distance. However, collectivism has been observed to influence ownership, likely due to the recent rise of Asia in international business.</p>

scholarly journals The Relative Effects of Institutions on Ownership in Acquisitions

2021 ◽  
Author(s):  
◽  
Camille Cochrane
Keyword(s):  
International Business ◽  
Institutional Environment ◽  
Uncertainty Avoidance ◽  
Institutional Distance ◽  
Relative Influence ◽  
Host Countries ◽  
Cognitive Distance ◽  
Cross Border ◽  
Market Experience ◽  
Managerial Implications

<p>Purpose - Globalization has increased competition to an international level. However, limited market experience causes uncertainty, affecting how firms strategize their entry. Institutional distance can be a dominant cause of such environmental uncertainty. The institutional environment incorporates three institutional pillars; the regulatory pillar, the normative pillar and the cognitive pillar. Institutions are shaped by culture and desires to protect domestic business, meaning institutions differ between countries. This is known as institutional distance. There is, however, a research gap concerning the relative influence of institutional pillars on cross-border acquisition ownership, when institutional distance is present. This thesis seeks to research the influential effect of all three institutional pillars on acquisition ownership, when firms are faced with institutional distance.  Theory - Institutional theory was the fundamental theory used in this research, applying the sociology perspective of Scott (1995). Firstly, investigations were conducted on individual pillars to see how each pillar influenced acquisition ownership. Secondly, individual pillar findings were then combined and compared, to illustrate their relative influence on acquisition ownership. Such simultaneous acknowledgement of all three institutional pillars, provided new insight on the relative effects of institutions on acquisition ownership.  Methodology - This study implemented a single method approach, using quantitative analysis. Archival data was gathered focusing on firms from three industries in eleven selected countries who conduct cross-border acquisitions (CBAs). CBAs were chosen due to their popular use as a research construct in imitation research. Cognitive distance, normative distance and regulatory distance were then used to measure institutional distance. Cognitive distance effects were measured using frequency based imitation. Normative distance was measured using two of Hofstede’s (1980) cultural value dimensions: uncertainty avoidance and collectivism. Regulatory distance was measured using World Bank Governance Indicators. Thus, it was important to strategically choose home countries to ensure a variety of dimension and indicator values with which to conduct a reliable study. Logistic regression, conducted with STATA, was then used to analyze relationships between institutions and acquisition ownership.  Key Findings – The findings illustrate that all three institutional pillars have an influential effect on acquisition ownership decisions. This reinforces the emerging belief, that studies must include all three institutional pillars in research. This finding adds to this scant research. Analyzing the comprehensive institutional environment produces more reliable results.  The findings suggest that institutional pillars form an institutional hierarchy when institutional distance exists between the home and host countries. Regulatory distance have the strongest influence on acquisition ownership. Severe regulatory sanctions threaten illegitimate behaviours, forcing foreign entrants to prioritize compliance to regulatory institutions. Normative distance has the second strongest impact on acquisition ownership. Its tacit nature camouflages dysfunctional cultural complexities that disrupt strategy implementation, which can cause a firm to relocate. Lastly, cognitive distance has the third strongest influence on acquisition ownership. Its lack of severe repercussions facilitates the prioritization of the previous two pillars. However, cognitive distance acknowledgement is important as it illustrates how host participants interpret stimuli from their environment, which informs foreign entrants of appropriate cross-national responsive behaviour.  Contributions - This study contributes to international business research by illustrating the hierarchical formation of the influence of institutional pillars on cross-border acquisition ownership, where institutional distance is present. This contribution has managerial implications. Managers are strongly encouraged to consider all of regulatory pillar, normative pillar and cognitive pillar when venturing abroad. Further, managers must acknowledge the institutional pillar hierarchy and prioritize responses accordingly, to avoid crippling outcomes that could lead to poor acquisition outcomes. Lastly, this thesis contributes to literature by highlighting the need to include collectivism as a research construct in ownership studies. Prior studies have narrowly focused on uncertainty avoidance and power distance. However, collectivism has been observed to influence ownership, likely due to the recent rise of Asia in international business.</p>

scholarly journals Do Institutional Distances Influence South-South Cross-Border Acquisitions?

Internext ◽  
2019 ◽  
Vol 14 (3) ◽  
pp. 190
Author(s):  
Stephanie Tonn Goulart Moura ◽  
Juliano Krug ◽  
Christian Falaster ◽  
Iara Regina dos Santos Parisotto
Keyword(s):  
International Business ◽  
Latin American ◽  
Home Environment ◽  
Multinational Companies ◽  
Institutional Distance ◽  
Institutional Environments ◽  
International Acquisitions ◽  
Cross Border

Different countries have different institutional environments. In this way, multinational companies must deal with the difficulties imposed by the differences between their home environment and that of the country where they are inserted. In this article, we analyze the effects of institutional distance on South-South acquisitions. Specifically, we analyze the effect of institutional distance on the amount of participation chosen in Latin American international acquisitions in Brazil. More specifically, the effect of institutional distance is analyzed through the percentage of shares acquired in international acquisitions. Our results contribute to the theory in international business because it explains why Latin American companies prefer to make total acquisitions even in situations of high institutional distances.

The relationship between MNCs’ strategies and executive staffing

2017 ◽  
Vol 25 (2) ◽  
pp. 233-250 ◽  
Author(s):  
Sangeetha Lakshman ◽  
C. Lakshman ◽  
Christophe Estay
Keyword(s):  
International Business ◽  
Business Strategy ◽  
Global Strategy ◽  
Business Strategies ◽  
Future Research ◽  
Research Approach ◽  
Global Integration ◽  
Content Type ◽  
Managerial Implications ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship of business strategies with executive staffing of multinational companies (MNCs). Design/methodology/approach Based on in-depth interviews conducted with top executives of 22 MNCs’, the authors identify important connections between international business strategies and staffing orientation. The authors used the qualitative research approach of building theory from interviews; thus, creating theoretical propositions from empirical evidence. Findings The authors find that when the pressure for global integration is high, MNCs use more parent-country national (PCNs) (ethnocentric staffing) as against the use of host-country managers (HCNs) (polycentric staffing) when this pressure is low. Additionally, MNCs using a global strategy are more likely to use an ethnocentric staffing approach, those using a multi-domestic strategy use a polycentric approach and firms using transnational strategy adopt a mix of ethnocentric and polycentric approaches. Research limitations/implications Although the authors derive theoretical patterns based on rich qualitative data, their sample is relatively small and comprises mostly of French MNCs. Generalizability to a broader context is limited. However, the authors’ findings have critical implications for future research. Practical implications The authors’ findings provide critical managerial implications for MNCs in matching their HR strategies with business strategies. These are important for effective strategy implementation. Originality/value Although MNC staffing orientations have been studied for a long time, their relationship to international business strategies is still not clearly understood. The authors contribute to the literature by investigating the relationship between MNCs’ business strategy types with staffing orientations.

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.

scholarly journals Context in international business: Entrepreneurial internationalization from a distant small open economy

2021 ◽  
Author(s):  
Eldrede Kahiya
Keyword(s):  
New Zealand ◽  
Literature Review ◽  
International Business ◽  
Open Economy ◽  
Institutional Environment ◽  
Small Open Economy ◽  
The Other ◽  
Medium Size ◽  
Strategy Process ◽  
Context Shapes

Context matters in International Business, but to what extent does it influence the content of knowledge? This study offers a systematic literature review on the internationalization of New Zealand firms. A geographically isolated small open economy (SMOPEC) with audacious trade aspirations, a strong domestic institutional environment, favorable attitude toward trade, and entrepreneurial small-to-medium size enterprises (SMEs), New Zealand provides an enlightening context to study internationalization. Using a sample of 95 studies, the review identifies antecedents, stimuli, capabilities, strategy, process and outcomes underpinning internationalizing New Zealand firms (INZFs). Context matters but not in the manner anticipated. On one hand research on the internationalization of New Zealand firms is largely congruent with extant knowledge, on the other the New Zealand context shapes uniquely, how and what scholars choose to research.

scholarly journals Cross-Border M&A Motives and Home Country Institutions: Role of Regulatory Quality and Dynamics in the Asia-Pacific Region

2021 ◽  
Vol 14 (10) ◽  
pp. 468
Author(s):  
Peter Zámborský ◽  
Zheng Joseph Yan ◽  
Erwann Sbaï ◽  
Matthew Larsen
Keyword(s):  
Institutional Environment ◽  
Home Country ◽  
Asia Pacific ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Cross Border ◽  
Regulatory Quality ◽  
Using Data ◽  
Over Time

The purpose of this paper is to analyze the relationship between home country institutions and cross-border merger and acquisition (M&A) motives of MNEs from the Asia-Pacific region, with a focus on the role of regulatory quality and dynamics. We empirically examine how M&A motives are affected by elements related to risk of the institutional environment of the acquiring firm’s home country regulatory quality over time. The study is grounded in the general theory of springboard MNEs, and the institutional views of cross-border operations, namely the institutional escapism and institutional fostering perspectives. Using data on over 700 cross-border M&As of European firms by Asia-Pacific MNEs in 2007–2017, we analyze the rationales for these deals and their relationship to the institutional characteristics of the buyers’ home countries including regulatory quality and voice and accountability. We found that the quality of home country regulatory environment is significantly related to domestic firms’ motivation for international M&As. However, the significance and sign of the effects differ for different types of motives and over time. Our findings contribute to the literature on general versus emerging MNE-specific internationalization theories (particularly the theory of springboard MNEs) by expounding on the types and dynamics of cross-border M&A motives.

International business and cross-border education: a case of the Janus face of globalisation?

2011 ◽  
Vol 13 (2) ◽  
pp. 105
Author(s):  
Gaby Ramia ◽  
Simon Marginson ◽  
Erlenawati Sawir ◽  
Chris Nyland
Keyword(s):  
International Business ◽  
Cross Border

The Role of the Institutional Environment in Marketing Channels

2002 ◽  
Vol 66 (3) ◽  
pp. 82-97 ◽  
Author(s):  
Rajdeep Grewal ◽  
Ravi Dharwadkar
Keyword(s):  
Institutional Environment ◽  
Marketing Channels ◽  
Task Environment ◽  
The Political ◽  
Institutional Processes ◽  
Channel Relationships ◽  
Current Task ◽  
Managerial Implications ◽  
Underlying Mechanisms

Set within the political economy framework, marketing channels literature predominantly has used an efficiency-based task environment perspective and largely overlooked a legitimacy-based institutional environment approach in studying channel attitudes, behaviors, processes, and structures. The purpose of this article is to highlight the importance of the institutional environment and develop a comprehensive conceptual framework that incorporates the institutional environment into current marketing channels research. The institutional environment perspective relies on the primacy of (1) regulatory institutions (e.g., laws), (2) normative institutions (e.g., professions), and (3) cognitive institutions (e.g., habitual actions) in influencing the legitimacy of channel members. Using institutional theory, the authors augment the current task environment approach by developing three institutional processes and their underlying mechanisms and elaborating on how these institutions might influence channel relationships. The article ends by laying out a research agenda and highlighting managerial implications.

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