Abstract
As a global platform for cultural exchange, the Confucius Institute (CI) has effectively promoted sustainable development among countries and regions. However, existing literature has mostly drawn insights from the national macro-level to study the roles played by CIs, whereas the potential of CIs to influence corporate behaviors has not received extensive attention. This study expands the research on CIs from the national macro-level to the enterprise micro-level by exploring the effect of CIs on the likelihood of acquisition completion. Using data from 1695 Chinese cross-border acquisitions from 2006 to 2017, we find that establishment of CIs can significantly increase acquisition completion likelihood. Furthermore, the level of influence of CIs on acquisition completion depends on country- and firm- level factors. At the country level, the positive effect of CIs on completion likelihood intensifies when cultural distance between host countries and China is great. At the firm level, the acquirer’s past cross-border acquisition experience moderates the effects of CIs, which are more beneficial to firms with no previous successes. In addition, we have made some further analyses, and find that the presence of CIs not only helps to increase the likelihood of acquisitions completion, but also helps to shorten the acquisition durations. The role of CIs in cross-border acquisition completion likelihood do not depend on the types of Chinse enterprises, which indicates that CIs, unlike government agencies, do not offer additional help for SOEs.
Highlights
The Confucius Institute (CI), launched by Hanban (The Confucius Institute Headquarters), has expended considerable efforts to promote the Chinese language and culture, spread Sinology, and facilitate cultural exchange [1]
The role of CIs in cross-border acquisition completion likelihood do not depend on the types of Chinse enterprises, which means that CIs, unlike government agencies, do not offer additional help for state-owned enterprises (SOEs)
We observe that the establishment of CIs in host countries significantly improves the likelihood that Chinese multinational enterprises (MNEs) will succeed at cross-border acquisitions
Summary
The Confucius Institute (CI), launched by Hanban (The Confucius Institute Headquarters), has expended considerable efforts to promote the Chinese language and culture, spread Sinology, and facilitate cultural exchange [1] It has become a global platform for Chinese teaching and the popularization of Chinese culture, enabling foreigners to gain a deeper and more direct understanding of China [2]. A substantial percentage of acquisitions are abandoned in the pre-completion due to differences in culture, language, and business practices among countries [9] This raises the following question: acting as a platform for cultural exchange, could CIs established in a host country affect the likelihood of cross-border acquisition completion by Chinese multinational enterprises (MNEs)?. Lien et al (2012) investigated the empirical effects of the presence of CIs on Chinese outward FDI flows and trade They found that the presence of CIs has a positive effect on FDI from China and Chinese exports to developing countries. Lien et al (2014) demonstrated that CIs, as a comprehensive platform for China’s foreign cultural exchange, have a significantly positive effect on China’s tourist flows [10]
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