Contingent Signaling Effects of Anti-Mafia Interventions of MNEs’ Acquisitions in Italy (2000-2015)

Abstract

Extant research on cross-border acquisitions argues that foreign firms’ ownership choices reflect signals about the quality of local institutions, in a way that a ‘positive’ signal is typically associated with a higher likelihood of majority ownership. In this paper, we challenge the common assumption that foreign firms univocally interpret such signals as positive or negative. We propose that MNEs may interpret the same signals differently depending on the consistency between the signal and the recipients’ mental models about the underlying phenomena. We test these conjectures in the context of government-sponsored institutional actions against mafia operations in Italy, using a dataset comprising 3,924 foreign acquisition deals in Italy in the period 2000 – 2015. Our findings indicate that MNEs’ ownership level increases as a response to anti- mafia institutional actions only when the acquirer is rooted in contexts (sectors or countries) that make the signal salient. Adopting a signaling theory perspective, our results contribute to international business research by placing a unique emphasis on signal interpretation. We also bring a more nuanced understanding of how the continued rise of organized crime as an important economic actor presents a grand challenge to a rule-based society.