Does political ideology matter in Chinese cross-border acquisitions?

Abstract

Although the “parties-do-matter-hypothesis” has been recognized, we know little about the micro-level effect of the political ideology on cross-border acquisition (CBA). This study investigates the impact of the political ideology of a governing party in host countries on Chinese multinational enterprises' (CMNEs) CBAs. Drawing on the concept of organizational legitimacy from neo-institutionalism, we build a theoretical framework to explain this impact and the conditions that influence the magnitude of this impact. By using the data of country-level political ideology and CBAs conducted by CMNEs from 1995 to 2017, our findings show that the rightwing ideology of the governing party in a host country has a negative influence on CMNEs’ CBA completion, and the magnitude of this negative influence is conditional on host countries’ economic and political conditions. Specifically, the negative effect is weaker in host countries in an economic recession, with a higher level of democracy, and with a minority government.