How different types and motives of cross-border acquisitions influence transaction duration? Evidence from Chinese firms

<p><b>Over the last decade, cross-border acquisitions (CBAs) have emerged as one of the most significant engines through which emerging market firms (EMFs) carry out foreign investments. Yet, emerging market acquirers (EMAs) terminate a significant percentage of initiated CBAs before completion. Compared to the 18 percent termination rate of CBAs involving acquirers from developed economies (DEs), CBAs by EMAs have a 33 percent termination rate. Scholars attribute the higher CBA termination by EMAs to the dual hurdle of 'liability of origin' and 'liability of foreignness' arising from direct government involvement and institutional voids in emerging economies. Although extant research provides in-depth insights into why EMAs have higher CBA termination rates than developed economies acquirers, they fall short in exploring how EMAs can navigate these challenges. Hence, in this study, I aim to investigate ownership based solutions to the institutional challenges affecting the CBA completion of EMAs.</b></p> <p>A striking phenomenon in the foreign investment of EMFs is that a firm's ownership matters. Pioneering ownership-based studies reveal that state-owned enterprises (SOEs) and private-owned enterprises (POEs) experience distinct interactions with home and host countries leading to diverse foreign investment challenges and strategies. Government regulatory discretion combined with capital market imperfection in emerging markets means that SOEs are privileged in accessing government support. In contrast, POEs lack direct government support and seek to establish and leverage political ties to survive. This need for sustained firm government relationships and the gradual pro-market reforms in many emerging economies catalyse hybrid ownership structures among EMFs where state and private owners coexist in one organization. However, this emergence of hybrid ownership structures and their implications for EMFs' foreign investment activities are under-investigated in the international business domain.</p> <p>Building on the new institutional theory and the signalling theory, I argue that hybrid ownership structures can act as signals through which external stakeholders evaluate and confer legitimacy on EMAs during the CBA process. My conceptualization emphasizes the mixture of unique resources brought into hybrid organizations by both SOEs and POEs. Accordingly, I assert that as hybrid organizations incorporate elements prescribed by both SOEs and POEs, they are likely to project at least partial appropriateness to a broader set of institutional referents. As a result, hybrid ownership structures confer legitimacy-enhancing benefits, resource-enhancing benefits, and operational autonomy benefits that position EMAs to simultaneously navigate the home and host institutional challenges in CBAs ultimately increasing the completion likelihood. In addition to proposing a direct effect of hybrid ownership on CBA completion, I develop novel varieties of hybrid ownership structures that categorize variations in the internal configurations of hybrid organizations as typology, degree, and nature of hybridization. I carry out further investigation on how the hybrid ownership effect might vary with these varieties of hybrid ownership structures. Subsequently, I identify top executives' political connection, target industry political sensitivity, and host country regulatory quality as contingences to the effect of hybrid ownership on CBA completion of EMAs.</p> <p>Analysing a dataset of 838 CBAs by Chinese firms between the years 2008 to 2017, the results from this study demonstrate that acquirers with hybrid ownership structures are more likely to complete CBAs than nonhybrid acquirers. Moreover, while the hybridization effect varied with the degree of hybridization, the results did not provide conclusive evidence for the nature of hybridization. The result also reveals that top executives' political connection and the host country regulatory quality present differing interactions with the hybrid ownership effect relative to the hybrid organization's typology. With these findings, I contribute to the literature on EMFs' CBA completion by demonstrating that hybrid ownership structures benefit from their different owners' resources to overcome challenges in CBAs. I also contribute to the conceptualization and implication of hybrid ownership for EMFs strategic outcomes. I find that the benefits of hybrid ownership differed with the controlling shareholder's identity and the degree of hybridization in a hybrid organization. Furthermore, by examining the boundary conditions of top executives' political connection, target industry political sensitivity, and host regulatory quality, I provide insights into how intra-organizational attributes and external factors shape the significance of ownershipstructures in EMFs foreign investment.</p>

<p><b>Over the last decade, cross-border acquisitions (CBAs) have emerged as one of the most significant engines through which emerging market firms (EMFs) carry out foreign investments. Yet, emerging market acquirers (EMAs) terminate a significant percentage of initiated CBAs before completion. Compared to the 18 percent termination rate of CBAs involving acquirers from developed economies (DEs), CBAs by EMAs have a 33 percent termination rate. Scholars attribute the higher CBA termination by EMAs to the dual hurdle of 'liability of origin' and 'liability of foreignness' arising from direct government involvement and institutional voids in emerging economies. Although extant research provides in-depth insights into why EMAs have higher CBA termination rates than developed economies acquirers, they fall short in exploring how EMAs can navigate these challenges. Hence, in this study, I aim to investigate ownership based solutions to the institutional challenges affecting the CBA completion of EMAs.</b></p> <p>A striking phenomenon in the foreign investment of EMFs is that a firm's ownership matters. Pioneering ownership-based studies reveal that state-owned enterprises (SOEs) and private-owned enterprises (POEs) experience distinct interactions with home and host countries leading to diverse foreign investment challenges and strategies. Government regulatory discretion combined with capital market imperfection in emerging markets means that SOEs are privileged in accessing government support. In contrast, POEs lack direct government support and seek to establish and leverage political ties to survive. This need for sustained firm government relationships and the gradual pro-market reforms in many emerging economies catalyse hybrid ownership structures among EMFs where state and private owners coexist in one organization. However, this emergence of hybrid ownership structures and their implications for EMFs' foreign investment activities are under-investigated in the international business domain.</p> <p>Building on the new institutional theory and the signalling theory, I argue that hybrid ownership structures can act as signals through which external stakeholders evaluate and confer legitimacy on EMAs during the CBA process. My conceptualization emphasizes the mixture of unique resources brought into hybrid organizations by both SOEs and POEs. Accordingly, I assert that as hybrid organizations incorporate elements prescribed by both SOEs and POEs, they are likely to project at least partial appropriateness to a broader set of institutional referents. As a result, hybrid ownership structures confer legitimacy-enhancing benefits, resource-enhancing benefits, and operational autonomy benefits that position EMAs to simultaneously navigate the home and host institutional challenges in CBAs ultimately increasing the completion likelihood. In addition to proposing a direct effect of hybrid ownership on CBA completion, I develop novel varieties of hybrid ownership structures that categorize variations in the internal configurations of hybrid organizations as typology, degree, and nature of hybridization. I carry out further investigation on how the hybrid ownership effect might vary with these varieties of hybrid ownership structures. Subsequently, I identify top executives' political connection, target industry political sensitivity, and host country regulatory quality as contingences to the effect of hybrid ownership on CBA completion of EMAs.</p> <p>Analysing a dataset of 838 CBAs by Chinese firms between the years 2008 to 2017, the results from this study demonstrate that acquirers with hybrid ownership structures are more likely to complete CBAs than nonhybrid acquirers. Moreover, while the hybridization effect varied with the degree of hybridization, the results did not provide conclusive evidence for the nature of hybridization. The result also reveals that top executives' political connection and the host country regulatory quality present differing interactions with the hybrid ownership effect relative to the hybrid organization's typology. With these findings, I contribute to the literature on EMFs' CBA completion by demonstrating that hybrid ownership structures benefit from their different owners' resources to overcome challenges in CBAs. I also contribute to the conceptualization and implication of hybrid ownership for EMFs strategic outcomes. I find that the benefits of hybrid ownership differed with the controlling shareholder's identity and the degree of hybridization in a hybrid organization. Furthermore, by examining the boundary conditions of top executives' political connection, target industry political sensitivity, and host regulatory quality, I provide insights into how intra-organizational attributes and external factors shape the significance of ownershipstructures in EMFs foreign investment.</p>

In recent years, MNEs originating from emerging economies (or EMNEs) have been active in cross-border acquisitions to transfer knowledge and capabilities across institutionally diverse countries. While the literature has offered valuable insights on their strategic choices of location (“where to acquire”) and target (“whom to acquire”), it has mostly ignored the channel of acquisition (“how to acquire”). In this study, we highlight an important but largely unstudied practice, beachhead acquisition, which occurs when a company initiates a cross-border acquisition through one of its subsidiaries already in the host country. Building on an institutional perspective, we explicate how societal tightness-looseness in the host country influences EMNEs’ choice of beachhead acquisition. Using evidence from Chinese firms’ cross-border acquisitions from 2003 to 2015, we find that societal tightness has an inverted U-shaped relationship with the probability of beachhead acquisitions, and the positive effects are enhanced when EMNEs are equipped with more intangible assets. Our research provides new insights on the strategic nature of cross-border M&As.

PurposeEmerging market multinationals often face a variety of legitimacy challenges as they engage in cross-border acquisitions in developed countries, which requires an assortment of legitimacy strategies best aligned with the legitimacy challenges they face. This study advocates for a configurational perspective that examines how different configurations of legitimacy challenges, organizational characteristics, and legitimacy strategies influence the likelihood of deal completion in cross-border acquisitions by emerging market multinational enterprises (EMNEs).Design/methodology/approachBased on 328 cross-border acquisition cases by Chinese firms, this study adopts the fuzzy-set qualitative comparative analysis to examine the combined effects of institutional distance, political affinity, equity sought, architecture design, sensitive·industry and state-owned and enterprise (SOE) on cross-border acquisition completion.FindingsThis study identifies six pathways with different configurations for deal completion, suggesting that a deal's overall legitimacy falls at the intersection of the country-level institution and the firm-level characters and strategy evaluations.Originality/valueThis study investigates how nested legitimacy influences cross-border acquisition completion by offering a holistic and configurational understanding of the deal completion of cross-border acquisitions by EMNEs and yields useful insights for future research on cross-border acquisition completion and legitimacy.

Recent research on cross-border acquisitions (CBAs) has relied heavily on the firm-level resource-based perspective without adequately addressing the role of the institutional context. The rising CBAs by Chinese firms have posed a significant challenge to extant literature due to their relatively unique characteristics and their distinct home country institutional environment, in particular the active role of the government. In this study, we seek to integrate the institution-based view with the resource-based perspective and examine how Chinese firms’ post-CBA long-term performance is affected by government ownership in conjunction with key firm-specific and institutional boundary conditions. Our study shows that Chinese firms with more government ownership demonstrate better post-CBA long-term performance. However, the above relationship is moderated by such firm-level boundary conditions as political connection and financial slack, and the country-level institutional boundary conditions (i.e. the host country formal institutions and the home-host country cultural distance).

State-owned equity is a crucial factor affecting the innovation performance of cross-border acquisitions. We construct a three-dimensional "country-region-industry" model to explore the relationship between state-owned equity and cross-border acquisition innovation, and investigate the moderating effects of local regional marketization and we also investigate the moderating effects of local regional marketization and industry-related factors on the relationship between the two. Based on the cross-border acquisition cases of Chinese multinational enterprises, we use empirical research analysis to investigate the combined effects of state-owned equity, local regional marketization, and industry relevance on the innovative performance of cross-border acquisition. We find an inverted U-shaped relationship between state-owned equity and cross-border acquisition innovation performance. We also find that local regional marketization and industry relevance have moderating effects on the relationship between state-owned equity and cross-border acquisition innovation performance. This study provides a new perspective on the study of cross-border acquisition performance in emerging markets. Our findings provide some compelling conclusions, which contribute to an in-depth understanding of the relationship between SOEs and innovation performance in cross-border acquisitions and provide empirical evidence for firms' innovation decisions and practices.

Based on a survey database of cross-border acquisitions by Chinese private firms, this study uses a fuzzy-set qualitative comparative analysis (fsQCA) to explore the holistic impact of acquisition ownership, organizational factors and environmental factors on acquisition performance in cross-border acquisitions. It is found that the cross-border acquisitions taken by Chinese private enterprises have four kinds of acquisition ownership strategies leading to high acquisition performance under different internal and external conditions. This study points out that ownership strategy is a key decision affecting cross-border acquisition performance and provides a variety of paths leading to the same outcome rather than just finding the linear relationship between corporate activity and performance. This study supports the assumption of equivalence, and reveals a variety of scenarios in which cross-border acquisition ownership contributes to the outcome of high cross-border acquisition performance, and further confirms the view of causal asymmetry between condition and outcome. This study reveals whether the proportion of cross-border acquisition ownership affects cross-border acquisition performance and under what circumstances is conducive to the realization of expected cross-border acquisition performance.

While cross‐border acquisitions (CBAs) by emerging market firms (EMFs) have grown rapidly in recent years, many have failed to bring the acquisitions to completion. Compared with acquisitions initiated by acquirers from developed economies, little is known about the possible determinants of completion or abandonment of CBAs conducted by EMFs. This paper investigates what contributes to the successful completion of CBAs by EMFs. Based on data of 637 announced CBAs by Chinese firms during 2000–17, we find that investing firms’ self‐learning experience from previous acquisitions can significantly increase the completion rate of subsequent related CBAs, while their industrial spillover experience helps raise the completion rate of unrelated CBAs. Our findings also show that the value of acquisition experience is significant only when the target firm is domiciled in countries with comparable level of institutional quality. Our results provide new insights into the complexity of the global M&A market and lessons for EMFs intending to conduct CBAs in the future.

Chinese firms’ increasing cross-border acquisitions (CBAs) in recent years seem to challenge the explanatory power of received theories of multinational enterprise (MNE) due to their relatively unique characteristics and the active role of the Chinese government. In this study, we seek to revisit and contextualize the OLI paradigm in conjunction with the institution-based view and examine how Chinese firms’ post-CBA long term performance is associated with government ownership. Our study shows that Chinese firms with more government ownership demonstrate better post-CBA long term performance. However, the above relationship is differentially moderated by such firm-level boundary conditions as political connections and financial slack, and the country-level institutional boundary conditions (i.e., the host country formal institutions and the home-host country cultural distance). We discuss our findings in detail and explore theoretical and practical implications for both Chinese firms and other emerging economy (EE) firms.

This paper considers the strategic motivation for cross border mergers and acquisitions (CBM&As) for a sample of UK firms acquiring North American and European firms. The leading set of motives lends support to the theories of strategic positioning and the resource based view. The highest ranked strategic motives for CBM&As are to enable presence in new markets, to enable faster entry to market, to facilitate international expansion, gain new capabilities and gain strategic assets. Hypotheses are tested on the relationship between the relative importance of individual strategic motives and a number of characteristics of the sample. In general findings show that there is little variation in the relative importance of the strategic motives across the characteristics of the sample.

The Impact of Acquisitions on Chinese Acquirerss Innovation Performance: An Empirical Investigation of 1,545 Chinese Acquisitions

This article considers the strategic motivation and performance of Chinese cross‐border mergerand‐ acquisition (M&A) activities of 27 deals that took place in the Shanghai and Shenzhen stock markets in 2000–2004. The study finds that cross‐border M&As formation by Chinese firms are primarily motivated by market development (that is, increasing market share) to enable faster entry into new markets, promote diversification, and obtain foreign advanced technology and other resources. In terms of wealth creation, the study finds that cross‐border M&As create value for Chinese acquiring firms. © 2008 Wiley Periodicals, Inc.

Will investors’ excitement last? Determinants of investors’ responses to cross-border acquisitions by Chinese 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.

Does corruption in a target country create a similar effect on cross‐border acquisitions (CBAs) by firms from a developed and a developing country? This article empirically examines the relationship between corruption and CBAs by firms from China and the United States. Based on a combined sample of 10,236 completed acquisitions over the period of 1990–2006, the authors find that both Chinese and U.S. firms make a significantly greater number of acquisitions in less corrupt countries. However, unlike the U.S. CBAs, we find a significantly positive relationship between the transaction value of Chinese CBAs and the level of perceived corruption in the target country. It is suggested that having been schooled in weaker institutions themselves, Chinese firms may find it easier to deal with corrupt conditions in target countries, giving them an advantage over firms from less corrupt countries. © 2010 Wiley Periodicals, Inc.