The Decision to Stay or Resign Following an Acquisition by a Chinese or Indian Company

Abstract

This paper analyses the challenges created by the liability of foreignness and the associated country-of-origin bias and their effect on Western managers’ decisions about whether to leave following their company’s acquisition by an emerging-economy multinational. Using a manipulated scenario-based survey conducted with American, French and German managers, the results show that managers are more likely to resign if their company is acquired by a company from an emerging economy (specifically, China or India) than by a company from their home or another Western, developed country. Furthermore, the results do not support previous research findings that show the role of prior alliance between the acquirer and its target, previous experience with successful acquisitions, previous experience with the local market and minimal post-acquisition integration to be forces helping to counterbalance the adverse effects of the liability of foreignness, country-of-origin bias and the ‘emergingness’ nature of foreign acquirers.