The Location Choice of Cross-border Acquisitions by Emerging Market Multinationals

Abstract

In the context of high-tech industries, we develop and test a “location attractiveness” theoretical framework proposing that emerging market firms that are seeking to exploit existing capabilities are more likely to make similar acquisitions (i.e., acquisitions in developing country markets) while EMNEs seeking to explore new opportunities are more likely to make acquisitions in highly developed countries. Our theoretical framework also suggests that the tendency of EMNE exploitative acquisitions in developing countries is strengthened when EMNEs possess firm-specific advantages (FSAs) over other EMNEs, because EMNEs can better exploit their unique capability sets in other developing countries rather than in highly developed countries. For EMNE exploratory acquisitions, we also examine whether an EMNE’s ability to recognize and integrate new technological knowledge strengthens the likelihood of EMNE exploratory acquisitions in highly developed countries, an examination which allows us to tease out whether highly developed countries are attractive because of greater technological innovation or because of better developed, more transparent markets for corporate control and intellectual property legal protections. Overall, our study provides some of the first theoretical explanation and empirical evidence regarding how exploratory and exploitative motivations by EMNEs and EMNEs’ firm-specific capabilities affect the geographic location choice of EMNE cross-border acquisitions.