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The influence of generalized and arbitrary institutional inefficiencies on the ownership decision in cross-border acquisitions

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Abstract

Extant studies have focused on conceptualizing and measuring the general quality of the institutions and their impact on an array of firms’ strategies. We distinguish two dimensions of institutional inefficiencies in a host country – generalized and arbitrary – and theorize from a knowledge perspective their impact on the acquirers’ ownership decisions in cross-border acquisitions (CBAs). Our empirical examination of 5522 CBAs by firms entering emerging economies reveals that, when exposed to a higher level of host-country generalized institutional inefficiencies, the acquirer tends to take a lower ownership in a CBA. When exposed to higher levels of arbitrary institutional inefficiencies, however, the acquirer tends to take a higher ownership in a CBA. We further find that these relationships are contingent upon the acquirer’s experience in the host region and technological nature.

Résumé

Les recherches existantes se focalisent sur la conceptualisation et la mesure de la qualité générale des institutions et de leur impact sur diverses stratégies des entreprises. Nous distinguons deux dimensions des inefficiences institutionnelles dans un pays d’accueil – généralisée et arbitraire – et théorisons, dans une perspective fondée sur les connaissances, leur impact sur les décisions relatives à la propriété des acquéreurs dans des acquisitions internationales (CBAs – Cross-Border Acquisitions). Notre analyse empirique sur 5522 CBAs des entreprises entrant dans les économies émergentes révèle que lorsque l’acquéreur s’expose à un degré plus élevé des inefficiences institutionnelles généralisées dans un pays d’accueil, il a tendance à prendre une moindre propriété dans une CBA. Néanmoins, lorsque l’acquéreur s’expose à un degré plus élevé des inefficiences institutionnelles arbitraires, il a tendance à prendre une propriété plus élevée. De plus, nous observons que ces relations sont contingentes à l’expérience de l’acquéreur dans les régions d’accueil ainsi qu’à la nature technologique.

Resumen

Los estudios existentes se han enfocado en la conceptualización y en la medición de la calidad general de las instituciones y su impacto en una serie de estrategias de las empresas. Distinguimos dos dimensiones de ineficiencias institucionales en un país anfitrión -generalizadas y arbitrarias- y teorizamos desde una perspectiva de conocimiento su impacto en las decisiones de propiedad de los adquirientes en las adquisiciones transfronterizas (CBAs por sus siglas en inglés). Nuestro examen empírico de 5.522 adquisiciones transfronterizas por empresas que entran en economías emergentes revela que, cuando es expuesto a un nivel superior de ineficiencias generalizadas, el adquiriente tiende a tomar menos propiedad en una adquisición transfronteriza. Al ser expuesto a niveles más altos de ineficiencias institucionales arbitrarias, no obstante, el adquirente tiende a tomar una participación más alta en una adquisición transfronteriza. Además, encontramos que estas relaciones están supeditadas a la experiencia del adquiriente en la región del anfitrión y de la naturaleza tecnológica.

Resumo

Estudos existentes têm se concentrado em conceituar e medir a qualidade geral das instituições e seu impacto sobre uma série de estratégias de empresas. Nós distinguimos duas dimensões de ineficiências institucionais em um país anfitrião – generalizadas e arbitrárias – e teorizamos sob uma perspectiva de conhecimento seu impacto nas decisões de propriedade de adquirentes em aquisições transfronteiriças (CBAs). Nosso exame empírico de 5.522 CBAs por empresas que entram em economias emergentes revela que, quando exposto a um nível mais alto de ineficiências institucionais generalizadas do país anfitrião, o adquirente tende a obter uma menor participação em um CBA. Quando exposto a níveis mais elevados de ineficiências institucionais arbitrárias, no entanto, o adquirente tende a obter uma maior participação em um CBA. Além disso, descobrimos que esses relacionamentos dependem da experiência do adquirente na região anfitriã e da natureza tecnológica.

摘要

现有的研究集中在对制度的总体质量以及它们对一系列公司战略的影响的概念化和测量上。我们区分东道国制度效率低下的两个维度 (普遍的和武断的) , 并从知识的角度对它们对跨境收购 (CBA) 中收购方所有权决策的影响进行理论化。我们对进入新兴经济体的公司的5522个CBA的实证研究表明, 当东道国的普遍的制度低效的情况较严重时, 收购方往往会降低CBA的所有权。然而, 当武断的制度低效的情况较严重时, 收购方往往会在CBA中有更高的所有权。我们进而发现, 这些关系取决于收购方在所在地区的经验和技术性质。

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ACKNOWLEDGEMENTS

This study was financed in part by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior – Brasil (CAPES) – Finance Code 001. This study received support from research Grant 672/2019 from Universidade Regional de Blumenau (FURB). Manuel P. Ferreira acknowledges financial support by National Funds of the FCT – Portuguese Foundation for Science and Technology within the project “UIDB/04928/2020.” Earlier versions of this paper were presented at the Academy of Management Meeting (2018) and at the Encontro Nacional da ANPAd (Brazil, 2017 and 2018).

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  1. Graduate School of Management (PPGAd and PPGCC), University of Blumenau (FURB – Universidade Regional de Blumenau), Blumenau, Santa Catarina, Brazil

    Christian Falaster

  2. Faculdade de Ciências Sociais Aplicadas, Universidade Federal de Lavras, Lavras, Minas Gerais, Brazil

    Manuel Portugal Ferreira

  3. CARME – Center of Applied Research in Management and Economics, Polytechnic Institute of Leiria, Leiria, Portugal

    Manuel Portugal Ferreira

  4. Kelley School of Business, Indiana University, Bloomington, Indiana, USA

    Dan Li

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Accepted by Arjen van Witteloostuijn, Area Editor, 19 March 2021. This article has been with the authors for four revisions.

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Falaster, C., Ferreira, M.P. & Li, D. The influence of generalized and arbitrary institutional inefficiencies on the ownership decision in cross-border acquisitions. J Int Bus Stud 52, 1724–1749 (2021). https://doi.org/10.1057/s41267-021-00434-1

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