The effect of change readiness of economies on international M&A flows

The purpose of this paper is to examine how a country’s change readiness impacts international mergers and acquisitions (M&A) capital flows on a national level toward host countries. The authors unpack the construct of change readiness and identify how its different dimensions impact international M&As (IMA). The authors provide a theoretical framework based on the resource-based view to facilitate an understanding of this concept.

The authors used a fixed-effect analysis to study a sample of 2,970 IMAs announced by publicly traded US companies during 2013–2017.

The authors propose that higher levels of change readiness would help foreign firms to cope with risks and uncertainties generated by the changes and shocks in the environment of a host country. The authors find support for their hypotheses showing that higher levels of change readiness increase the number of IMAs that a country receives every year. This characteristic of the host country shows a significant influence, especially in technology-intensive IMA flows.

This study provides implications for business executives and policymakers both in terms of risk mitigation strategies and investment attraction. Understanding the fact that when it comes to foreign investment in the form of IMAs business executives are aware of the importance of change readiness in host countries might lead to motivate the governments and host country officials to provide better infrastructure to boost the change readiness in their economy.

Overall, this study improves our knowledge about mechanisms through which change readiness of host countries might impact firms' strategies for international expansion. As we are indeed living in the era of global disruptions and strong shocks caused by political turmoil, climate change and the spread of new diseases, this study contributes to the literature on risk mitigation in international business and is one of the first to look closely at the role of host countries' change readiness and the effect it might have on attracting international M&As.