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Does political ideology matter in Chinese cross-border acquisitions
Abstract
Although the "parties-do-matter-hypothesis" has been recognized, we know little about the micro-level effect of the political ideology on cross-border acquisition (CBA). This study investigates the impact of the political ideology of a governing party in host countries on Chinese multinational enterprises' (CMNEs) CBAs. Drawing on the concept of organizational legitimacy from neo-institutionalism, we build a theoretical framework to explain this impact and the conditions that influence the magnitude of this impact. By using the data of country-level political ideology and CBAs conducted by CMNEs from 1995 to 2017, our findings show that the rightwing ideology of the governing party in a host country has a negative influence on CMNEs' CBA completion, and the magnitude of this negative influence is conditional on host countries' economic and political conditions. Specifically , the negative effect is weaker in host countries in an economic recession, with a higher level of democracy , and with a minority government.
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Although emerging market firms (EMFs) seek to undertake aggressive cross-border mergers and acquisitions (M&As), many of the announced deals are not finalized. This study examines how the prior failure of EMFs to complete cross-border M&As may influence the likelihood of completing future deals. Challenging the conventional wisdom that failure is the mother of eventual success, we argue that EMFs’ prior failure experiences may instead reduce the likelihood of their completing a subsequent deal. Moreover, the negative effect of prior failure experience is conditioned on firm capabilities to learn and the institutional contexts of the subsequent deals. Specifically, if EMFs have successfully completed cross-border M&A(s) or achieved a high degree of internationalization, they can learn more effectively from prior failure experience. Prior failure experience can be even more detrimental when the subsequent deal is carried out in an institutionally distant or more developed market. Based on over 30 years of data on cross-border M&As announced by EMFs, mostly from Asia, our analyses strongly support these propositions.
This paper examines the validity of three approaches to estimate party positions on the general left–right and EU dimensions. We newly introduce party elite data from the comprehensive IntUne survey and cross-validate it with existing expert survey and manifesto data. The general left–right estimates generated by elites and experts show a higher congruence than those derived from party manifestos; neither measure clearly materializes as more valid regarding EU positions. We identify which factors explain diverging estimates. For instance, disagreement among experts has greater impact than their mere number. The substantial centrist bias of the manifesto estimates persists even when alternative documents are used to substitute manifestos. Low response rates among elites have no systematic detrimental effect on the validity of party position estimates.
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.
We develop and test a model of Chinese greenfield investments using institutional and learning theories. Both the host country institutional context and the firm's international characteristics affect the establishment mode. Using 152 Chinese emerging market multinationals (EMNEs) with 401 subsidiaries distributed in 26 countries from 2003 to 2013, we build a database of 284 pairs of host country/Chinese firms to test two hypotheses. We find that, first, governance environment affects the establishment mode: greenfield investments are preferred over acquisitions in relation-based host markets, and M&As are preferred in rule-based countries. Second, the depth of Chinese EMNEs' international experience (i.e. the amount of previous investments in the same host market) moderates the effect of the governance environment on the establishment mode. Firms with greater international depth use more M&As in relation-based markets and more greenfield investments in rule-based markets, suggesting that previous investments in the same host country provide a type of learning that reduces acquisition uncertainty in the former case and increases the self-confidence of Chinese EMNEs in the latter.
Acquisition- and ownership-related policies put in place to safeguard countries’ essential security interests, also known as "investment policies related to national security" or "FDI screening policies" have received great attention around the globe in recent years. This report, freely available at https://oe.cd/natsec2020, sets out current and emerging trends in this area; describes the mechanisms' design elements; and reports how 62 advanced and emerging economies manage threats to their essential security interest that are associated with the acquisition or ownership of sensitive assets.
Based on empirical evidence of four Chinese firms’ outward mergers and acquisitions (M&As) to European countries, this paper examines previously neglected key success factors in post-acquisition reverse capability transfer. We identified three such factors: home-country advantage, motivation-oriented complementary resources, and acquirers’ attractiveness, and argue that post-acquisition capability transfer is affected by not only the process factors that occur during the post-acquisition phase but also by pre-acquisition status factors. In this way, the paper enriches the process perspective of M&A, thereby contributing to the international M&A literature and to studies of multinational corporations (MNCs) from emerging economies.
Research Summary Good corporate social responsibility (CSR) ratings can increase a firm's legitimacy and reduce its default risk. Yet, the interpretation of CSR varies between different countries. We investigate whether CSR ratings have a risk‐mitigating effect across different institutional contexts. We find that good CSR ratings have a general risk‐mitigating effect. Yet, we also find that the effect decreases when the rating agency is embedded in the institutional context of its home country and the rated firm operates in a country with a different culture or regulatory system. This suggests that a rating agency's country of origin and its embeddedness in that country's context play an important role in the relationship between CSR ratings and default risk. Managerial Summary In this article, we investigate to what extent CSR rating agencies signal organizational legitimacy across institutional contexts. Specifically, we evaluate how institutional distance between the rating agency and the rated firm moderates the negative effect of the CSR rating on the firm's default risk. We compare two CSR rating agencies, OEKOM, which is strongly embedded in its institutional context, and ASSET4, which operates across diverse institutional contexts. Based on a panel of 604 firms in 13 countries from 2011 to 2016, we show that CSR ratings from both rating agencies have a risk‐mitigating main effect. Yet, only in the case of OEKOM is the effect negatively moderated by regulatory and cultural distance. Thus, the legitimating effect of institutionally embedded CSR rating agencies decreases with institutional distance.
Research Summary
Good corporate social responsibility (CSR) ratings can increase a firm's legitimacy and reduce its default risk. Yet, the interpretation of CSR varies between different countries. We investigate whether CSR ratings have a risk‐mitigating effect across different institutional contexts. We find that good CSR ratings have a general risk‐mitigating effect. Yet, we also find that the effect decreases when the rating agency is embedded in the institutional context of its home country and the rated firm operates in a country with a different culture or regulatory system. This suggests that a rating agency's country of origin and its embeddedness in that country's context play an important role in the relationship between CSR ratings and default risk.
Managerial Summary
In this article, we investigate to what extent CSR rating agencies signal organizational legitimacy across institutional contexts. Specifically, we evaluate how institutional distance between the rating agency and the rated firm moderates the negative effect of the CSR rating on the firm's default risk. We compare two CSR rating agencies, OEKOM, which is strongly embedded in its institutional context, and ASSET4, which operates across diverse institutional contexts. Based on a panel of 604 firms in 13 countries from 2011 to 2016, we show that CSR ratings from both rating agencies have a risk‐mitigating main effect. Yet, only in the case of OEKOM is the effect negatively moderated by regulatory and cultural distance. Thus, the legitimating effect of institutionally embedded CSR rating agencies decreases with institutional distance.
De-globalization, now a distinct possibility, would induce a significant qualitative shift in strategies, structures, and behaviors observable in international business (IB). Coming to terms with this qualitative shift would require IB research to develop a much deeper integration of politics, the key driver of de-globalization. To support such integration, this paper introduces two relevant theories of (de-)globalization from political science, liberalism and realism. Both predict de-globalization under current conditions but lead to different expectations about the future world economy: liberalism suggests a patchwork of economic linkages, while realism predicts the emergence of economic blocs around major countries. This paper discusses the resulting opportunities in three areas of IB research: political strategies and roles of multinational enterprises (MNEs), global value chains, and the role of the national context. For political strategies and roles, there is a need to explore how regular business activities and deliberate political agency of MNEs affect the political sustainability of globalization. For value chains, questions include their future reach and specialization, changes in organizational forms, and the impact of political considerations on location decisions. Research opportunities on national contexts relate to their ability to sustain globalization and their connection with economic and military power.
Drawing on the comparative ownership framework, we perform a comparative analysis of Chinese and Indian multinational enterprises (MNEs)’ ownership strategies in knowledge-intensive cross-border acquisitions (CBAs). Specifically, we claim that due to their lower comparative ownership advantage, and the consequent higher information asymmetry, Chinese MNEs are more cautious (than Indian MNEs) in their ownership strategy. We rely on a dataset of acquisitions undertaken by high and medium-high tech Chinese and Indian MNEs worldwide during the period 2000–2014. Results confirm that Chinese MNEs prefer lower equity control than their Indian counterparts. However, such a preference for lower equity decreases with higher home-host institutional distance and host country-specific previous experience. These factors do not seem to modify the ownership preference of Indian MNEs in the same way.
This study uses data at the firm level to examine the relationship between the market entry strategies of 556 Chinese MNEs and their performance in Germany. Based on the revisited Uppsala internationalization process model, we develop six hypotheses on the impact of different market entry modes on performance, and on the moderating effect of home government support on this relationship. The findings show significant effects of location choice, activity mode and establishment mode, as well as duration of market presence on performance. Furthermore, strong interaction effects of home government support on these relationships reveal that the advantages of different market entry strategies are amplified by home government support. We conclude with theoretical and managerial implications, as well as a reflection of limitations and directions for future research. We conclude with theoretical and managerial implications as well as a reflection of limitations and directions of future research. The study contributes to international management research by integrating performance effects and the facilitating role of home government support into the internationalization process model.
Estimates of party ideological positions in Western Democracies yield useful party-level information, but generally lack the ability to provide an insight into the intraparty politics of party elites. In this article, we generate comparable measures of latent individual policy positions from elite survey data that enable analysis of elite-level party ideology and heterogeneity. This approach has some advantages over both expert surveys and approaches based on behavioral data, such as roll-call voting, and is directly relevant to the study of party cohesion. We generate a measure of elite positions for several mostly European countries using a common space scaling approach and demonstrate its validity as a measure of party ideology. We then apply these data to examine sources of party elite heterogeneity, focusing on the role of intraparty competition in electoral systems, nomination rules, and party goals. We find that policy-seeking parties and centralized party nomination rules are associated with less party heterogeneity. While intraparty competition has no effect, such contexts appear to condition the effect of district magnitude.
MNC subsidiaries engage in a variety of corporate political activities to gain legitimacy in the host country. Based on institutional theory, our study examines five types of strategies that MNC subsidiaries pursue to gain legitimacy in foreign markets. Using data from Australian subsidiaries of MNCs operating in different industries, and whose parents originate from 28 different countries, we find that mimetic isomorphism strategy has the strongest effect whereas information strategy has no effect on subsidiary legitimacy. The other three strategies, namely, financial, constituency building and relational have strong to moderate effects on subsidiary legitimacy. In addition, we show that multiple CPA strategies are essential and work together synergistically to contribute to the legitimacy of MNC subsidiaries. Our paper provides empirical support to the widely recognized need for MNC subsidiaries to engage in different types of CPA to legitimize their operations in diverse institutional contexts across the globe.
Purpose
This study aims to examine the dual effects of home country institutional forces (i.e. institutional support and institutional constraints) on the internationalization of private firms in emerging markets. By doing so, this study aims to examine the applicability of the two seemingly paradoxical views (i.e. the governmental promotion view and the institutional escapism view) in explaining private firms’ internationalization. Further, this study investigates how the effect of the home country institutional environment on firms’ internationalization is contingent upon firm characteristics.
Design/methodology/approach
A sample of Chinese private firms is used to examine the effect of home country institutions on internationalization.
Findings
Empirical findings suggest that both institutional support and institutional constraints promote the internationalization of private firms in emerging markets. Moreover, it is found that firm resources strengthen the effect of government support on internationalization. It is also found that firms’ business ties strengthen the effect of institutional constraint on internationalization, whereas firms’ political ties weaken the effect of institutional constraints on internationalization.
Originality/value
By adopting an integrated and comprehensive investigation of the dual effects of home country institutional environment in emerging markets on internationalization, this study provides evidence to the applicability of the two competing views (i.e. the governmental promotion view and the institutional escapism view) in relation to home country institutional effects on internationalization. In addition, this study examines how institutional effects vary across firms with different resources and social ties, thus extends understandings of the boundary conditions of the two institutional effects.
This paper contributes to the literature on emerging multinational enterprises (EMNEs) by revealing how the conditions in their home countries influence their cross-border acquisitions. The study focuses on the liability of emergingness (LOE). It develops an integrative theoretical framework based on neo-institutional theory and the concept of legitimacy to explain the relationship between LOE and EMNEs’ cross-border acquisitions completion and the situational conditions that shape this relationship. The study uses data on 27,648 announced acquisitions conducted by EMNEs from 24 emerging economies in 175 host countries to estimate the relationships. The results reveal that, while two types of LOE (economic and institutional) have negative impacts on cross-border acquisition completion, the negative impacts become less important or disappear when the host country’s unemployment rate is too high, and the host country’s institutional quality is too low. This finding suggests that EMNEs can mitigate the negative effect of the LOE by carefully choosing a good time and a suitable location to enter into these transactions.
Based on real option theory and transaction cost theory, we hypothesize that a high level of governing party fractionalization in the host country’s government fosters FDI because high governing party fractionalization is associated with low economic policy uncertainty. By using the data of governing party fractionalization in 135 host countries and greenfield FDI projects from China from 2003 to 2015, the findings of the study confirm the positive effect of governing party fractionalization on FDI. Moreover, the results of our studies confirm that the positive effect of governing party fractionalization on FDI is weakened for investing firms with experience in host countries and with central government ownership, for FDI projects conducted in natural resource industries, and in host countries with high GDP growth and low capital abundance. We further confirm that economic policy uncertainty is a mechanism through which governing party fractionalization influences FDI.
This paper examines the complex relationships between the government and multinational enterprises (MNEs) in Russia. Different from most studies that focus on the state as a whole, we distinguish between different levels of government, namely federal and regional. We investigate how these relationships influence the ability of Russian MNEs to gain external legitimacy. We report the findings of a qualitative multiple-case study of 12 Russian MNEs based on observations and 55 face-to-face interviews conducted in 2014 and 2015. The analysis reveals four different types of relationships: collaborative, submissive, adversarial, and collusive. We find that collaborative and submissive relationships have a positive effect on the external legitimacy of MNEs, whereas adversarial and collusive ones have a negative effect. We conclude that Russian MNEs are able to gain external legitimacy by capitalizing on different types of relationships with the federal and regional governments and using them to advance their own international activities.
Research summary : In the context of economic nationalism, we investigate the relevance of political affinity between countries to the initial acquisition premium offered in cross‐border acquisitions. Political affinity is defined as the similarity of national interests in global affairs. We argue that political affinity affects how foreign acquirers anticipate their bargaining position in their negotiations with domestic target firms. With decreasing political affinity, the host government becomes increasingly likely to intervene against foreign firms in an acquisition deal. Consequently, foreign acquirers need to provide a more lucrative initial offer to dissuade target firms from leveraging government intervention to oppose the acquisition. Our prediction is supported by strong evidence that political affinity, as revealed by UN general assembly voting patterns, leads to lower initial acquisition premiums.
Managerial summary : Media reports suggest that politics plays an important role in international business transactions. However, we still know very little about how bilateral political relations affect corporate decision‐making. In this article, we analyze the influence of the quality of bilateral political relations on the bidding behavior of foreign acquirers in cross‐border acquisitions. We argue that the host government is more likely to intervene against the foreign acquirer during deal negotiations if the quality of bilateral political relations is poor. A lower political affinity between countries therefore decreases the bargaining power of the acquirer and pushes up the initial bid premium the acquirer has to offer to the local target. Our empirical results confirm our argument. Copyright © 2015 John Wiley & Sons, Ltd.
This paper tests the widespread belief that right-wing governments tend to promote economic freedom while left-wing ones prefer more control over the economy. Using annual data for 106 countries over the period 1975-2015 and a two-step system GMM estimator, this study shows that right-wing governments are indeed more prone to promote economic freedom and to deregulate the economy. It also finds that this effect seems to be stronger in developing/emerging economies than in more developed countries. Moreover, the analysis of the broad dimensions of economic freedom indicates that right-wing governments tend to act by improving monetary soundness and freedom to trade internationally and by easing regulations that restrict entry into markets. Mainstream left-wing governments do not seem to affect economic freedom, however populist left-wing parties, when in office, are found to have a detrimental effect.
It is often taken as a stylized fact that state ownership harms the financial performance of firms. Yet we show that this relationship varies greatly across national contexts. We argue that the political ideology of the government, both independently and in conjunction with political institutions (state capacity and political constraint), affects this relationship. We test our hypotheses using meta-analytical techniques on an international sample spanning 53 years and 131 countries. Our research sheds further light on the state ownership – firm performance relationship by highlighting the role of the political ideology of the government, and its interactions with political institutions.
I use new data on central and general governments for 23 OECD countries over the period 1960–2015 (unbalanced panel) to examine fiscal performance under minority governments. The results do not suggest that minority governments had higher fiscal deficits and public expenditure than majority governments—corroborating many previous studies. An innovation of my study is to examine fiscal policies of minority governments that enjoy organized support of opposition parties. The results do not show that minority governments that enjoy organized support of opposition parties increased public expenditure to a larger extent than majority governments. If anything, fiscal deficits were somewhat higher under single-party minority governments with organized support of opposition parties than under majority governments especially. Minority and majority governments had quite similar fiscal performance in OECD countries.
In parliamentary systems, political parties must often bargain with each other in order to form a government. Do parliamentary rules regulating government formation impact the type of government that is formed? Existing scholarship suggests that the need for an investiture vote—a requirement that a new government must face a parliamentary vote at some point during its formation—reduces the likelihood of a minority government. This article suggests that while real-world investiture rules can vary across several dimensions, only the investiture decision rule—which specifies the size of the majority required for a decision to be made—impacts the propensity for parties to form minority governments. Using new data on investiture rules for 26 European countries since 1946 or the first year of democracy, we find that parliamentary democracies that have an investiture requirement are not less likely to experience minority governments than those where governments come to power without an investiture vote. However, when an absolute majority is required for a government to succeed at the investiture stage, minority governments are considerably less likely to form; absolute majority investiture rules reduce the frequency of minority governments.
Why do governments pursue regulatory reforms fostering entrepreneurship? In this paper, we examine the link between government ownership of banks, political regime transparency, and regulatory barriers to the entry of new industrial firms. We propose a signalling theory for the deregulation of entry. We argue that high levels of government ownership of banks and political system opacity erode the reputation of national economies in the eyes of international investors. To improve international perceptions of their business and investment climate, governments reduce regulatory barriers to new business entry. Deregulation of new firm entry signals an improved investment climate to foreign investors, and thereby substitutes for political system transparency. This signal is credible, valued by international investors, and easier to implement than alternative signals. Evidence drawn from an analysis of 93 developed and developing countries supports our propositions. Countries with high levels of state ownership of banks exhibit higher regulatory barriers to firm entry. However, this relationship attenuates and even reverses in extremely opaque political systems. Consistent with our argument that international perceptions are the key mechanisms underlying this conditional relationship, we also show that the moderating effect of political system opacity weakens among countries with high levels of government ownership of banks and FDI inflows. Our findings have important implications for the literature on state ownership of banks, the political economy of reform, and for our understanding of strategic signalling in international relations.
This document, freely available at http://oe.cd/natsec2019, has been prepared in support of an OECD conference on the same topic held on 12 March 2019.
This article sheds light on how the internationalization of state-owned enterprises is influenced by the state involvement in ownership and by the home country’s institutional settings. Integrating international business literature with the debate on the varieties of capitalism, we contend that state-dominated enterprises internationalize more (less) than privately owned enterprises in coordinated (liberal) market economies, whereas they exhibit an inconstant behavior in state-influenced market economies. Our analysis on a sample of enterprises pertaining to 20 OECD countries supports our hypotheses. This article adds to studies on the influence of institutions on firms’ internationalization and has implications for both managers and policymakers.
Reseach Summary
State‐owned enterprises (SOEs) are often more opaque than other types of firms. This opaqueness tends to generate resistance when SOEs undertake cross‐border acquisitions. Opaqueness can also aggravate concerns about an SOE’s semi‐political nature and its susceptibility to agency problems, making gaining legitimacy harder. Data on attempted foreign acquisitions by Chinese firms were analyzed to compare the likelihood of deal completion between SOEs and firms with other forms of ownership. The SOEs’ completion rate was 14% lower than that of other firms. Their disadvantage was shown to be alleviated when they could provide credible signals by being publicly‐listed (though only on an exchange in a well‐developed economy or by hiring reputable auditors). We also find that the disadvantage of SOEs was partially mediated by their opaqueness.
Managerial Summary
Opaqueness, or lack of transparency, is critical in many business transactions. In this paper, we argue that the concept of opaqueness can help us understand why SOEs tend to have a lower likelihood of deal completion in cross‐border acquisitions. Our evidence suggests that opaqueness influences the relationship between state ownership and deal completion, and firms can improve their chance of success in cross‐border acquisitions by providing credible information, such as by listing on an exchange in a developed market or hiring a reputable auditor. These help mitigate the hazard of opaqueness.
This study explores the effect of certification on profitability in a transition economy. Obtaining a certification is a strategic legitimacy action that positively affects a firm’s profitability, specifically for a foreign firm in a transition economy, where institutions are less developed and stable. However, we argue that certification is particularly effective if legitimacy based on adaptation to local circumstances is weak. An analysis of data from 319 MNE subsidiaries in China over the period 1998-2009 largely supports our hypotheses. Certification is an effective strategic action which improves profitability. However, the strength of this effect is influenced by the level of marketization of the host region, the institutional quality in the home country, the density of the foreign firm community in the host country, the number of years the foreign firm has been in the host country, and the size of the foreign firm. These findings throw light on the role certification can play in helping firms overcome the liability of foreignness in a transition economy.
Proper government reaction to economic crisis has long been a central element of public policy debate and is experiencing a revival after the Great Recession of 2008. Previous studies argue on theoretical and empirical grounds that crises may lead to more interventionist policies, but also cause deregulation and liberalization. This article claims that policy responses will partly depend on the core economic ideology of government, causing ideologically heterogeneous post-crisis strategies. Employing a panel of 69 countries for which salient ideology measures can be constructed, we find that growth crises between 1975 and 2015 caused larger increases in government size and regulatory policy when countries have left-wing governments. We also find some evidence of policy ratchets, meaning that certain crisis policies present a tendency to become permanent, regardless of the ideology of successive governments in power. Rolling back the public sector in size and scope seems to be possible, but our results show that, on average, it does not clearly occur as an ideologically driven reaction to anti-crisis policies.
Governments actively court foreign direct investment (FDI) as a tool for economic growth and development. Despite the important role of FDI in the global economy, we do not know how this activity affects election outcomes. Crucially, state and local governments are often responsible for attracting FDI. Although FDI creates jobs, it also generates competition for domestic producers. Drawing on theories of global production, I argue that inward FDI increases the net welfare of voters in the local host economy. Therefore, new investment should increase the electoral success of incumbent parties in local elections. I use new project-level greenfield FDI data to test this claim in the context of Brazilian mayoral elections between 2004 and 2012. I find that the announcement of a new investment project increases the probability that the incumbent party wins reelection. The findings suggest a channel through which globalization directly affects mass politics at the subnational level.
Drawing on the institution-based view and the global political economy perspective, this study examines the role of home-country government support and interstate relations in the overseas subsidiary performance of Chinese multinational enterprises (MNEs). We focus on two aspects of home-country government support: financial support and non-financial policy support, as well as their effects under the contingency of interstate relations. Using survey data, we find that Chinese MNEs’ subsidiary performance is positively related to the degree of home-country government non-financial policy support, but not financial support. The impact of non-financial policy support is contingent on interstate political and economic relations. Stronger interstate political relations complement the impact of non-financial policy support on subsidiary performance, whereas interstate economic relations have a substitutive effect.
This paper examines the direct effects of the Chinese institutional environment on local MNCs' decisions to acquire firms in developed countries. Due to the significant capabilities gap between Chinese acquirers and developed market targets, these transactions require a unique post-M&A integration approach that differs from those prescribed by extant research. We use a qualitative research approach based on executive interviews and information gathered through secondary data sources and the analysis of media accounts to examine the acquisition of the German Preh GmbH by the Chinese Joyson Group. Building on institutional theory, we introduce a new category of institutions, semi-formal institutions, and related legitimacy pressures in order to point to the institutional complexity Chinese MNCs have to navigate. Furthermore, building on social capital theory, this paper develops a supportive partnering approach for implementing M&As by Chinese MNCs in developed markets, and discusses the academic and practical implications of this new approach.
The expansion of the Chinese firms' global footprints in recent years reveals their growingly evident strategic intent and emerging capability, and calls for the need to (re)examine how emerging multinational enterprises' (EMNEs) internationalization strategies could be conceptualized with implications for human resource management (HRM). However, there remains insufficient research on cross-border merger and acquisition activities by emerging economy firms in general and by Chinese firms more specifically. This review paper fills part of this research gap by examining the acquisition intent and post-acquisition strategy of Chinese MNEs (CMNEs). Specifically it examines the post-acquisition challenges they are likely to encounter, and the implications for organizational and HRM capability building. We identify a set of research avenues for future investigation that may shed further light on how institutional and cultural factors at various levels and CMNEs' strategy impact various aspects of HRM practices.
The study of ideology in authoritarian regimes—of how public preferences are configured and constrained—has received relatively little scholarly attention. Using data from a large-scale online survey, we study ideology in China. We find that public preferences are weakly constrained, and the configuration of preferences is multidimensional, but the latent traits of these dimensions are highly correlated. Those who prefer authoritarian rule are more likely to support nationalism, state intervention in the economy, and traditional social values; those who prefer democratic institutions and values are more likely to support market reforms but less likely to be nationalistic and less likely to support traditional social values. This latter set of preferences appears more in provinces with higher levels of development and among wealthier and better-educated respondents. These findings suggest that preferences are not simply split along a proregime or antiregime cleavage and indicate a possible link between China’s economic reform and ideology.
In this article, we review critiques of international business (IB) research with a focus on whether IB scholarship tackles “big questions.” We identify three major areas where IB scholars have addressed important global phenomena, but find that they have had little influence outside of IB, and only limited effects on business or government policy. We propose a redirection of IB research towards “grand challenges” in global business and the use of interdisciplinary research methods, multilevel approaches, and phenomena-driven perspectives to address those questions. We argue that IB can play a more constructive and vital role by tackling expansive topics at the business–societal interface.
United Nations (UN) General Assembly votes have become the standard data source for measures of states preferences over foreign policy. Most papers use dyadic indicators of voting similarity between states. We propose a dynamic ordinal spatial model to estimate state ideal points from 1946 to 2012 on a single dimension that reflects state positions toward the US-led liberal order. We use information about the content of the UN’s agenda to make estimates comparable across time. Compared to existing measures, our estimates better separate signal from noise in identifying foreign policy shifts, have greater face validity, allow for better intertemporal comparisons, are less sensitive to shifts in the UN’ agenda, and are strongly correlated with measures of liberalism. We show that the choice of preference measures affects conclusions about the democratic peace.
The paper attempts to determine whether parties of the left, when in government, spend more than parties of the right. It first reviews the theoretical literature and concludes that parties are likely to make a difference, but only a modest one. It then reviews previous empirical studies, which come out with conflicting results. It finally proposes a study that covers 15 liberal democracies over a period of 28 years, from 1960 to 1987. and combines longitudinal, cross-sectional, and pooled designs. The analysis shows that parties ot the left do spend a little more than parties of the right. The difference, however, emerges only for majority governments whose party composition remains unchanged over a number of years, an indication that it takes time for parties to affect total spending.
How do home country institutions influence cross-border postacquisition performance? We develop an institutional framework showing that informal and formal institutions not only have important individual effects but also work together in complex and interesting ways. While collectivism and humane orientation (two major informal institutions) can facilitate postacquisition integration and firm performance, shareholder orientation and property rights protection (two formal institutions) constrain postacquisition integration and firm performance. As acquirers are simultaneously embedded in their home countries’ informal and formal institutions, we further hypothesize that the positive effects of collectivism and humane orientation can be weakened by incompatible formal institutions that hamper postacquisition collaborative efforts. We find strong support for our hypotheses in a multilevel analysis of a sample of 12,021 cross-border acquisitions involving 43 home and target countries between 1995 and 2003.
This paper offers a quantitative analysis of ideology in China, to examine how beliefs and preferences are configured, and to measure the extent to which they are bound together by some form of constraint. Based on a large scale online survey, we identify an ideological spectrum characterized by one main dimension bound by a relatively weak constraint using both principal component analysis and models of the item response theory. On one end of this spectrum, preferences for authoritarian rule coincide with support for traditional norms and political distribution of resources. On the other end of this spectrum, preferences for political liberalization coincide with opposition to traditional values and support for markets allocation of resources. Evidence suggests that this latter set of views is more likely found in provinces with higher levels of development and among individuals with higher income and education. We corroborate these findings with a nationally representative sample from the Asian Barometer Survey.
When are minority cabinets effective? We study the extent to which minority cabinets demonstrate legislative reliability, i.e. introduce to parliament the bills they have announced in their legislative agendas. We test hypotheses drawn from two theories of minority government effectiveness: the positional agenda power theory which emphasizes the central location of the minority cabinet in the policy space; and the ideological proximity theory which stresses the importance of the ideological closeness of opposition parties to the government. In an analysis of over 1,600 bills announced by Danish and Swedish minority cabinets in 19 legislative agendas published between 1998 and 2012, we find more support, overall, for the ideological proximity than for the positional agenda power model.
Approximately one-third of international business (IB) articles include conditional hypotheses, yet the vast majority risk errors in testing or interpreting the results. Scholars typically restrict their empirical analysis to the coefficient of the interaction term in the regression, exposing themselves to the hazard of overstating or understating results. To mitigate the risk of misstating, we advocate that IB scholars also evaluate the statistical significance of the marginal effect of the primary independent variable over the range of values of the moderating variable. We demonstrate that overstating results can occur when the interaction term coefficient is statistically significant but the marginal effect is not significantly different from zero for some value(s) of the moderating variable. Understating can occur when the interaction term coefficient is not statistically significant, but the marginal effect is statistically different from zero for some value(s) of the moderating variable. In this article, we describe, using simulated data, these two possibilities associated with testing conditional hypotheses, and offer practical guidance for IB scholars.
This article, to date, is the first to consolidate, review, and integrate over 250 earlier studies that examine the country-specific determinants of cross-border mergers and acquisitions. Following 6Ws’ systematic review design and protocol, we survey the taxonomy of research published over the past three decades in international business, strategic management, finance, and economics. We present our syntheses in seven strands: macroeconomic and financial markets environment, institutional and regulatory environment, political environment and corruption, tax and the taxation environment, accounting standards and valuation guidelines, cultural environment, and geographical environment. Our integrative review and discussions are framed through Home–Host country, West–South, and South–West directional flows. We then show some highlights of the bibliometric analysis, provide a summary for each country-level determinant, and offer several theoretical propositions and research directions in need of future exploration. The review suggests that better the host country’s institutional laws with regard to financial markets, taxation and corporate governance, then higher the number of inward acquisitions. It emphasizes that geopolitical distance, regulatory distance, and cultural distance between developed and developing economies are more likely to be moderated by the target country’s market size, natural resources base, and weak institutional laws, especially corporate tax and capital gains tax. Overall, the article contributes to institutional framework and political economy view of globalized production by reviewing the crucial research question – what determines cross-border merger and acquisition transactions around the world?
This paper describes the empirical evidence on partisan politics in OECD panel studies. I elaborate on the research designs, the measurement of government ideology and why the empirical studies did not derive causal effects. Discussing about 100 panel data studies, the results indicate that leftwing and rightwing governments pursued different economic policies until the 1990s: the size and scope of government was larger when leftwing governments were in power. Partisan politics have not disappeared since the 1990s, but have certainly become less pronounced. In particular, government ideology still seems to influence policies such as privatization and market deregulation. I discuss the consequences of declining electoral cohesion and what future research needs to explore.
Using sectoral data from 104 countries over 40 years we show that per-worker productivity declines during recessions. The adverse effect is particularly strong if recessions are accompanied by banking crises and especially in sectors and countries with greater financial frictions.
Research summary: Cross‐border acquisitions may raise legitimacy concerns by host‐country stakeholders, affecting the acquisition outcomes of foreign firms. We propose that theorization by local regulatory agencies is a key mechanism that links legitimacy concerns with acquisition outcomes. Given that theorization is time consuming and its outcome is uncertain, we argue that state‐owned foreign firms experience a lower likelihood of acquisition completion and a longer duration for completing a deal than other foreign firms. Moreover, we introduce a set of firm characteristics (target public status, target R&D alliances, and acquirer acquisition and alliance experiences) that may affect the threshold level of legitimacy, thereby altering the proposed relationships. Our framework and findings provide useful implications for institutional theory on its core concept of legitimacy.
Managerial summary: Cross‐border acquisitions by state‐owned foreign firms may lead to national security concerns and thus debates and discussions among local regulatory agencies. We argue that such institutional processes may reduce the likelihood of acquisition completion and prolong the duration of acquisition completion. Using cross‐border acquisitions in the United States, we find that acquisitions by state‐owned foreign firms are not less likely to be completed than acquisitions by other foreign firms, but they take more time to be completed. Moreover, state‐owned foreign firms are less likely to complete an acquisition when the target firm has more R&D alliances. However, their acquisition experience and alliance experience in the host country increase the likelihood of acquisition completion, whereas their alliance experience alone shortens the acquisition duration. Copyright © 2016 John Wiley & Sons, Ltd.