Responses to Institutional Voids and Cross-Border Acquisitions: Evidence from China
Author:
Mr. Yinuo TANG
PhD Candidate in Strategy
Joseph M. Katz Graduate School of Business
University of Pittsburgh
Abstract:
Limited attention has been paid to how emerging market firms (EMFs)’ responses to institutional voids affect their international expansion strategy. This study investigates non-market and market-based responses to institutional voids – political connections and cross-listing, respectively – and their differential impact on EMFs’ performance in cross-border acquisitions. Although both responses serve the purpose of overcoming institutional voids, we propose that politically connected EMFs will experience lower performance in cross-border acquisitions, especially in high technology industries. In contrast, cross-listed EMFs will experience higher performance, especially in national strategic industries. The moderating effects of industry show that for cross-border acquirers, the impact of employing nonmarket/market strategy is contingent on the institutional difference between home and host country. After accounting for endogeneity, a dataset of 466 Chinese firms’ cross-border acquisitions during the 2003-2013 time period supported our hypotheses. We contribute to understanding how nonmarket and market responses to domestic institutional voids influence EMFs’ returns in cross-border acquisitions and exemplifies how heterogeneity of institutional environment affects the value of strategy.
