Cross-border mergers and acquisitions of emerging economies' multinational enterprises — The mediating role of socialization integration mechanisms for successful integration

There has been recent surge of cross-border mergers and acquisitions (M&As) by emerging economies' multinational enterprises (EMNEs), however no conceptual model exists that can be utilized in global context to understand the success of these cross-border activities. In this article, a conceptual model is developed which suggests that distributed leadership increases the chance of the EMNEs' cross-border M&A success through the mediating role of socialization integration mechanisms. In addition, we identify the degree of autonomy given to the acquired firm as a potential moderator of the relationship between distributed leadership and the success of cross-border M&As of EMNEs. Irrespective of the country of origin, this model has the potential to be utilized in creating strategies for developed and emerging economies' MNEs' cross-border M&As' success.     

Investor protection and value creation in cross‐border M&As by emerging economies

Previous research investigating cross‐border M&As (CBM&As) by emerging economies (EEs) provided contrasting evidence on the value enhancement role of investor protection rules. We conduct a new empirical study to address the issue with an accurate sample selection of bidders from more homogeneous developing countries and transactions on developed countries only. Our analysis over the 1997–2012 period on a sample of M&A deals by companies from Brazil, Russia, India, China, and South Africa (BRICS) does not provide evidence that better institutional standards in the destination country are rewarded by the local stock market. We find that foreign governance quality is not associated with positive excess stock returns around the announcement date. Rather, these returns are affected by firm‐specific and deal‐specific factors, such as the relative deal size, the listed status of the target company, and the acquirer size. Comparison with other studies on excess returns for emerging markets (including BRICs) suggests that the results could be driven at least partially by country choice.     

Intra-industry and inter-country effects of European mergers

We empirically test the valuation effects of European M&A announcements on rivals within the target's country (intra-industry effects) and on other European rivals (inter-country effects), for the period of 1996 to 1999. We find evidence of inter-country effects that has not previously been documented, suggesting that the ongoin integration of European economies, supported by the introduction of the euro, facilitates the transmission of private information across country boundaries in Europe. We also conduct a cross-sectional analysis to isolate potential sources of intra-industry and inter-country effects. *** DIRECT SUPPORT *** A00DH017 00007     

Navigating the New Normal: Political Affinity and Multinationals’ Post-Acquisition Performance

The New Normal in the international business landscape reflects a world challenged by economic volatility and political hostilities. This suggests increased political risk, even for MNEs operating in developed markets. We use the legitimacy-based view of political risk to examine how political affinity between host and home markets may contribute to an MNE’s post-acquisition performance in a developed market. A high degree of political affinity signifies aligned national interests thus reducing legitimacy concerns faced by MNEs during post-acquisition integration. Based on cross-border M&A deals focused on U.S. targets completed by MNEs representing 45 countries between 2004 and 2012, we find that MNEs from countries with greater political affinity to the U.S. experience better post-acquisition performance. We also investigate two country-level factors that intensify the threat to legitimacy; the MNEs’ home market economic status and the presence of a financial crisis in the host market. Our findings indicate that political affinity mitigates risk for MNEs originated from emerging economies much more than for MNEs originated from developed economies, whereas a financial crisis reduces the benefit of political affinity.     

The impact of psychological ownership on employee retention in mergers and acquisitions

Research has demonstrated that turnover rates among employees and executives in the acquired firm are much higher during an M&A event. Recent empirical and review articles on M&A have also shown that employee retention/turnover can best be understood by looking at psychological attributes and perceptions of M&As, thus drawing significant attention to the psychological and ‘human’ side voids to theoretically exploit and enhance understanding of people-related problems in M&A endeavors. In this article, we develop a moderated mediation model and propose that acquired firm employees' psychological ownership is positively related to acquired firm employees' retention through the direct and mediating effects of employees' commitment and involvement in M&A. We also propose that the effect of acquired firm employees' psychological ownership on employees' commitment and involvement and, ultimately, acquired firm employees' retention is moderated by loss of acquired firm autonomy. We also discuss implications for theory and practice, as well as future research directions of such an employees' psychological ownership perspective on retention effects.     

Riding the tides of mergers and acquisitions by building a resilient workforce: A framework for studying the role of human resource management

Mergers and acquisitions (M&As) have been a popular strategy for firms to increase their competitive advantage. Existing research has revealed a wide range of implications for the workforce and human resource management (HRM) stemming from M&As. However, insufficient attention has been paid to issues related to employee resilience. We argue that employee resilience, a concept that is still to gain widespread attention in HRM research, is crucial to organizations wishing to manage their M&As successfully, especially in the post-M&A integration. We develop a set of complementary propositions, present a research framework, and indicate directions for future studies.     

Corporate environmental responsibility,employer reputation and employee commitment: an empirical study in developed and emerging economies

Employer reputation is relevant not only to attract but also to retain qualified employees. While in the past financial incentives have been the most important instrument, corporate environmental responsibility (CER) is becoming more and more relevant as a determinant for employer attractiveness and employee commitment. On the basis of signaling theory, we conducted an empirical study among 215 firms in China, Germany, India and the USA. Our results reveal that green strategy & culture, green technology & products, green recruitment & evaluation and green communication positively influence the environmental reputation of a company as an employer and in turn employee commitment. The signaling effects of these CER activities are similar in Germany and the USA (developed economies) as well as in China and India (emerging economies). An exception is green communication, which has a more positive effect on environmental reputation in developed economies. We conclude with managerial and theoretical implications as well as recommendations for future research.     

The (mis)measurement of M&A performance—A systematic narrative literature review

This paper seeks to further the understanding of the variety of meanings M&A scholars attach to the label “M&A performance” by providing an alternative way to interpret the claimed inconsistency of M&A research findings. While many scholars contend that the problem stems from the multiplicity of M&A performance measures, we believe the problem rests in trying to compare different measures as if they were measuring the same feature of the organization. Through our narrative review of empirical research we analyze factors shaping the M&A – as well as the organizational – performance measurement process. The conclusion is that it is not possible to talk about M&A performance as if it was a universal construct.     

The role of human resource management in cross-border mergers and acquisitions

Cross-border mergers and acquisitions (M&As) have become the dominant mode of growth for firms seeking competitive advantage in an increasingly complex and global business economy. Although human resource management (HRM) can play a value-adding role in the merger process, existing research and evidence does not clearly demonstrate how it can do so. This paper addresses the neglected human side of M&As by providing a strategic fit framework to assess the link between M&A strategy and HRM strategy. Because cross-border M&As are of an order of magnitude more complex than domestic mergers, we examine contingencies in national contexts that influence outcomes in the merger process. We draw on recent empirical evidence to highlight HRM roles in terms of resources, processes and values that reflect the influence of both strategic fit and national context in the integration stage of cross-border M&A.     

Theorizing in the qualitative study of mergers & acquisitions

This paper focuses on theorizing in the study of mergers and acquisitions (M&As), a globally significant inter-organizational phenomenon. We analyze 76 qualitative papers on M&As published in leading management journals between 1966–2016. We identify five modes of theorizing in the study of M&As. We find that M&A scholars make theoretical contributions using different theoretical positioning and research design strategies. The majority of the papers offer a contribution to middle-range theorizing (i.e., the literature on M&As), while a third of the papers also contribute to higher-order, or grand theories in management. In closing, this leads us to call for a rejuvenation of middle-range theorizing in management research.     

Cross-border mergers and acquisitions with heterogeneous firms: Technology vs. market motives

The most common form of foreign direct investment (FDI) is cross-border mergers and acquisitions (M&A). A common explanation for M&A activity identified in the industrial organization literature is that firms seek technological expertise. However, this has not been examined in the FDI literature. In this paper, I develop and estimate a model of cross-border M&A and focus on the technology seeking explanation. In particular, I develop a general equilibrium model of exporting, greenfield FDI, technology-seeking cross-border M&A, and market-seeking cross-border M&A with heterogeneous firms. The model predicts that firms from a larger country are more likely to acquire in a smaller country when M&A activity is driven by a technology-seeking motive, but the opposite is true when it is driven by a market-seeking motive. Using detailed data on worldwide M&A activity from 1985 to 2007, I find empirical evidence that cross-border M&A activity exhibits behavior consistent with this prediction.     

Growing through the merger and acquisition

The paper studies with an endogenous growth model how the merger and acquisition (M&A) affects the aggregate growth rate. We model the M&A as a capital reallocation process, which can increase both productivity and growth rates of firms. The model is tractable and greatly consistent with patterns observed in the M&A at the micro level. Matching our model to the data, we find that prohibiting the M&A would lead to the reduction of the aggregate growth rate of US economy by 0.1% and the reduction of the aggregate TFP by 5%.     

The relationship between R&D,innovation and productivity in emerging economies: CDM model and alternatives

CDM (Crépon, Duguet and Mairesse, 1988) is a workhorse model in the economics of innovation, which explains productivity in a three-stage procedure driven initially by R&D and leads to patents and then to productivity improvements. Based on the logic of this model, an increasing number of papers applies it to emerging economies but modifies the original model without being explicit about the nature and implications of this modification. We argue in this paper that, in its original form, CDM does not capture stylized facts of the determinants of productivity in emerging economies and that we need alternative models. Accordingly, we are critical of papers that try to maintain the validity of the model but actually change it. For that purpose, we test the original CDM model and its two alternatives: investment and production capability–driven models. Our research is based on a large sample of firms in Central and Eastern Europe, former Soviet republics and Turkey, and we show that the alternative models are much closer to the stylized facts of innovation activities and technology upgrading in these and other emerging economies. Our conclusions have important policy implications, which we discuss.     

Democratization in the host country and institutional risk of cross-border M&A: an empirical study on Chinese listed enterprises

We take the sample of Chinese listed enterprises’ cross-border M&A from 1999 to 2010 to construct a Poisson distribution model, and theoretically explore and empirically research how democratization in the host country influences the going-out process of Chinese enterprises. The overall results show that democratization impedes the inflows of Chinese enterprises’ cross-border M&A, because the higher the degree of democratization in the host country, the stronger the intensity of industry protection and the greater the power of trade unions—and this creates institutional risk for Chinese enterprises. We also find institutional risk aroused by democratization deeply influences the cross-border M&A of Chinese state-owned enterprises and the M&A flowing into the natural resources industry. This study contributes to further understanding democratization degree and institutional risk, and at the same time, it is also significantly meaningful for guiding the development and implementation of Chinese enterprises’ internationalization strategy.     

Integration risk in cross-border M&A based on internal and external resource: empirical evidence from China

This paper concerns the high failure rate during the integration phase of cross-border M&A from the resource-based view. This integration risk in cross-border M&A comes from both firm’s internal resource and external resource integration. On this basis, we clearly analyze the relationship between resource similarity and firm’s internal resources integration risk, as well as resource complementarity and firm’s external resource integration risk. Then, we put forward the main conclusion: stronger external resource complementarity and stronger internal resource similarity between the acquirer and target firms will make integration in cross-border M&A less risky. For this study’s empirical stage, we collect a large amount of questionnaire data from Chinese firms with cross-border M&A experiences. We use the logistic regression method to verify hypothesis. This paper provides both the acquirer and target firms with fresh ideas of how to avoid the integration risk of cross-border M&A. We hope to help firms from developing country to achieve more outstanding results through cross-border M&A in an intense global competitive environment.     

The role of HRM and social capital configuration for knowledge sharing in post-M&A integration: a framework for future empirical investigation

The literature on human resource management (HRM) indicates that HRM plays an important role in merger and acquisition (M&A) integration success, but pays little attention to the mechanisms for knowledge sharing in post-M&A integration. Limited work has been carried out to provide understanding on how social capital and HRM practices influence intra-organizational knowledge sharing in M&A integration. This paper primarily focuses on the phenomenon of social capital and HRM practices – one of the primary means by which knowledge sharing can occur within firms. The main aim of this paper is to provide an alternative framework that introduces the literature on HRM and social capital to discuss how HRM practices and the various dimensions of social capital may enhance knowledge sharing in post-M&A integration. Drawing on the literature on social capital and HRM, we offer an alternative view on the issue of knowledge sharing in M&A integration by explaining how specific HRM practices that have an impact on employees’ knowledge, skills and abilities for participating in knowledge sharing activities may depend on relational, cognitive and structural social capital. We isolate a number of HRM practices and social capital variables that may enhance knowledge sharing in post-M&A integration, and develop a research model and propositions for future empirical investigation.     

Government intervention in European mergers and acquisitions

The increasing globalization of economies has leveraged protectionist attitudes in different countries during the last decades. In the context of cross-border mergers and acquisitions (M&A), national governments have intervened to “protect” big domestic firms and their industries from foreign bidders. Despite the potential for severe implications of these actions on the internationalization of firms and development of markets, the research in this area is relatively scarce, and we still know very little about the real causes and consequences of government intervention. In this paper, we study government opposition to cross-border European M&A during the period 1997–2017, an era of important changes in Europe. Using an event study methodology, we examine abnormal returns for targets and their rivals in the time period prior to actual intervention to gauge if investors perceive intervened deals as harmful events for the industry, which could justify government intervention. We use a hand collected sample of 1,574 EU15 rival firms for 48 mergers, of which 18 experience government intervention. Entropy balanced regression models show that rivals of intervened targets earn significantly lower returns relative to rivals of non-intervened targets on deal announcement. Nevertheless, rivals’ abnormal returns are not negative, suggesting that intervened deals are not perceived ex ante as harmful for industry competitiveness. The results are more consistent with investors’ ability to identify likely blocked deals, which puts downward pressure on abnormal returns to both the target companies and their rivals. These findings indicate that government interventions against foreign bidders seem to have an economic cost in the sector that is anticipated by the investors.     

Empirical research on M&A performance of private enterprises in China

With the development of the security market and the growing power of the private enterprises, the M&A(Mergers and Acquisition) of private enterprises is becoming increasingly popular. This article selects the M&A cases in Shanghai and Shenzhen Exchanges from 2000 to 2001 and examines the performance of private enterprises pre- and post-M&A based on the financial index method and the event study method. The research reveals that the M&A performance is mixed in China. Meanwhile, the empirical research indicates that the stock market overreacts to the M&A events.     

MNEs,technological efforts and channels of export spillover: An analysis of Indian manufacturing industries

The present study provides some empirical evidence for the export spillover effect examining the case of an emerging market economy, namely India, using firm level data for the period 1994–2006. We disentangle different spillover channels, namely the demonstration effect, the imitation effect (R&D spillover) and a proxy to measure spillover effects coming from higher MNEs’ skills. We also account for the heterogeneous technological behaviour of local firms considering how in-house R&D efforts and disembodied technological imports may affect the exporting performance. Our findings show how export spillover effects are mainly mediated by an imitation effect, contrary to the case of other emerging market economies like China, where a demonstration effect is evident. We also recognise that both the decision to export and export intensity are influenced most of all by the technological activities of local firms. Moreover, the findings of the analysis suggest that in-house R&D is more relevant than other external sources of technological knowledge such as disembodied technology imports to internalise the positive spillover effect emanating from MNEs.     

Emerging Multinationals from Mid‐Range Economies: The Influence of Institutions and Factor Markets

This paper revisits and extends our earlier work (in 2005) in the pages of this journal. We argue that there is a need for more fine‐grained understanding of the country context along two dimensions: (1) institutional development and (2) infrastructure and factor market development. Specifically, we propose an enriched typology of emerging economies with a focus on mid‐range emerging economies, which are positioned between traditional emerging economies and newly developed economies. Then we examine new multinationals from these mid‐range emerging economies that have internationalized both regionally and globally. We outline directions for further research based on this typology in terms of (1) government influence, (2) resource orchestration, (3) market entry, and (4) corporate governance regarding the internationalization strategy of these emerging multinationals from mid‐range economies.