Institutional,cultural and industry related determinants of ownership choices in emerging market FDI acquisitions |
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Institution: | 1. Department of Management and International Business, College of Business Administration, Florida International University, 448 Mango Business Building, 11200 SW 8 Street, Miami, FL 33199, USA;2. Management and Quantitative Methods Department, College of Business, Illinois State University, Normal, IL 61790-5580, USA |
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Abstract: | In this study, we tackle a relatively un-researched question: What explains partial FDI acquisitions? The choice between full, majority, and minority ownership is explained on the basis of three locational factors – the differences, or “distances,” between the countries of the acquirer and target firm – operationalized in terms of (i) institutions, (ii) culture, and (iii) sectoral relatedness. The sample comprises 1389 acquisitions in India and China by acquirers from 33 nations over an 11-year period. We find that the likelihood of minority acquisition over majority or full becomes higher when acquisitions involve low institutional distance or high uncertainty avoidance distance. However, the likelihood of minority acquisition over full or majority becomes lower when acquisitions involve industry relatedness. The results add to our understanding of the advantages and disadvantages of partial versus full FDI acquisitions in emerging markets. This study adds to the nascent literature that uses country or location “distance” metrics to show how the multinational firm, being “multiple embedded” (Meyer et al., 2011), can take advantage of the dual location of home and host countries. |
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Keywords: | Cross-border acquisition Emerging markets Ownership choice Institutional distance Uncertainty avoidance |
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