Emerging economies and institutional quality: Assessing the differential effects of institutional distances on ownership strategy |
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| Affiliation: | 1. Bissett School of Business, Mount Royal University, Canada;2. HEC Montreal, Canada;3. JMSB, Concordia University, Canada;1. Hohenheim University, Chair of Corporate Finance, Wollgrasweg 49, 70599 Stuttgart, Germany;2. ZEW Mannheim, Department of International Finance and Financial Management, Germany;3. Leuphana University, Nord/LB Chair of Integrated Financial Risk Management, Scharnhorststr. 1, 21335 Lüneburg, Germany;4. University of Groningen, Faculty of Economics and Business, The Netherlands |
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| Abstract: | The current study contributes to the institution-based view of internationalization that is contingent upon the home country development. We examine the differential effects of formal and informal institutions on emerging market multinational corporations’ (EMNCs) ownership strategies. Facing a large informal institutional distance that represents diverse cultural beliefs, EMNCs opt for a low ownership position that alleviates legitimacy threat, whereas a large formal institutional distance leads EMNCs to establish dominant ownership control. EMNC home market conditions, including market size and regulatory institutional quality, further explain the differential effects of institutional distances. |
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| Keywords: | Emerging market multinational corporations (EMNCs) Cross-border mergers and acquisitions (M&As) Institutional distance Ownership strategy |
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