Economic Freedom and Cross-Border Acquisitions from Emerging Markets into Developed Economies

Abstract

Extending the home base perspective by considering investors' parent countries, this study examines the effect of economic freedom ( EF ) on emerging-market enterprises' ( EMEs ) overseas acquisition completion in developed countries. Using a large data set of 5,174 cross-border acquisition deals from ten major emerging markets ( EMs ) during 1985-2011, we fi nd that (1) the probability of deal completion is positively associated with the levels of EF of the acquirers' countries, the acquirers' parent and the target; (2) the EF of the countries of acquirers' parents has a substitutive effect on that of the acquirers' countries; (3) the difference of EF between the targets' countries and the countries of acquirers' parents negatively infl uences deal completion; and (4) the difference of EF between the targets' countries and the acquirers' countries negatively infl uences deal completion. These fi ndings FEATURE ARTICLE

Antecedents of corporate image: The case of Chinese multinational enterprises in the Netherlands

“…EMNEs are stereotyped as having poor governance and accountability, lacking managerial and global experience and possessing weak technological and innovative capacities (He & Zhang 2018;Luo & Tung 2007); an example is Huawei, a world-leading high-tech business which face doubts and resistance across the US and Europe (BBC, 2019 March 7). This effect can significantly influence EMNEs' performance and their motivation to make new or further investments or even cause them to withdraw from a market (He & Zhang 2018;Zhang, He, & Gorp, 2017).…”

Dismantling institutional complexity behind international competitiveness of emerging market firms

“…Gaur et al () explain the role of institutional factors in the shift from export activities to foreign direct investment operations. Zhang, He, and van Gorp () examine the effect of economic freedom on the completion of overseas acquisitions in advanced economies by EM firms. Research also accounts for context specific factors such as the role of guanxi in international expansion of Chinese firms (Chen, ) and the use of svyazy by Russian firms (Shirokova & McDougall‐Covin, ).…”

Organizational characteristics of cross-border mergers and acquisitions

“…In recent years, we notice a growing research interest on the completion likelihood and the time required to reach a final agreement of publicly announced deals in and out of emerging economies (e.g. Muehlfeld et al, 2012;Serdar Dinc and Erel, 2013;Zhang and He, 2014;Tingley et al, 2015;Zhang et al, 2011Zhang et al, , 2017Li et al, 2017;Popli et al, 2016;Reddy et al, 2016b;Ferreira et al, 2017;Lim and Lee, 2017;Reddy and Xie, 2017). The extant literature, however, suggest contradicting views on the likelihood of completing cross-border acquisition negotiations (Dikova et al, 2010).…”

“…However, state-owned firms having acquisition experience and alliance experience in the USA are more likely to complete a publicly announced deal and require less time to reach a final approval stage (Li et al, 2017; see also C. for acquisitions in and out of BRIC countries). Studies also argue that the completion likelihood of acquisitions by stateowned firms and private firms is contingent on differences in economic, institutional and cultural factors between the acquirer country and the target country, institutional ownership, public status of the target, industry relatedness and government control in concentrated industries such as oil and gas (Tingley et al, 2015;Popli et al, 2016;Ferreira et al, 2017;Lim and Lee, 2017;Zhang et al, 2017; see also Zhang and He, 2014 for deals in China; Reddy et al, 2016b for deals in India).…”

“…At the same time, regulatory framework of foreign M&A, government ownership in concentrated industries, ruling political party ministers, doing business environment, economic performance and cultural differences in the target country have mixed effects on the success of publicly announced cross-border M&A deals (Zhang et al, 2011(Zhang et al, , 2017Erel et al, 2012;Tingley et al, 2015;Xie et al, 2017). In recent years, several developed and developing economies have tightened the competition rules, governance mechanisms and merger process guidelines.…”