Emerging market firm investments in advanced markets: A country of origin perspective

Reddy, Rama Krishna; Park, Sung- Jin; Mooty, Scott

doi:10.1016/j.mulfin.2022.100748

Cited by 1 publication

(6 citation statements)

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“…Capital market quality measures the availability and costs of capital in a given market (Reddy et al, 2022), and strongly informs the internationalization process of firms (Oxelheim et al, 2001). It underlies capital allocation efficiency, favoring investments with greater potential (La Porta et al, 1997;Wrugler, 2000), while offering shareholder protections and antidirectorial rights (La porta et al, 1997;Rossi and Volpin, 2004).…”

Section: Capital Market Quality and Equity Soughtmentioning

confidence: 99%

“…To estimate a proxy for capital market quality, we selected GCR items related to an EMF's internal corporate governance, external monitoring, and other institutional mechanisms governing an emerging market country's capital market. Following theory from law and finance (La Porta et al, 1997;Beck and Levine, 2005;Reddy et al, 2022) Control variables. To control for other influences that may affect the level of equity sought, we borrow several control variables at the firm and deal levels used in prior literature (e.g.…”

Section: Sample and Data Collectionmentioning

confidence: 99%

“…Capital market quality measures the availability and costs of capital in a given market (Reddy et al. , 2022), and strongly informs the internationalization process of firms (Oxelheim et al.…”

Section: Theory Development and Hypothesesmentioning

confidence: 99%

“…Transforming non-market capabilities Mathews (2002Mathews ( , 2006 elaborated on this motive through his link, learn, and leverage perspective, noting that EMFs generally have a strategic disadvantage due to their late entry into the global marketplace. As institutional quality improves and attracts foreign firms into the country, domestic firms' focus on non-market capabilities deprives them of competitive assets needed to effectively compete with traditional MNEs (Fabian et al, 2009;Reddy et al, 2022). Lecraw (1977) illustrated these non-market capabilities by showing how Thai firms had developed risk exposure capabilitiesbased on their "furnace-like" experience in their home countryallowing maneuvering of institutions in other hard-to-manage environments.…”

Section: Introductionmentioning

confidence: 99%

“…As institutional quality improves and attracts foreign firms into the country, domestic firms' focus on non-market capabilities deprives them of competitive assets needed to effectively compete with traditional MNEs (Fabian et al. , 2009; Reddy et al. , 2022).…”

Section: Introductionmentioning

confidence: 99%

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Whether, how and why home country environments influence emerging market firm acquisition behavior

Reddy

Fabian

Park

2022

IJOEM

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PurposeAccording to the 2019 World Investment Report, recent events in deglobalization have made many countries, especially developed markets, resist inward foreign direct investment (FDI) as ceding control to foreign countries. At the same time, many emerging market firms (EMFs) have been increasing their acquisitions in developed markets. The authors elaborate three unconventional motives that justify such acquisitions, and test whether conditions in home countries related to these motives predict the pursuit of greater or lesser equity control. Understanding how home country conditions may spur seeking greater equity control can help policymakers and business firm decision-makers improve these dynamics.Design/methodology/approachExamining data covering the period 2006–2018, the authors test hypotheses using a sample of 4,130 acquisitions by EMFs into developed markets, and test hypotheses to investigate “How does the institutional and resource environment of an EMF's home country relate to the respective EMF acquisition behavior of seeking equity control?”FindingsThe authors found that higher institutional quality, poorer factor market development, and higher capital market quality in the home country are related to higher equity positions sought.Practical implicationsAcquiring and target firm managers, along with other stakeholders, can gain insights on how to respond to acquisition opportunities by recognizing how home country conditions influence emerging market internationalizing behaviors into developed markets.Originality/valueThe compilation of this data uniquely covers 48 different emerging markets and further concentrates on the relatively less understood pre-deal phase for EMNEs entering developed markets.

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