Review of International Business and Strategy

This study aims to examine the impact of home–host country distance on the cross-border mergers and acquisitions performance. The results of this study are based on a final sample of 483 completed cross-border deals involving BRICS nation acquirers and targets spread across a set of 27 nations. While controlling for prior experience, among other factors, the impact of nine institutional distance dimensions on deal performance is examined. Cumulative abnormal returns calculated over the select event windows are used as a measure of deal performance. The results of this study validate the explanatory power of cross-country distance and exhibit that financial and cultural distance exert a negative influence on deal performance, whereas political and global connectedness distance positively impacts performance. Interestingly, geographic distance is not found to be related to performance outcomes. The results of this study caution against possible aggregation of the cross-country distance measure and point towards the need to acknowledge and analyse the multi-dimensional nature of distance. The results of this study are expected to aid managers in devising internationalisation strategies and target selection, maximising their performance and shareholder wealth. This study contributes to the knowledge of internationalisation and cross-country distance. It presents as one of the first to investigate the impact of institutional distance on deal performance using a substantially large multi-country emerging market data set.

This paper aims to give an overview of the literature on Central and Eastern European (CEE) firms’ successful internationalization: different authors’ understanding of success, and, thereafter, these firms’ internationalization processes, external factors, internal motivators and actions that affect successful internationalizers’ initial and subsequent foreign activities, and, finally, internationalization outcomes. This is a systematic-narrative hybrid literature review paper that focuses on CEE firms’ successful internationalization. This paper concludes that CEE firms’ “success” is understood and measured differently, successful internationalizers can experience various internationalization paths, they are affected by a large number of external impact factors, internal motivators or actions and their internationalization outcomes vary considerably. Thus, there is no “ideal” type of successful internationalization: as different CEE firms can be called “successful”, they also follow different trajectories to achieve success. To the best of the author’s knowledge, this is the first literature review paper that gives an overview on how success has been defined in studies about CEE firms’ internationalization, if some types of internationalizers have been considered more successful and if there are any important CEE-specific contextual factors or not.

This paper aims to derive and estimate a theory-based empirical specification that models a firm’s choices of its international diversification (ID) and product diversification (PD) and how they evolve over time in response to shocks that alter the relative cost and relative profitability of ID and PD. We use longitudinal data on U.S. manufacturing firms from 1984 to 1999, a period of intense shocks associated with rapid globalization, to estimate a dynamic panel data Tobit model that permits lags in a firm’s adjustment to its optimal mix of ID and PD over time. We find strong support for the theoretical framework underlying our empirical specifications and posited dynamics, with full adjustment estimated to require, on average, 1.5 years, a finding with implications for the time spacing of observations in empirical studies of ID and PD to avoid biased inferences. Among the globalization shocks during the time period studied, our results indicate that global competitive pressures and efficiency gains from global supply integration to be the more important factors driving U.S. firms toward greater ID relative to PD. Augmentation of firms’ organizational (managerial) and physical capital resources is also found to be important for supporting an expansion of ID relative to PD. Technological resource augmentation is instead found to favor expansion of PD relative to ID. Our empirical specification is novel. It readily incorporates an often ignored but necessary theoretical condition that defines a firm’s optimal choices of its ID and PD, and it allows observed choices at a point in time to deviate from their optimal values.

This paper aims to examine the influence of formal and informal institutional quality on country-level variations in foreign equity shares in transition economies (TEs). Drawing on institutional theory and transaction cost theory, this paper examines the influence of formal and informal institutional quality on country-level variations in foreign equity shares in TEs. The authors use a two-step empirical strategy, identifying clusters of explanatory variables and running generalized least squares random effect estimations to test for the influence of explanatory and control variables on foreign equity shares. Foreign equity share is positively affected by informal institutions and negatively by formal institutions. However, when control for stage of transition we find that the the presence of informal institutions in more rapidly or advanced transforming economies negatively influences foreign equity shares. Complex infrastructure discourages foreign equity shareholdings, and foreign companies use informal practices to overcome unfavourable host country conditions. Government size has a negative effect, and gross domestic product per capita positively affects foreign equity shares. The study is the new groundwork for the re-enactment of a fruitful discussion on foreign equity. The study has practical implications for managers, too – managers of foreign-owned firms operating in weakly installed institutional environments should carefully analyse the entry strategies because of the high presence of informal institutions. Furthermore, managers could understand the various facilitation roles of informal institutions in any firm internationalisation effort to arrive at optimal ownership holdings for better internationalisation performance. Although the study is based on a sample of transition countries, the findings have implications for other emerging economies’ contexts sharing similar institutional settings. This study provides a unique empirical investigation and evidence based on country-level indicators on the effect of formal and informal institutions on foreign equity shares holdings in TEs, reinforcing the importance of impacts of both the formal and informal dimensions on ownership decisions of foreign investors.

This study takes a dyadic approach to explaining merger and acquisition (M&A) deal outcomes. Acknowledging the socio-cognitive (e.g. intangible and macro-environmental) idiosyncrasies, the authors theorize that some acquirer–target dyads have a superior ability to complete complex relational transactions in an M&A deal. Specifically, deals are successful when an acquirer and a target: are similar considering their sectoral characteristics, have contextually-informed deal-making competencies, and are familiar with one another given their sectoral and institutional features. This study uses logistic regression analysis to examine how sectoral and institutional characteristics in the acquiring and target company dyads relate to the likelihood of merger and acquisition deal completion. Analyzing a sample of 37,560 M&A deals, the authors find empirical evidence in support of the dyadic to deal completion. The authors find that sectoral similarity and institutional familiarity in an M&A dyad can predict the likelihood of deal completion. Specifically, service multinational acquirers are more competent than their manufacturing counterparts in general, and in same-sector and same-country deals in particular. In contrast, service sector acquirers also are at a relative disadvantage vis-à-vis their manufacturing counterparts in cross-national deals. Considering the theoretical and managerial implications, the authors identify new avenues for future research on service and manufacturing M&A dyads that can deepen the knowledge of inter-firm transaction processes. First, the authors draw on the socio-cognitive, behavioral, and relational models to explain M&A deal process in both domestic and cross-border settings. Drawing on service vis-à-vis manufacturing sector business models, the authors predict deal completion. Second, the authors propose that familiarity between the acquiring and target companies in the form of sectoral and cross-national factors becomes pivotal to the inter-firm processes. Finally, the authors empirically demonstrate how inter-firm dynamics in a dyad can pose complex deal-making challenges, which make some acquirers especially susceptible to contextual shocks.