Research summary: Cross-border acquisitions may raise legitimacy concerns by host-country stakeholders, affecting the acquisition outcomes of foreign firms. We propose that theorization by local regulatory agencies is a key mechanism that links legitimacy concerns with acquisition outcomes. Given that theorization is time consuming and its outcome is uncertain, we argue that state-owned foreign firms experience a lower likelihood of acquisition completion and a longer duration for completing a deal than other foreign firms. Moreover, we introduce a set of firm characteristics (target public status, target R&D alliances, and acquirer acquisition and alliance experiences) that may affect the threshold level of legitimacy, thereby altering the proposed relationships. Our framework and findings provide useful implications for institutional theory on its core concept of legitimacy. Managerial summary: Cross-border acquisitions by state-owned foreign firms may lead to national security concerns and thus debates and discussions among local regulatory agencies.We argue that such institutional processes may reduce the likelihood of acquisition completion and prolong the duration of acquisition completion. Using cross-border acquisitions in the United States, we find that acquisitions by state-owned foreign firms are not less likely to be completed than acquisitions by other foreign firms, but they take more time to be completed. Moreover, state-owned foreign firms are less likely to complete an acquisition when the target firm has more R&D alliances. However, their acquisition experience and alliance experience in the host country increase the likelihood of acquisition completion, whereas their alliance experience alone shortens the acquisition duration.

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This study aims to extend transaction cost economics (TCE) to explain the effects of the strategies of internal and external R&D on innovation performance under two types of environmental uncertainty, namely dynamism and complexity. As a departure from conventional TCE wisdom that internally focused R&D strategy is more efficient under environmental uncertainty, this study proposes that such a strategy can be less efficient under environmental dynamism, which is another important type of uncertainty. The results from a sample of manufacturing firms in China from 2002 to 2007 show that externally focused R&D strategy leads to better innovation performance under environmental dynamism, whereas internally focused R&D strategy results in better innovation performance under environmental complexity.

This study extends prior research on corporate political behaviour (CPB) and firms’ pursuit of political legitimacy in response to monolithic government pressures by developing and testing a framework for analysis of CPB in response to polylithic pressures. We suggest that traditional forms of CPB may be ill‐suited to polylithic governmental pressures, such as when firms need to navigate between conflicting home‐ and host‐country political worldviews and policies. We posit that in such complex political situations, firms will turn to a more subtle form of CPB (i.e., rhetorical commitment versus avoidance) as a hoped‐for solution to their international political legitimacy challenge. Our contingency perspective also highlights how geopolitical factors (i.e., whether governments of home and host countries are clearly aligned versus misaligned) will influence whether firms express their support for a home government’s foreign policy or avoid any such expression of support. We empirically test the predictive power of our framework by analysing how these political factors led Chinese firms to opt for rhetorical commitment versus rhetorical avoidance vis‐à‐vis the Chinese government’s Belt and Road Initiative (BRI). We conclude with a discussion of how our framework for analysis and our supportive findings can inform and extend research on CPB and political legitimacy.