Economic nationalism and foreign acquisition completion: The case of China

Abstract

The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Abstract: Extending institutional theory, we incorporate a neglected but important component of formal institution, economic nationalism, into a model that specifies its effects on cross-border acquisition success. We suggest that economic nationalism has a dynamic nature and sees the interaction between protectionism and liberalism. As such, it exerts both positive and negative effects on foreign investments, contingent on how these investments are perceived as aligned with the national interests as reflected by national security considerations, foreign relations, and growth strategy. Using a data set containing 7,275 announced cross-border acquisition deals in China during 1985-2010, the study finds that (1) when an acquisition activity targets essential industries or state-owned enterprises, it is less likely to be completed because of provoked national economic security concerns; and (2) when an acquirer brings technology and/or capital, or/and helps to restructure poorly-performing firms, or/and the acquirer comes from a country with good foreign relations with China, the acquisition is considered as safe and helpful for the country's development, and it is more likely to be completed.

Determinants of Cross-Border Mergers and Acquisitions: A Comprehensive Review and Future Direction

“…Based on the Thomson Financial M&A database for the period 1982, Zhang, Zhou, and Ebbers (2011 reported that 210,183 deals found to be unsuccessful (460,710 deals completed) out of 670,893 acquisition events. In a recent study, Zhang and He (2014) described that two forces such as nationalistic sentiments grow as a reaction to the instabilities and economic nationalism greatly affects foreign firms' market entry and operations.…”

“…More positively, strategy research in emerging economies not only has become an integral part of strategy research in general, but also has led the charge in advancing theories by drawing attention to the context-specific nature of strategic management (Xu & Meyer, 2013). In recent studies, scholars have focused on impact of nationalism and institutional factors on foreign acquisitions success (e.g., Serdar Dinc & Erel, 2013;Zhang et al, 2011;Zhang & He, 2014). Eventually, we capture that cross-border M&As research is relatively young, limited than domestic M&As and other foreign market entry strategies.…”

Institutional Laws, and Mergers and Acquisitions in India: A Review/Recommendation

“…In Barbopoulos et al (2012), Erel et al (2012), and Zhang and He (2014), the authors suggested that "knowledge of the legal system and regulatory provisions, and tax subsidies for international investments or new business ventures is seriously essential for the managers of acquiring enterprises". Importantly, managers should aware local political setting, local government control, bureaucratic administration procedure, home and host country relations, trade agreements, and overall global business environment, together build special attention in achieving institutional dichotomous problems (Zhang and He, 2014).…”

“…Importantly, managers should aware local political setting, local government control, bureaucratic administration procedure, home and host country relations, trade agreements, and overall global business environment, together build special attention in achieving institutional dichotomous problems (Zhang and He, 2014). Thus, managers must read and understand the legal terminology and relevant laws associated with specific industries prior to establishing their alliances or making acquisitions in countries like India.…”

Why Do Cross-Border Merger/Acquisition Deals Become Delayed, or Unsuccessful? A Cross-Case Analysis in the Dynamic Industries

“…In a recent study, Serdar Dinc and Erel (2013) argued that "nationalism in mergers is more likely to be motivated by sociological and political reasons than economic ones". Therefore, host country regulations, policies, foreign relations between home and country countries and progress of the host country's economy are extremely essential for acquiring firm managers in successfully conducting overseas deals in emerging markets like India and China (e.g., Zhang & He, 2014). In addition, host country corruption is directly proportionate that adversely affects cross-border inward capital flows when coming from developed to developing economies (e.g., Barbopoulos, Marshall, MacInnes, & McColgan, 2014).…”