From outsiders to insiders: cultural friction in cross-border M&As by Chinese companies

Abstract

Purpose Based on the business network view and cultural friction theory, this study aims to construct a theoretical model of the cultural friction effect and its mechanism of action during the transformation of Chinese enterprises from outsiders to insiders with equal and legitimate competitive status. Design/methodology/approach Data including cross-border M&As of Chinese enterprises in 17 major countries or regions and domestic M&As in China and host countries from 1982 to 2016 were used to test the hypotheses. Findings This study finds that the presence of cultural friction in cross-border M&As diminishes the probability that Chinese firms will adopt a more rapid pace of entry into the core position of the host country's business network. Originality/value First, this study has theoretical implications for studying Chinese firms' cross-border M&As from the perspective of the host country. Second, the theoretical construction of this paper reveals the double meaning from outsidership to insidership. Third, this study responds to the academic initiative that a more comprehensive and appropriate study should include factors such as the structural characteristics of the home or host market and stakeholders.

Experiential learning, institutional quality and Chinese state-owned firms’ cross-border acquisitions

“…From the perspective of whether M&As can be completed, state-owned firms have a lower probability of success. First, their state-owned status often forces state-owned firms to be viewed as firms with political intentions, which exacerbates host countries' concerns about their background and political goals (Li and Wu, 2016). This also leads regulators to more rigorously theorize the overseas M&As of state-owned firms due to worries about national energy and economic security, which reduces the possibility of the successful completion of M&As by state-owned firms.…”

“…However, if a bilateral relationship exists, the host country government is more willing to actively maintain a good relationship with the home country for the sake of maintaining economic and political relationships with that country (Chen and Guo, 2018;Duanmu, 2014), which reduces the risk of M&A failure. Second, the overseas M&As of state-owned firms are mainly concentrated in industries involving sensitive assets (Li and Wu, 2016); thus, close and intimate diplomatic relations are required to resolve concerns about the legitimacy of the overseas M&As of such firms and to help them overcome the obstacles of the approval system and improve the possibility of successful M&As. Therefore, we propose the following hypothesis:…”