Overcoming institutional challenges in cross-border acquisitions: how home- and host-country acquisition experiences shorten the deal completion phase

Abstract

Purpose Drawing on the institutional theory and organizational learning literature, the purpose of this study is to investigate the relationship between prior acquisition experience and the duration of the deal completion stage in cross-border acquisitions and the impacts of the quality of business institutions in the host country and the institutional distance between home and host countries on this relationship. Design/methodology/approach This study uses the sixth wave of mergers and acquisitions, the first truly global wave that covered a wide range of institutional settings, to test the hypotheses. Using a panel data regression method, it analyzes 8,175 cross-border acquisitions from 2003 to 2009, conducted by acquirers from 47 advanced and emerging economies in 56 advanced and emerging economies. Findings This study finds that host-country acquisition experience has more impact on shortening deal completion duration. Home-country acquisition experience is more effective in host countries with less developed business institutions than in those with more developed ones. The results of this study show that the quality of business institutions in the host country and the institutional distance between the home and host countries amplify or attenuate the effect of past acquisition experiences, depending on their origin and the quality of business institutions and institutional distance of where they are used. Originality/value The growing popularity of cross-border acquisitions among emerging country acquirers calls for a systemic study of the cross-border acquisition process. One of the critical and less understood stages in this process is the deal completion stage. This study examines how the institutional environments in the home and host countries impact the effectiveness of past acquisition experiences on shortening this stage.

Advantage of foreignness in a digital world: role of long tail users

“…Here, I argue that the diversity of foreign experience accumulated by an MNE affects its advantage of foreignness in a digital world. Firms learn to bridge the gap between their home and host countries by using prior international experience as a guide for future action (Guillen, 2003;Soleimani and Yang, 2022). For example, Zhou and Guill en (2015) argued that the diversity of prior international experience encourages firms to enter new countries.…”

“…The second variable, an MNE’s diversity of international experience, reflects its capacity to understand and serve long tail users. Previous international experience is widely acknowledged as a valuable resource upon which MNEs can rely when entering a new country (Guillen, 2003; Johanson and Vahlne, 1977; Soleimani and Yang, 2022). Therefore, I explore how the diversity of an MNE’s prior international experience influences its ability to cater to long tail users.…”

The impact of institutional quality on country-level variations in foreign equity shares in transition economies

“…This moves forward in understanding the asymmetry of institutions and their influence on equity shares of foreign firms. While there has been some research on the interplay between formal and informal institutions for cross-border investments (Soleimani and Yang, 2022) and growth (Efendic et al , 2011; Efendic and Pugh, 2015), this has not extended to the study of equity shares of foreign firms in local joint ventures. We posit that the positive influence of informal institutions is that investors use informal practices to overcome complex formal institutional frameworks.…”