The Roles of Chinese CEOs in Managing Individualistic Cultures in Cross‐border Mergers and Acquisitions

Abstract

The individualism‐collectivism culture represents an important and well‐researched distinction across cultures. Yet research is less clear about how the different levels of individualistic cultures in host countries affect the success of an increasingly important firm strategy – cross‐border mergers and acquisitions (CBMAs). This study addresses this key research question in the context of Chinese firms’ CBMAs, as Chinese firms are increasingly acquiring targets outside of China in the New Normal global business landscape. This study further theorizes and tests how the Chinese acquirer CEOs’ characteristics moderate the wealth creation relationship. In an analysis of 404 Chinese firms’ CBMAs, we found that an individualistic culture in the host country is negatively associated with Chinese acquirers’ CBMA wealth creation. We also demonstrate that Chinese CEOs’ exposure to foreign culture and female gender weaken that negative relationship, while CEO duality strengthens this negative relationship. Our research thus suggests that culture in host countries can negatively affect acquirers’ CBMA performance, but CEOs may be able to manage the effects of the culture to increase their CBMA performance.

Managing Technological, Sociopolitical, and Institutional Change in the New Normal

“…Moreover, the male CEOs should try to reduce their directive leadership in their CBMAs where the inputs and cooperation of the acquired firms are vitally needed for value creation (Miao et al, 2013;Wang et al, 2008). The findings can be of great relevance particularly to other developing economies that are seeking to learn from Chinese firms' experiences in the process of internationalization (Jones, 2012;Zhu et al, 2020).…”

“…The eighth paper, by Zhu, Zhu, and Ding (2020) explored how the different levels of individualistic cultures in host countries affect the success of cross-border mergers and acquisitions (CBMAs). Using 404 Chinese firms as the sample, they found a negative relationship between individualistic cultures (in the host country) and wealth creation (through Chinese acquirers' CBMA).…”

“…That is, we see iterative cycles, shifting from globalization to deglobalization and perhaps back again. In a way, however, the New Normal is actually characterized more by a co‐existence of globalization and deglobalization, as trade flattens out and cross border investment declines, but cross border cyber activity increases along with increases in born global firms and cross border merger activity, especially originating in emerging economies (Cavusgil and Knight, 2015; Lund and Tyson, 2018; Zhu et al, 2020).…”

“…The current New Normal environment is exceedingly complex with pressures for deglobalization, often in more prominent developed economies with established institutions that are changing, with simultaneous pressures for increased globalization, often in emerging economies, enabled by improvised digital and supply chain technologies and where inclusive institutions continue to develop and new competitors crop up and move aggressively out from their strongholds in (previously) remote emerging economies (Lund and Tyson, 2018; Zhu et al, 2020). Multinational enterprises must navigate across and within these different countries trying to effectively manage and hopefully balance these often‐conflicting forces and the rising power of emerging economies and their often more activist governments.…”

“…The growth in trade also slowed to a crawl (Lund and Tyson, 2018). Another somewhat unexpected change has been the deglobalization of some markets thereby pulling back from the increases in globalization and trade of the 1990s and early 2000s, while other markets still retain some degrees of globalization, more in the expanding emerging economies (Lund and Tyson, 2018; Peng et al, 2017; Rodrik, 2018; Zhu et al, 2020).…”