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Domestic Acquisitions, Institutional Heterogeneity and the Internationalization of Chinese Firms
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Author: Yulia Muratova, Aarhus BSS, Aarhus U.
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Liability of foreignness increases firm risk of doing business abroad. However, it appears not to deter Chinese firms as evidenced by their risky internationalization pattern. This study is concerned with explaining this phenomenon. Drawing on organizational learning and institutional theories, I argue that institutional heterogeneity in China offers firms an opportunity to develop routines to overcome the liability of foreignness through gaining acquisition experience outside of their home province. Further, I propose that coastal and inland firms develop different routines from coastal and inland acquisition experience. I test these arguments on a panel dataset of listed Chinese firms, tracing their acquisition behavior from 2006 to 2015. My analyses suggest that acquisition experience outside of the home province matters and that, in the case of inland firms, coastal acquisition experience is particularly beneficial for future internationalization. The present study contributes to the literature on the internationalization of Chinese firms. It highlights the value of context-specific measures for Chinese management research, sheds light on the functionality of institutional heterogeneity in China, and provides evidence to re-evaluate the degree of risk of Chinese firms’ cross-border growth.
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Paper is No Longer Available Online: Please contact the author(s).
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Revisiting the Monitoring Role of Sovereign Wealth Funds: Evidence from a Quasi-Experimental Setting
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Author: Nico Lehmann, U. of Goettingen
Author: Almasa Sarabi, U. of Erlangen-Nuremberg
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This paper revisits the monitoring role of sovereign wealth funds (SWFs). SWFs are state-owned investment organizations and constitute a specific type of institutional ownership. Exploiting a shock in SWF investment holdings for the U.S. stock market and using standard Difference-in-Differences methodology, we provide three main findings. First, we document that treatment firms improve in terms of firm performance over a three-year period following the inclusion to the SWF investment portfolio. Second, and in line with an active and strategic role of SWFs, we show that especially treatment firms with governance and monitoring deficiencies prior to the SWF investment benefit subsequently in terms of firm performance. Third, we document that, among other things, a superior stock picking quality and with that a rather passive investment strategy does not explain our long- term performance findings. Overall, our study extends prior research by providing plausibly causal evidence on the long-term monitoring consequences of SWFs.
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Paper is No Longer Available Online: Please contact the author(s).
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Electoral Outcomes and Managerial Perceptions of the Business Environment
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Author: Parasuram Balasubramanian, Washington U. in St. Louis, Olin Business School
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A stream of literature examines the link between electoral cycles and economic activity at the firm level, but we do not know much about managers’ policy expectations and beliefs after an electoral cycle. This study attempts to address this question by exploiting an electoral cycle within a cross-sectional survey. Using the Indian parliamentary election of 2014 as exogenous variation within the India Enterprise Survey (2014), we find that a decisive electoral outcome has an effect on managerial perceptions of the business environment, measured through measures of corruption and tax administration. While we find mixed evidence for the overall effect of the election on managerial perceptions, we find smaller firms appear to have higher expectations from a new government. Results also suggest that managers reflect the mood of their region’s voting choices.
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Paper is No Longer Available Online: Please contact the author(s).
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Competing for Emerging Markets: A Resource Dependence Model of Foreign Market Entry Mode
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Author: Maurice Jerel Murphy, U. of Southern California
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Resource dependency theory (RDT) is one of the preeminent theories in strategic management. It has been utilized to enhance the study of MNE strategy (i.e. mergers and acquisitions, joint ventures, etc.), boards of directors, corporate political activities, and stakeholder management; however, RDT has yet to be employed in theorizing about how multinationals assess the effect of the target host county’s dependence on the resources of the firm, the robustness of the political and business ties of the firm within the target market, and the strength of bilateral relations between the home and host government of the firm on the MNE’s foreign market entry mode choice. This notion, which I refer to as an MNE’s relative power vis-a-vis the target market, is of great import especially when attempting to enter emerging market economies with a network-based institutional environment (i.e. heavily predicated upon social relations and in- group affiliation). To this end, I draw upon the foreign market entry, political and business ties, and resource dependence literatures to propose a conceptual framework that examines how MNEs appraise their resource salience, political and business ties, and the bilateral relationship between their home and target host countries to determine the most optimal foreign entry mode strategy.
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Paper is No Longer Available Online: Please contact the author(s).
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