Seasoned Sailors: Can MNEs Learn with Troubled Institutional Environments?
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Abstract
In the present study, we examine the manner in which firms’ experiential learning in challenging institutional environments shapes their entry strategies in subsequent international acquisitions targeting comparable contexts. Specifically, our research delineates the nexus between the institutional expertise firms garner from operations in countries characterized by deficient institutional frameworks and the level of ownership they subsequently elect in acquisitions within similarly constituted environments. Utilizing a dataset comprised of 3,577 cross-border acquisitions aimed at emerging markets, spanning the period from 2010 to 2019, we find that institutional experience serves as a moderating variable. This moderation influences the impact of corruption, economic freedom, and political stability on the proportion of ownership stakes acquired during the transaction. While firms are generally inclined to augment their ownership levels in acquisitions where the institutional environment is more favorable, our findings paradoxically reveal that institutional experience amplifies, rather than mitigates, the relationship between extant institutional conditions and the chosen level of ownership, contrary to our initial hypotheses.
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Darolt, G. S., Falaster, C., Reinert, V., Quadros, C. B. de, & Zucco, F. D. (2023). Seasoned Sailors: Can MNEs Learn with Troubled Institutional Environments?. Brazilian Administration Review, 20(4), e230115. https://doi.org/10.1590/1807-7692bar2023230115
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Cheng, Y. (2008). Asset specificity, experience, capability, host government intervention, and ownership-based entry mode strategy for SMEs in international markets. International Journal of Commerce and Management, 18(3), 207-233. https://doi.org/10.1108/10569210810907146
Cho, K. R., & Padmanabhan, P. (2005). Revisiting the role of cultural distance in MNC's foreign ownership mode choice: the moderating effect of experience attributes. International Business Review, 14(3), 307-324. https://doi.org/10.1016/j.ibusrev.2005.01.001
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Dalla Vecchia, L. A., Wernke, R., & Zanin, A. (2019). Relação entre competitividade global e fatores do ambiente institucional de 134 países. Revista Capital Científico, 17(4), 81-98. https://revistas.unicentro.br/index.php/capitalcientifico/article/view/5553/0
Dang, M., Henry, D., Nguyen, M. T., & Hoang, V. A. (2018). Cross-country determinants of ownership choices in cross-border acquisitions: Evidence from emerging markets. Journal of Multinational Financial Management, 44, 14-35. https://doi.org/10.1016/j.mulfin.2018.01.001
Darby, J., Desbordes, R., & Wooton, I. (2010). Does public governance always matter? How experience of poor institutional quality influences FDI to the South [Working Paper no. 3290]. CESifo Working Paper Series. https://ssrn.com/abstract=1738168
De Prijcker, S., Manigart, S., Wright, M., & Maeseneire, W. (2012). The influence of experiential, inherited and external knowledge on the internationalization of venture capital firms. International Business Review, 21(5), 929-940. https://doi.org/10.1016/j.ibusrev.2011.11.001
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Duanmu, J. L. (2014). A race to lower standards? Labor standards and location choice of outward FDI from the BRIC countries. International Business Review, 23(3), 620-634. https://doi.org/10.1016/j.ibusrev.2013.10.004
Falaster, C., Ferreira, M. P., & Li, D. (2021). The influence of generalized and arbitrary institutional inefficiencies on the ownership decision in cross-border acquisitions. Journal of International Business Studies, 52, 1724-1749. https://doi.org/10.1057/s41267-021-00434-1
Feito-Ruiz, I., & Menéndez-Requejo, S. (2010). Family firm mergers and acquisitions in different legal environments. Family Business Review, 23(1), 60-75. https://doi.org/10.1177/0894486509353419
Figueira-de-Lemos, F., Johanson, J., & Vahlne, J.-E. (2011). Risk management in the internationalization process of the firm: A note on the Uppsala model. Journal of World Business, 46(2), 143-153. https://doi.org/10.1016/j.jwb.2010.05.008
Fisman, R., & Svensson, J. (2007). Are corruption and taxation really harmful to growth? Firm level evidence. Journal of Development Economics, 83(1), 63-75. https://doi.org/10.1016/j.jdeveco.2005.09.009
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