scholarly journals Hybrid ownership structures and cross-border acquisition completion of emerging market firms: An institutional and signalling theory perspective

2021 ◽  
Author(s):  
◽  
Tega Ogbuigwe
Keyword(s):  
Foreign Investment ◽  
Emerging Market ◽  
Government Support ◽  
Hybrid Organizations ◽  
Political Connection ◽  
Ownership Structures ◽  
Top Executives ◽  
Developed Economies ◽  
Regulatory Quality ◽  
Direct Government

<p><b>Over the last decade, cross-border acquisitions (CBAs) have emerged as one of the most significant engines through which emerging market firms (EMFs) carry out foreign investments. Yet, emerging market acquirers (EMAs) terminate a significant percentage of initiated CBAs before completion. Compared to the 18 percent termination rate of CBAs involving acquirers from developed economies (DEs), CBAs by EMAs have a 33 percent termination rate. Scholars attribute the higher CBA termination by EMAs to the dual hurdle of 'liability of origin' and 'liability of foreignness' arising from direct government involvement and institutional voids in emerging economies. Although extant research provides in-depth insights into why EMAs have higher CBA termination rates than developed economies acquirers, they fall short in exploring how EMAs can navigate these challenges. Hence, in this study, I aim to investigate ownership based solutions to the institutional challenges affecting the CBA completion of EMAs.</b></p> <p>A striking phenomenon in the foreign investment of EMFs is that a firm's ownership matters. Pioneering ownership-based studies reveal that state-owned enterprises (SOEs) and private-owned enterprises (POEs) experience distinct interactions with home and host countries leading to diverse foreign investment challenges and strategies. Government regulatory discretion combined with capital market imperfection in emerging markets means that SOEs are privileged in accessing government support. In contrast, POEs lack direct government support and seek to establish and leverage political ties to survive. This need for sustained firm government relationships and the gradual pro-market reforms in many emerging economies catalyse hybrid ownership structures among EMFs where state and private owners coexist in one organization. However, this emergence of hybrid ownership structures and their implications for EMFs' foreign investment activities are under-investigated in the international business domain.</p> <p>Building on the new institutional theory and the signalling theory, I argue that hybrid ownership structures can act as signals through which external stakeholders evaluate and confer legitimacy on EMAs during the CBA process. My conceptualization emphasizes the mixture of unique resources brought into hybrid organizations by both SOEs and POEs. Accordingly, I assert that as hybrid organizations incorporate elements prescribed by both SOEs and POEs, they are likely to project at least partial appropriateness to a broader set of institutional referents. As a result, hybrid ownership structures confer legitimacy-enhancing benefits, resource-enhancing benefits, and operational autonomy benefits that position EMAs to simultaneously navigate the home and host institutional challenges in CBAs ultimately increasing the completion likelihood. In addition to proposing a direct effect of hybrid ownership on CBA completion, I develop novel varieties of hybrid ownership structures that categorize variations in the internal configurations of hybrid organizations as typology, degree, and nature of hybridization. I carry out further investigation on how the hybrid ownership effect might vary with these varieties of hybrid ownership structures. Subsequently, I identify top executives' political connection, target industry political sensitivity, and host country regulatory quality as contingences to the effect of hybrid ownership on CBA completion of EMAs.</p> <p>Analysing a dataset of 838 CBAs by Chinese firms between the years 2008 to 2017, the results from this study demonstrate that acquirers with hybrid ownership structures are more likely to complete CBAs than nonhybrid acquirers. Moreover, while the hybridization effect varied with the degree of hybridization, the results did not provide conclusive evidence for the nature of hybridization. The result also reveals that top executives' political connection and the host country regulatory quality present differing interactions with the hybrid ownership effect relative to the hybrid organization's typology. With these findings, I contribute to the literature on EMFs' CBA completion by demonstrating that hybrid ownership structures benefit from their different owners' resources to overcome challenges in CBAs. I also contribute to the conceptualization and implication of hybrid ownership for EMFs strategic outcomes. I find that the benefits of hybrid ownership differed with the controlling shareholder's identity and the degree of hybridization in a hybrid organization. Furthermore, by examining the boundary conditions of top executives' political connection, target industry political sensitivity, and host regulatory quality, I provide insights into how intra-organizational attributes and external factors shape the significance of ownershipstructures in EMFs foreign investment.</p>

scholarly journals Hybrid ownership structures and cross-border acquisition completion of emerging market firms: An institutional and signalling theory perspective

2021 ◽  
Author(s):  
◽  
Tega Ogbuigwe
Keyword(s):  
Foreign Investment ◽  
Emerging Market ◽  
Government Support ◽  
Hybrid Organizations ◽  
Political Connection ◽  
Ownership Structures ◽  
Top Executives ◽  
Developed Economies ◽  
Regulatory Quality ◽  
Direct Government

<p><b>Over the last decade, cross-border acquisitions (CBAs) have emerged as one of the most significant engines through which emerging market firms (EMFs) carry out foreign investments. Yet, emerging market acquirers (EMAs) terminate a significant percentage of initiated CBAs before completion. Compared to the 18 percent termination rate of CBAs involving acquirers from developed economies (DEs), CBAs by EMAs have a 33 percent termination rate. Scholars attribute the higher CBA termination by EMAs to the dual hurdle of 'liability of origin' and 'liability of foreignness' arising from direct government involvement and institutional voids in emerging economies. Although extant research provides in-depth insights into why EMAs have higher CBA termination rates than developed economies acquirers, they fall short in exploring how EMAs can navigate these challenges. Hence, in this study, I aim to investigate ownership based solutions to the institutional challenges affecting the CBA completion of EMAs.</b></p> <p>A striking phenomenon in the foreign investment of EMFs is that a firm's ownership matters. Pioneering ownership-based studies reveal that state-owned enterprises (SOEs) and private-owned enterprises (POEs) experience distinct interactions with home and host countries leading to diverse foreign investment challenges and strategies. Government regulatory discretion combined with capital market imperfection in emerging markets means that SOEs are privileged in accessing government support. In contrast, POEs lack direct government support and seek to establish and leverage political ties to survive. This need for sustained firm government relationships and the gradual pro-market reforms in many emerging economies catalyse hybrid ownership structures among EMFs where state and private owners coexist in one organization. However, this emergence of hybrid ownership structures and their implications for EMFs' foreign investment activities are under-investigated in the international business domain.</p> <p>Building on the new institutional theory and the signalling theory, I argue that hybrid ownership structures can act as signals through which external stakeholders evaluate and confer legitimacy on EMAs during the CBA process. My conceptualization emphasizes the mixture of unique resources brought into hybrid organizations by both SOEs and POEs. Accordingly, I assert that as hybrid organizations incorporate elements prescribed by both SOEs and POEs, they are likely to project at least partial appropriateness to a broader set of institutional referents. As a result, hybrid ownership structures confer legitimacy-enhancing benefits, resource-enhancing benefits, and operational autonomy benefits that position EMAs to simultaneously navigate the home and host institutional challenges in CBAs ultimately increasing the completion likelihood. In addition to proposing a direct effect of hybrid ownership on CBA completion, I develop novel varieties of hybrid ownership structures that categorize variations in the internal configurations of hybrid organizations as typology, degree, and nature of hybridization. I carry out further investigation on how the hybrid ownership effect might vary with these varieties of hybrid ownership structures. Subsequently, I identify top executives' political connection, target industry political sensitivity, and host country regulatory quality as contingences to the effect of hybrid ownership on CBA completion of EMAs.</p> <p>Analysing a dataset of 838 CBAs by Chinese firms between the years 2008 to 2017, the results from this study demonstrate that acquirers with hybrid ownership structures are more likely to complete CBAs than nonhybrid acquirers. Moreover, while the hybridization effect varied with the degree of hybridization, the results did not provide conclusive evidence for the nature of hybridization. The result also reveals that top executives' political connection and the host country regulatory quality present differing interactions with the hybrid ownership effect relative to the hybrid organization's typology. With these findings, I contribute to the literature on EMFs' CBA completion by demonstrating that hybrid ownership structures benefit from their different owners' resources to overcome challenges in CBAs. I also contribute to the conceptualization and implication of hybrid ownership for EMFs strategic outcomes. I find that the benefits of hybrid ownership differed with the controlling shareholder's identity and the degree of hybridization in a hybrid organization. Furthermore, by examining the boundary conditions of top executives' political connection, target industry political sensitivity, and host regulatory quality, I provide insights into how intra-organizational attributes and external factors shape the significance of ownershipstructures in EMFs foreign investment.</p>

scholarly journals Ownership hybridization and FDI propensity: How firms from state-directed emerging economies can overcome institutional challenges in foreign direct investment.

2020 ◽  
Author(s):  
Tega Ogbuigwe ◽  
Hongzhi Gao ◽  
Eldrede Kahiya
Keyword(s):  
Emerging Economies ◽  
Liability Of Foreignness ◽  
Private Ownership ◽  
Political Connection ◽  
Host Countries ◽  
Foreign Investments ◽  
Ownership Structures ◽  
Top Executives ◽  
Government Involvement ◽  
Institutional Challenges

The emergence of hybrid ownership structures and their OFDI activities is a critical but under-investigated phenomenon. We proffer that ‘state-directed emerging economies’ (SDEEs) - a unique typology of emerging economies – are largely driving the emergence of hybrid ownership structures. The direct and continuous government involvement in SDEE markets and the perception this economic system creates across a variety of host countries, present the dual hurdle of liability of “origin” and liability of foreignness in the OFDI of SDEEs firms. Our study proposes ownership hybridization (i.e. mixing state and private ownership) in the home market, as a mechanism through which SDEE firms counteract these unique institutional challenges in foreign investments. We argue that through hybridization, SDEEs firms benefit from the unique resources brought into the mixture by the different ownership logics and synergistically strengthen their ability to overcome institutional challenges in foreign investments. Nevertheless, benefits of hybridization are likely to vary in magnitude in relation to the degree of hybridization, suggesting an optimal blend of state and private ownership in a hybrid firm. In addition, we propose that hybridization effects are also contingent on top executives and their political connection, that engender resource and legitimacy implications. Our approach differs from existing studies that view home and host country institutional challenges in isolation. Rather, we recognize the inter-related effect of these institutional challenges and propose ownership hybridization as a strategy that simultaneously counteracts both.

scholarly journals Ownership hybridization and FDI propensity: How firms from state-directed emerging economies can overcome institutional challenges in foreign direct investment.

2020 ◽  
Author(s):  
Tega Ogbuigwe ◽  
Hongzhi Gao ◽  
Eldrede Kahiya
Keyword(s):  
Emerging Economies ◽  
Liability Of Foreignness ◽  
Private Ownership ◽  
Political Connection ◽  
Host Countries ◽  
Foreign Investments ◽  
Ownership Structures ◽  
Top Executives ◽  
Government Involvement ◽  
Institutional Challenges

The emergence of hybrid ownership structures and their OFDI activities is a critical but under-investigated phenomenon. We proffer that ‘state-directed emerging economies’ (SDEEs) - a unique typology of emerging economies – are largely driving the emergence of hybrid ownership structures. The direct and continuous government involvement in SDEE markets and the perception this economic system creates across a variety of host countries, present the dual hurdle of liability of “origin” and liability of foreignness in the OFDI of SDEEs firms. Our study proposes ownership hybridization (i.e. mixing state and private ownership) in the home market, as a mechanism through which SDEE firms counteract these unique institutional challenges in foreign investments. We argue that through hybridization, SDEEs firms benefit from the unique resources brought into the mixture by the different ownership logics and synergistically strengthen their ability to overcome institutional challenges in foreign investments. Nevertheless, benefits of hybridization are likely to vary in magnitude in relation to the degree of hybridization, suggesting an optimal blend of state and private ownership in a hybrid firm. In addition, we propose that hybridization effects are also contingent on top executives and their political connection, that engender resource and legitimacy implications. Our approach differs from existing studies that view home and host country institutional challenges in isolation. Rather, we recognize the inter-related effect of these institutional challenges and propose ownership hybridization as a strategy that simultaneously counteracts both.

Accounting conservatism, corporate governance and political connections

2017 ◽  
Vol 25 (2) ◽  
pp. 288-318 ◽  
Author(s):  
Nor Farizal Mohammed ◽  
Kamran Ahmed ◽  
Xu-Dong Ji
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Political Influence ◽  
Ordinary Least Squares ◽  
Accounting Conservatism ◽  
Political Connections ◽  
Board Independence ◽  
Political Connection ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between accounting conservatism, corporate governance and political connection in listed firms in Malaysia where political influence plays a significant role in the capital market and in many business dealings. Design/methodology/approach By utilizing 824 firm-year observations comprising large listed companies over a period of four years from 2004, this study uses ordinary least squares regression models to investigate the relationship between accounting conservatism, corporate governance and political connections in Malaysia. Multiple measures of conservatism developed by Basu (1997) and Khan and Watts (2009) are employed. Findings The results show evidence of accounting conservatism (bad news being recognized earlier than good news) in Malaysia. Further, the results reveal that better corporate governance structure in terms of board independence is positively associated with accounting conservatism while management ownership is negatively associated with it. However, political connection has a negative moderating effect on the positive relationship between accounting conservatism and board independence. The results also suggest political connections have a positive association with firm’s future performance. Originality/value This study is the first in investigating the effect of political connections on accounting conservatism in Malaysian context and how political connections negatively affect the monitoring role of the corporate boards. By directly measuring political connection and controlling for various corporate governance mechanisms and firm-specific attributes, this study contributes to enhance the authors’ understanding of the political influence in financial reporting quality and firm performance in an emerging market setting.

scholarly journals Too much reciprocity?

2020 ◽  
Vol 14 (2) ◽  
pp. 473-491
Author(s):  
Zhe Sun ◽  
Qi Ai
Keyword(s):  
Social Exchange ◽  
Social Exchange Theory ◽  
Emerging Market ◽  
Chief Executive ◽  
Political Connections ◽  
Political Connection ◽  
Content Type ◽  
Chinese Multinationals ◽  
The Government ◽  
The Impact

Purpose Using the evidence of Chinese outbound mergers and acquisitions (M&As) enacted between 2006 and 2014, this study aims to investigate the role played by home political connections on the cost implications of Chinese multinationals. It also examines whether home political connections – at different levels and of different configurations – impact the operational cost of Chinese multinationals. Design/methodology/approach The data were analysed using a multivariate regression model. To examine their heterogeneous effect on Chinese multinationals, the political connection data were further split into higher and lower level political connections and in chief executive officer (CEO) and chairperson political connections. Findings This study implies the negative effect of home political connections on the internationalisation of Chinese multinationals. At the same time, the impact of lower-level political connections is stronger than that of their higher-level counterparts. Moreover, CEO political connections have a stronger effect on the operational costs of Chinese multinationals than their Chairperson equivalents. Originality/value By unravelling the “black box” of Chinese internationalisation from the social exchange perspective, through the informal political connection networking ties between Chinese firms and the government, this study advances emerging market multinational theory, contributes to the understanding of the heterogeneous nature of political connections and sheds new light on social exchange theory from the perspective of the emerging phenomenon of Chinese internationalisation.

scholarly journals Re-engineering business to achieve the requirements of e-government

2016 ◽  
Vol 2 (4) ◽  
pp. 186
Author(s):  
Ghassan Qassem Daoud Al Lami
Keyword(s):  
Government Support ◽  
Service Organizations ◽  
Design Work ◽  
Business Environments ◽  
Data Collection And Analysis ◽  
Government Project ◽  
Practical Performance ◽  
Direct Government ◽  
Main Engine ◽  
Section Analysis

Achieved success and progress organizations today through the possibility of using available resources are believed to provide broader services to the community, which is reflected based on the formulation and building the organization strategies, and that the acceleration of change necessitated the organizations follow the strategies or modern administrative methods towards the transformation of the application of e-government and one of these business environments methods (strategies) business re-engineering aimed at re-design work of the Organization. Seeks current research to apply the principles of business re-engineering in service organizations environment as the main engine for the application of e-government administrative, and thus contributing to the processes design effectively broader and better services to the community and to provide, was launched this research of practical dilemma is the readiness of Iraqi organizations (represented by the Department of body taxes) for the application of business re-engineering through the availability of key components for the attribution of efforts to restructure and modernize the practical performance for the adoption of e-government project. Find four basic sections includes eating the first of it research methodology (a problem and the rationale and objectives of the research, Planned premise for research, and methods of data collection and analysis) has been allocated for the second section side of knowledge, And interested third section analysis of the practical side, depending on the results of questionnaires to diagnose the views of a number of staffs in the Tax Authority research topic and finally reach the fourth section to a set of conclusions and recommendations, notably the need for direct government support and effective public organizations, and to provide an appropriate environment for the application of e-government, and the launch of the so-called concept of electronic organizations. And work to adopt the approach business re-engineering through the identification of candidate processes for re-engineering to be more important to achieve the objectives of the organization, and the need to use research centers in specialized colleges or Foreign Advisory centers to apply e-government requirements in business field.

scholarly journals On The Relation Between Regulation And Economic Growth

2012 ◽  
Vol 11 (2) ◽  
pp. 147
Author(s):  
Atul A. Dar ◽  
Sal AmirKhalkhali
Keyword(s):  
Economic Growth ◽  
Fixed Effects ◽  
Developed Economies ◽  
Governance Indicators ◽  
Regulatory Quality ◽  
The World Bank ◽  
Quality Scale ◽  
Positive Growth ◽  
Accounting Model

This paper examines the relation between regulation and economic performance in the context of 23 developed economies. We apply a generalisation of the growth accounting model popularized by Solow to data over the 2002-2008 period. In the model, we assume that regulatory quality impacts on growth via its impact on total factor productivity growth. We look at three measures of regulatory quality, all of which are based on the set of governance indicators developed by the World Bank. The model is estimated using a fixed effects as well as a random effects estimation strategy. Our findings do lend support for the view that the better the quality of regulation, the higher rate of economic growth, but find no support for the view that the strength of the positive growth impact is stronger for countries that rank relatively lower on the regulatory quality scale.

scholarly journals Using Common Features to Investigate Common Growth Cycles for BRICS Countries

2018 ◽  
Vol 21 (4) ◽  
pp. 589-615
Author(s):  
Bruno Ricardo Delalibera ◽  
João Victor Issler ◽  
Roberto Castello Branco
Keyword(s):  
Emerging Market ◽  
Emerging Market Economies ◽  
Growth Cycles ◽  
Common Features ◽  
Developed Economies ◽  
Brics Countries ◽  
The Us ◽  
Short And Long Term ◽  
The Common

This paper examines the short and long-term co-movement of large  emerging market economies -- the BRICS countries -- by applying the  econometric techniques and the tests proposed in the common-feature literature. Despite their dissimilarities, given the rising trade linkages among the BRICS over the last 20 years one should expect their cycles to be  synchronized. Our empirical findings fully support this hypothesis. The evidence holds also for the co-movement between the BRICS and developed  economies, the US and the Eurozone, which may reflect the effects of  globalization.

The influence of motivations on international location choice in least developed, emerging and developed countries: evidence from Chinese MNEs

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fernando Angulo-Ruiz ◽  
Albena Pergelova ◽  
William X. Wei
Keyword(s):  
Emerging Markets ◽  
Multinational Enterprises ◽  
Location Choice ◽  
Emerging Market ◽  
Developed Countries ◽  
Asia Pacific ◽  
Institutional Constraints ◽  
Least Developed Countries ◽  
Content Type ◽  
Developed Economies

Purpose This research aims to assess variations of motivations when studying international location decisions. In particular, this study aims to assess the influence of diverse motivations – seeking technology, seeking brand assets, seeking markets, seeking resources and escaping institutional constraints – as determinants of the international location choice of emerging market multinational enterprises (EM MNEs) entering least developed, emerging, and developed countries. Design/methodology/approach The authors develop a set of hypotheses based on the ownership–location–internalization framework and complement it with an institutional perspective. The conceptual model posits that the different internationalization motivations (seeking technology, seeking brand assets, seeking markets, seeking resources and escaping institutional constraints) will impact the location choice of EM MNEs in developed economies, emerging markets or least developed countries. This study uses the 2013 survey data collected by the China Council for the Promotion of International Trade and the Asia Pacific Foundation of Canada. The final sample of analysis of this research includes 693 observations. Findings After controlling for several variables, two-stage Heckman regressions show there is a variation of motivations when EM MNEs enter least developed countries, emerging markets and developed economies. EM MNEs are motivated to enter least developed countries to seek markets and resources. Conversely, those firms enter developed countries in their search for technological assets and to escape institutional constraints at home. While the present study findings show a clear difference in the motivations that lead to location choice in least developed vs developed countries, the results are not as clear for location in other emerging countries. Research limitations/implications The paper offers empirical support for the importance of motivations as crucial determinants of location choice. Originality/value This paper provides a detailed quantitative study on the internationalization location choice of EM MNEs based on their motivations. Though theoretical models underscore the importance of motivations, we know very little about how, in practice, motivations drive location choice. This study contributes to the international location choice literature a deeper understanding of how diverse motivations drive choices of expansion into developed economies, emerging markets or least developed countries.

Developing effective local content regulations in sub-Sahara Africa

2016 ◽  
Vol 24 (4) ◽  
pp. 354-374 ◽  
Author(s):  
Desmond Tutu Ayentimi ◽  
John Burgess ◽  
Kerry Brown
Keyword(s):  
Emerging Economies ◽  
Foreign Investment ◽  
Investment Incentives ◽  
Content Type ◽  
Investment Incentive ◽  
Local Content ◽  
Developed Economies ◽  
Incentive Policies ◽  
Policies And Programs ◽  
Strategic Balance

Purpose The authors propose a strategic-balance approach to local content laws in which less developed economies in sub-Sahara Africa can develop investment incentive policies for attracting multinationals and direct foreign investment but, at the same time, have a structured and operational framework for the enforcement of local content laws. The purpose of the paper is to identify the elements involved in the equation: the incentives, the potential spillovers and the criteria for evaluation. Design/methodology/approach The approach involves a review of the literature and the operational details and limitations of local content laws in sub-Sahara Africa. Findings The paper develops a conceptual model for a holistic understanding and management of this dilemma by policymakers and development practitioners to maximize the benefits of natural resources to less developed countries in sub-Sahara Africa towards the fight against poverty and underdevelopment. Research limitations/implications This paper provides the opportunity to influence policy direction in relation to the adoption of investment incentive policies and programs and the enforcement of local content policy guidelines and regulations in sub-Sahara Africa. Practical implications Multinational companies (MNCs) operating in less developed and emerging economies in sub-Sahara Africa should consider how their economic and corporate social responsibility activities can help develop the capabilities of the local workforce through training and development activities; develop domestic firms’ capabilities via enterprise development programs; and develop local firm’s absorptive capacities through knowledge transfers and innovation systems to support development activities. Social implications Policymakers in less developed and emerging economies in sub-Sahara Africa need to strike a balance in adopting investment incentives policies towards attracting foreign investments and the enforcement of local content regulations to make sure they derive the maximum benefits from their strategic resources. It is important for policymakers to understand that the mere attraction of MNCs into an economy does not explicitly guarantee domestic job creation; rather, it depends on how MNCs respond to local content policy regulations through their business strategies. Linking investment incentives with local content policy regulations at a critical point could potentially support and strengthen industrial development in sub-Sahara Africa. Originality/value This paper is among the first to examine the challenges of both attracting foreign direct investment and enforcing local content laws and regulations in sub-Sahara Africa. This paper contributes to the understanding of this dilemma and how less developed economies can manage such a crucial and important issue using our proposed strategic-balance approach. The contribution of local content laws and the design and adoption of investment incentives policies and programs to attract foreign investment to promoting sustainable domestic growth and development must depend on the balance between the enforcement of local content policy guidelines and the provision of such investment incentive packages to attracting foreign investment.

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