The Relative Effects of Institutions on Ownership in Acquisitions

<p>Purpose - Globalization has increased competition to an international level. However, limited market experience causes uncertainty, affecting how firms strategize their entry. Institutional distance can be a dominant cause of such environmental uncertainty. The institutional environment incorporates three institutional pillars; the regulatory pillar, the normative pillar and the cognitive pillar. Institutions are shaped by culture and desires to protect domestic business, meaning institutions differ between countries. This is known as institutional distance. There is, however, a research gap concerning the relative influence of institutional pillars on cross-border acquisition ownership, when institutional distance is present. This thesis seeks to research the influential effect of all three institutional pillars on acquisition ownership, when firms are faced with institutional distance. Theory - Institutional theory was the fundamental theory used in this research, applying the sociology perspective of Scott (1995). Firstly, investigations were conducted on individual pillars to see how each pillar influenced acquisition ownership. Secondly, individual pillar findings were then combined and compared, to illustrate their relative influence on acquisition ownership. Such simultaneous acknowledgement of all three institutional pillars, provided new insight on the relative effects of institutions on acquisition ownership. Methodology - This study implemented a single method approach, using quantitative analysis. Archival data was gathered focusing on firms from three industries in eleven selected countries who conduct cross-border acquisitions (CBAs). CBAs were chosen due to their popular use as a research construct in imitation research. Cognitive distance, normative distance and regulatory distance were then used to measure institutional distance. Cognitive distance effects were measured using frequency based imitation. Normative distance was measured using two of Hofstede’s (1980) cultural value dimensions: uncertainty avoidance and collectivism. Regulatory distance was measured using World Bank Governance Indicators. Thus, it was important to strategically choose home countries to ensure a variety of dimension and indicator values with which to conduct a reliable study. Logistic regression, conducted with STATA, was then used to analyze relationships between institutions and acquisition ownership. Key Findings – The findings illustrate that all three institutional pillars have an influential effect on acquisition ownership decisions. This reinforces the emerging belief, that studies must include all three institutional pillars in research. This finding adds to this scant research. Analyzing the comprehensive institutional environment produces more reliable results. The findings suggest that institutional pillars form an institutional hierarchy when institutional distance exists between the home and host countries. Regulatory distance have the strongest influence on acquisition ownership. Severe regulatory sanctions threaten illegitimate behaviours, forcing foreign entrants to prioritize compliance to regulatory institutions. Normative distance has the second strongest impact on acquisition ownership. Its tacit nature camouflages dysfunctional cultural complexities that disrupt strategy implementation, which can cause a firm to relocate. Lastly, cognitive distance has the third strongest influence on acquisition ownership. Its lack of severe repercussions facilitates the prioritization of the previous two pillars. However, cognitive distance acknowledgement is important as it illustrates how host participants interpret stimuli from their environment, which informs foreign entrants of appropriate cross-national responsive behaviour. Contributions - This study contributes to international business research by illustrating the hierarchical formation of the influence of institutional pillars on cross-border acquisition ownership, where institutional distance is present. This contribution has managerial implications. Managers are strongly encouraged to consider all of regulatory pillar, normative pillar and cognitive pillar when venturing abroad. Further, managers must acknowledge the institutional pillar hierarchy and prioritize responses accordingly, to avoid crippling outcomes that could lead to poor acquisition outcomes. Lastly, this thesis contributes to literature by highlighting the need to include collectivism as a research construct in ownership studies. Prior studies have narrowly focused on uncertainty avoidance and power distance. However, collectivism has been observed to influence ownership, likely due to the recent rise of Asia in international business.</p>

The Relative Effects of Institutions on Ownership in Acquisitions

<p>Purpose - Globalization has increased competition to an international level. However, limited market experience causes uncertainty, affecting how firms strategize their entry. Institutional distance can be a dominant cause of such environmental uncertainty. The institutional environment incorporates three institutional pillars; the regulatory pillar, the normative pillar and the cognitive pillar. Institutions are shaped by culture and desires to protect domestic business, meaning institutions differ between countries. This is known as institutional distance. There is, however, a research gap concerning the relative influence of institutional pillars on cross-border acquisition ownership, when institutional distance is present. This thesis seeks to research the influential effect of all three institutional pillars on acquisition ownership, when firms are faced with institutional distance. Theory - Institutional theory was the fundamental theory used in this research, applying the sociology perspective of Scott (1995). Firstly, investigations were conducted on individual pillars to see how each pillar influenced acquisition ownership. Secondly, individual pillar findings were then combined and compared, to illustrate their relative influence on acquisition ownership. Such simultaneous acknowledgement of all three institutional pillars, provided new insight on the relative effects of institutions on acquisition ownership. Methodology - This study implemented a single method approach, using quantitative analysis. Archival data was gathered focusing on firms from three industries in eleven selected countries who conduct cross-border acquisitions (CBAs). CBAs were chosen due to their popular use as a research construct in imitation research. Cognitive distance, normative distance and regulatory distance were then used to measure institutional distance. Cognitive distance effects were measured using frequency based imitation. Normative distance was measured using two of Hofstede’s (1980) cultural value dimensions: uncertainty avoidance and collectivism. Regulatory distance was measured using World Bank Governance Indicators. Thus, it was important to strategically choose home countries to ensure a variety of dimension and indicator values with which to conduct a reliable study. Logistic regression, conducted with STATA, was then used to analyze relationships between institutions and acquisition ownership. Key Findings – The findings illustrate that all three institutional pillars have an influential effect on acquisition ownership decisions. This reinforces the emerging belief, that studies must include all three institutional pillars in research. This finding adds to this scant research. Analyzing the comprehensive institutional environment produces more reliable results. The findings suggest that institutional pillars form an institutional hierarchy when institutional distance exists between the home and host countries. Regulatory distance have the strongest influence on acquisition ownership. Severe regulatory sanctions threaten illegitimate behaviours, forcing foreign entrants to prioritize compliance to regulatory institutions. Normative distance has the second strongest impact on acquisition ownership. Its tacit nature camouflages dysfunctional cultural complexities that disrupt strategy implementation, which can cause a firm to relocate. Lastly, cognitive distance has the third strongest influence on acquisition ownership. Its lack of severe repercussions facilitates the prioritization of the previous two pillars. However, cognitive distance acknowledgement is important as it illustrates how host participants interpret stimuli from their environment, which informs foreign entrants of appropriate cross-national responsive behaviour. Contributions - This study contributes to international business research by illustrating the hierarchical formation of the influence of institutional pillars on cross-border acquisition ownership, where institutional distance is present. This contribution has managerial implications. Managers are strongly encouraged to consider all of regulatory pillar, normative pillar and cognitive pillar when venturing abroad. Further, managers must acknowledge the institutional pillar hierarchy and prioritize responses accordingly, to avoid crippling outcomes that could lead to poor acquisition outcomes. Lastly, this thesis contributes to literature by highlighting the need to include collectivism as a research construct in ownership studies. Prior studies have narrowly focused on uncertainty avoidance and power distance. However, collectivism has been observed to influence ownership, likely due to the recent rise of Asia in international business.</p>

Loneliness is associated with greater cognitive distance between the self and a close friend

Loneliness describes the distressing experience associated with perceived social disconnection. Despite the clear links between loneliness and mental and physical health, relatively little is known about how loneliness affects cognition. To assess the effects of loneliness on cognitive distance between the self and others, participants completed an implicit memory task for adjectives encoded in relation to the self, a close friend, or a celebrity. We assessed item memory accuracy and sensitivity, and depth of processing was assessed through source monitoring and metamemory performance. In addition, participants reported their trait loneliness and depression. An overall self-referential advantage was identified compared with both friend and celebrity encoded items. Likewise, a friend-referential advantage was identified compared to celebrity-encoded items. Metacognitive sensitivity (sensitivity of confidence for correct and incorrect responses) and metacognitive bias (confidence regardless of accuracy) showed a similar pattern. Lonelier individuals showed a greater self-referential bias in comparison to words encoded in relation to a close friend, coupled with a smaller friend-referential bias in comparison to words encoded in relation to celebrity. More depressed individuals also showed a greater self-referential bias in comparison to words encoded in relation to a close friend, but this did not explain the relationship with loneliness. Therefore, perceived social isolation (loneliness) is reflected in a greater cognitive distance between self and close friends and this operates independent of depression. The results have important implications for understanding the social contextual effects on memory and the cognitive ramifications of loneliness.

Diversity of experience and labor productivity in creative industries

This paper studies how the previous experience among workers relates to the labor productivity of the creative industries in Sweden. Effective knowledge transfers are dependent on the cognitive distance among employees. Using longitudinal matched employer-employee data, I measure the portfolio of the skills within a workplace through (i) the workers' previous occupation, and (ii) the industry they have been working in previously. Estimates show that diversity of occupational experience is positive for labor productivity, but the diversity of industry experience is not. When distinguishing between related and unrelated diversity, the relatedness of occupational experience is positive for labor productivity, while unrelated occupational experience instead shows negative relationship with productivity. These results point towards the importance of occupational skills that workers bring with them to a new employment, for labor productivity.

Towards a holistic view of corporate social responsibility. The antecedent role of information asymmetry and cognitive distance

Purpose This paper aims to enlarge ongoing debate about corporate social responsibility (CSR) proposing reflections about the role of cognitive and information flows in influencing companies’ approaches and market expectations related to CSR. Design/methodology/approach The paper builds upon the research streams related to the information asymmetry and cognitive distance, for identifying through the interpretative lens provided by systems studies, possible key drivers on which policymakers, researchers and practitioners should act for building a suitable, shared and long-term oriented path for CSR. Findings The paper defines a scenario map about CSR in the light of information asymmetry and cognitive distance. Such a map supports both researchers and practitioners in better understanding actions and paths required for building a shared approach to CSR. Research limitations/implications Recognizing the multidimensionality of CSR and the multiple managerial and organizational contributions provided for underling its advantages for companies, the paper focuses the attention on the elements and conditions able to promote, stimulate and encourage companies’ CSR strategies. Originality/value The paper provides a fresh conceptual framework for explaining conditions and elements required for ensuring the success of strategies for CSR. Adopting a systems view, the paper overcomes the limitations related to a reductionist view about advantages and results of CSR to call the attention on the conditions that should be met for ensuring the emergence of a shared approach to CSR.