The Effect of National Distance and Industry Relatedness on Post-Acquisition Performance: Emerging Country MNEs in Developed Countries

Year 2021, Volume: 6 Issue: 2, 59 - 71, 30.12.2021

Sibel Ayas

Abstract

Based on 75 cross-border acquisitions from China, India, South Africa, and Turkey, this study investigates the role of national distance and industry relatedness in increasing post-acquisition performance of acquiring firms from developing countries from 2007 to 2015. This study focuses on acquiring firms only operating in knowledge-intensive industries such as computer, software, and health technologies. Findings show that cultural distance has a negative relationship with post-acquisition performance. In contrast, knowledge distance and economic distance lead to a significant increase in acquiring firms' return on assets. Human resource distance, on the other hand, has no significant relationship with performance. The relationship between industry-relatedness and post-acquisition performance appears to be statistically insignificant.

Keywords

National Distance, Industry Relatedness, Firm Performance, Cross-Border Acquisition, Emerging Economies

Supporting Institution

TUBITAK

Ulusal Mesafe ve Sektörel İlişkililiğin Satın Alma Sonrası Performans Üzerindeki Etkisi: Gelişmiş Ülkelerdeki Gelişmekte Olan Ülke ÇUŞ’leri

Abstract

Bu araştırmada, 2007-2015 dönemi boyunca Çin, Hindistan, Güney Afrika ve Türkiye’de gerçekleştirilen 75 satın alma faaliyeti incelenmiştir. Araştırmanın amacı, gelişmekte olan ülke firmalarının satın alma sonrası performansını artırmada ulusal mesafenin ve sektörel ilişkililiğin rolünü araştırmaktır. Bu çalışmada özellikle bilgisayar, yazılım veya sağlık teknolojileri gibi bilgi yoğun sektörlerde faaliyet gösteren şirket satın alımlarını incelenmektedir. Araştırmanın sonucu, kültürel mesafe ile firma performansı arasındaki ilişkinin negatif olduğunu, bilgi mesafesi ve ekonomik mesafenin ise firmaların aktif karlılık oranı üzerinde önemli bir artışa yol açtığını göstermektedir. Bunun aksine, insan kaynağı mesafesi ile performans arasında anlamlı bir ilişki yoktur. Bunun yansıra, sektörel ilişkililik ile satın alma sonrası performans arasındaki ilişki istatistiksel olarak anlamsızdır.

Keywords

Ulusal Mesafe, Sektörel İlişkililik, Firma Performansı, Sınır-Ötesi Satın Alma, Gelişmekte Olan Ülkeler

References

• Aguilera, R. V., & Grøgaard, B. (2019). The dubious role of institutions in international business: A road forward. Journal of International Business Studies, 50, 20-35.
• Ahammad, M. F., Tarba, S. Y., Liu, Y., & Glaister, K. W. (2016). Knowledge transfer and cross-border acquisition performance: The impact of cultural distance and employee retention. International business review, 25(1), 66-75.
• Akbulut, M. E., & Matsusaka, J. G. (2010). 50+ years of diversification announcements. Financial review, 45(2), 231-262.
• Alimov, A. (2015). Labor market regulations and cross-border mergers and acquisitions. Journal of International Business Studies, 46(8), 984-1009.
• Anand, J., & Delios, A. (2002). Absolute and relative resources as determinants of international acquisitions. Strategic Management Journal, 23(2), 119-134.
• Audretsch, D. B., Keilbach, M., & Lehmann, E. (2005). The knowledge spillover theory of entrepreneurship and technological diffusion. In University entrepreneurship and technology transfer (pp. 69-91). Emerald Group Publishing Limited.
• Aybar, B., & Ficici, A. (2009). Cross-border acquisitions and firm value: An analysis of emerging-market multinationals. Journal of International Business Studies, 40(8), 1317-1338.
• Belsley, D. A., Kuh, E. & Welsch, R. E. (1980). Regression Diagnostics: Identifying Influential Data and Sources of Collinearity. New York: John Wiley.
• Berry, H., Guillén, M. F., & Zhou, N. (2010). An institutional approach to cross-national distance. Journal of International Business Studies, 41(9), 1460-1480.
• Cantwell, J. (1989). Technological innovation and multinational corporations. Blackwell.
• Caves, R. E. (1996). Multinational enterprise and economic analysis. Cambridge university press.
• Chakrabarti, R., Gupta-Mukherjee, S., & Jayaraman, N. (2009). Mars–Venus marriages: Culture and cross-border M&A. Journal of International Business Studies, 40(2), 216-236.
• Chatterjee, S., Lubatkin, M. H., Schweiger, D. M., & Weber, Y. (1992). Cultural differences and shareholder value in related mergers: Linking equity and human capital. Strategic management journal, 13(5), 319-334.
• Cloodt, M., Hagedoorn, J., & Van Kranenburg, H. (2006). Mergers and acquisitions: Their effect on the innovative performance of companies in high-tech industries. Research policy, 35(5), 642-654.
• Cohen, W. M., & Levinthal, D. A. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative science quarterly, 35(1), 128-152.
• Collins, J. D., Holcomb, T. R., Certo, S. T., Hitt, M. A., & Lester, R. H. (2009). Learning by doing: Cross-border mergers and acquisitions. Journal of business research, 62(12), 1329-1334.
• Datta, D. K., & Puia, G. (1995). Cross-border acquisitions: An examination of the influence of relatedness and cultural fit on shareholder value creation in US acquiring firms. MIR: Management International Review, 337-359.
• Desyllas, P., & Hughes, A. (2010). Do high technology acquirers become more innovative? Research Policy, 39(8), 1105-1121.
• Dikova, D., & Sahib, P. R. (2013). Is cultural distance a bane or a boon for cross-border acquisition performance? Journal of World Business, 48(1), 77-86.
• Erel, I., Liao, R. C., & Weisbach, M. S. (2012). Determinants of cross‐border mergers and acquisitions. The Journal of finance, 67(3), 1045-1082.
• Estrin, S., Baghdasaryan, D., & Meyer, K. E. (2009). The impact of institutional and human resource distance on international entry strategies. Journal of Management Studies, 46(7), 1171-1196.
• Evans, J., & Mavondo, F. T. (2002). Psychic distance and organizational performance: An empirical examination of international retailing operations. Journal of international business studies, 33(3), 515-532.
• Furman, J. L., Porter, M. E., & Stern, S. (2002). The determinants of national innovative capacity. Research policy, 31(6), 899-933.
• Gaffney, N., Karst, R., & Clampit, J. (2016). Emerging market MNE cross-border acquisition equity participation: The role of economic and knowledge distance. International Business Review, 25(1), 267-275.
• Gompers, P., & Lerner, J. (2001). The venture capital revolution. Journal of economic perspectives, 15(2), 145-168.
• Gubbi, S. R., Aulakh, P. S., Ray, S., Sarkar, M. B., & Chittoor, R. (2010). Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms. Journal of International Business Studies, 41(3), 397-418.
• Guler, I., & Guillén, M. F. (2010). Institutions and the internationalization of US venture capital firms. Journal of International Business Studies, 41(2), 185-205.
• Gupta, V., de Luque, M. S., & House, R. J. (2004). Multisource construct validity of GLOBE scales. Culture, leadership, and organizations: The GLOBE study of, 62, 152-177.
• Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., & Davison, R. B. (2009). Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of management, 35(3), 469-502.
• Hall, A., Sulaiman, V. R., Clark, N., & Yoganand, B. (2003). From measuring impact to learning institutional lessons: an innovation systems perspective on improving the management of international agricultural research. Agricultural systems, 78(2), 213-241.
• Harrison, J. S., Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. (2001). Resource complementarity in business combinations: Extending the logic to organizational alliances. Journal of management, 27(6), 679-690.
• Hitt, M. A., Dacin, M. T., Levitas, E., Arregle, J. L., & Borza, A. (2000). Partner selection in emerging and developed market contexts: Resource-based and organizational learning perspectives. Academy of Management journal, 43(3), 449-467.
• Hitt, M. A., Harrison, J. S., & Ireland, R. D. (2001). Mergers & acquisitions: A guide to creating value for stakeholders. Oxford University Press.
• Hitt, M., Harrison, J., Ireland, R. D., & Best, A. (1998). Attributes of successful and unsuccessful acquisitions of US firms. British Journal of Management, 9(2), 91-114.
• Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. Beverly Hills, CA: Sage.
• House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (Eds.). (2004). Culture, leadership, and organizations: The GLOBE study of 62 societies. Sage publications.
• Huang, Z., Zhu, H., & Brass, D. J. (2017). Cross‐border acquisitions and the asymmetric effect of power distance value difference on long‐term post‐acquisition performance. Strategic Management Journal, 38(4), 972-991.
• Karolyi, G. A., & Taboada, A. G. (2015). Regulatory arbitrage and cross‐border bank acquisitions. The Journal of Finance, 70(6), 2395-2450.
• Kedia, B., Gaffney, N., & Clampit, J. (2012). EMNEs and knowledge-seeking FDI. Management International Review, 52(2), 155-173.
• King, D. R., Dalton, D. R., Daily, C. M., & Covin, J. G. (2004). Meta‐analyses of post‐acquisition performance: Indications of unidentified moderators. Strategic management journal, 25(2), 187-200.
• Kogut, B., & Singh, H. (1988). The effect of national culture on the choice of entry mode. Journal of international business studies, 19(3), 411-432.
• Larsson, R., & Finkelstein, S. (1999). Integrating strategic, organizational, and human resource perspectives on mergers and acquisitions: A case survey of synergy realization. Organization science, 10(1), 1-26.
• Leung, K., Bhagat, R. S., Buchan, N. R., Erez, M., & Gibson, C. B. (2005). Culture and international business: Recent advances and their implications for future research. Journal of international business studies, 36(4), 357-378.
• Liou, R. S., & Rao-Nicholson, R. (2017). Out of Africa: The role of institutional distance and host-home colonial tie in South African Firms’ post-acquisition performance in developed economies. International Business Review, 26(6), 1184-1195.
• Madhok, A., & Keyhani, M. (2012). Acquisitions as entrepreneurship: Asymmetries, opportunities, and the internationalization of multinationals from emerging economies. Global Strategy Journal, 2(1), 26-40.
• Makri, M., Hitt, M. A., & Lane, P. J. (2010). Complementary technologies, knowledge relatedness, and invention outcomes in high technology mergers and acquisitions. Strategic management journal, 31(6), 602-628.
• Meyer, K. E., & Estrin, S. (2014). Local context and global strategy: extending the integration responsiveness framework to subsidiary strategy. Global Strategy Journal, 4(1), 1-19.
• Meyer, K. E., & Nguyen, H. V. (2005). Foreign investment strategies and sub‐national institutions in emerging markets: Evidence from Vietnam. Journal of management studies, 42(1), 63-93.
• Moeller, S. B., & Schlingemann, F. P. (2005). Global diversification and bidder gains: A comparison between cross-border and domestic acquisitions. Journal of Banking & Finance, 29(3), 533-564.
• Morosini, P., Shane, S., & Singh, H. (1998). National cultural distance and cross-border acquisition performance. Journal of international business studies, 29(1), 137-158.
• Nachum, L., Zaheer, S., & Gross, S. (2008). Does it matter where countries are? Proximity to knowledge, markets and resources, and MNE location choices. Management Science, 54(7), 1252-1265.
• Nelson, R. R., & Rosenberg, N. (1993). Technical innovation and national systems. National innovation systems: A comparative analysis, 322.
• Ning, L., Kuo, J. M., Strange, R., & Wang, B. (2014). International investors’ reactions to cross-border acquisitions by emerging market multinationals. International Business Review, 23(4), 811-823.
• Papadakis, V. M., & Thanos, I. C. (2010). Measuring the performance of acquisitions: An empirical investigation using multiple criteria. British Journal of Management, 21(4), 859-873.
• Peng, M. W. (2012). The global strategy of emerging multinationals from China. Global Strategy Journal, 2(2), 97-107.
• Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of international business studies, 39(5), 920-936.
• Porter, M. E. (1990). The Competitive Advantage of Nations. Harvard business review.
• Powell, K. S., & Rhee, M. (2016). Experience in different institutional environments and foreign subsidiary ownership structure. Journal of Management, 42(6), 1434-1461.
• Prahalad, C. K., & Bettis, R. A. (1986). The dominant logic: A new linkage between diversity and performance. Strategic management journal, 7(6), 485-501.
• Ramamurti, R., & Singh, J. V. (Eds.). (2009). Emerging multinationals in emerging markets. Cambridge University Press.
• Rao-Nicholson, R., Salaber, J., & Cao, T. H. (2016). Long-term performance of mergers and acquisitions in ASEAN countries. Research in International Business and Finance, 36, 373-387.
• Reus, T. H., & Lamont, B. T. (2009). The double-edged sword of cultural distance in international acquisitions. Journal of International Business Studies, 40(8), 1298-1316.
• Rugman, A. M. (Ed.). (2009). The Oxford handbook of international business. Oxford University Press.
• Schweizer, L. (2005). Organizational integration of acquired biotechnology companies into pharmaceutical companies: The need for a hybrid approach. Academy of management journal, 48(6), 1051-1074.
• Shenkar, O. (2001). Cultural distance revisited: Towards a more rigorous conceptualization and measurement of cultural differences. Journal of international business studies, 32(3), 519-535.
• Shimizu, K., Hitt, M. A., Vaidyanath, D., & Pisano, V. (2004). Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future. Journal of international management, 10(3), 307-353.
• Slangen, A. H. (2006). National cultural distance and initial foreign acquisition performance: The moderating effect of integration. Journal of World Business, 41(2), 161-170.
• Slangen, A. H., & Van Tulder, R. J. (2009). Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research. International business review, 18(3), 276-291.
• Srivastava, S., Singh, S., & Dhir, S. (2020). Culture and International business research: A review and research agenda. International Business Review, 29(4), 101709.
• Stahl, G. K., & Voigt, A. (2008). Do cultural differences matter in mergers and acquisitions? A tentative model and examination. Organization science, 19(1), 160-176.
• Stuart, T., & Sorenson, O. (2003). The geography of opportunity: spatial heterogeneity in founding rates and the performance of biotechnology firms. Research policy, 32(2), 229-253.
• Teece, D. J. (1992). Competition, cooperation, and innovation: Organizational arrangements for regimes of rapid technological progress. Journal of economic behavior & organization, 18(1), 1-25.
• Thanos, I. C., & Papadakis, V. M. (2012). The use of accounting-based measures in measuring M&A performance: a review of five decades of research. In Advances in mergers and acquisitions (pp. 103-120). Emerald Group Publishing Limited.
• Tsang, E. W., & Yip, P. S. (2007). Economic distance and the survival of foreign direct investments. Academy of Management Journal, 50(5), 1156-1168.
• Uhlenbruck, K., Rodriguez, P., Doh, J., & Eden, L. (2006). The impact of corruption on entry strategy: Evidence from telecommunication projects in emerging economies. Organization science, 17(3), 402-414.
• Vanhaverbeke, W., Duysters, G., & Beerkens, B. (2002). Technological Capability Building Through Networking Strategies Within High-Tech Industries. In Academy of management Proceedings (pp. F1-F6). Briarcliff Manor, NY: Academy of Management.
• Webb, E. J., Campbell, D. T., Schwarz, R. D., & Sechrest, L. (2000). Unobtrusive Measures (Revised Edition). Thousand Oaks, California: Sage.
• Whitley, R. (Ed.). (1992). European business systems: Firms and markets in their national contexts. Sage.
• Xu, D., Pan, Y., & Beamish, P. W. (2004). The Effect of Regulative and Normative Distances on MNE Ownership and Expatriate Strategies (1). Management International Review, 44(3), 285.
• Yiu, D., & Makino, S. (2002). The choice between joint venture and wholly owned subsidiary: An institutional perspective. Organization science, 13(6), 667-683.
• Zhu, H., Ma, X., Sauerwald, S., & Peng, M. W. (2019). Home country institutions behind cross-border acquisition performance. Journal of Management, 45(4), 1315-1342.
• Zhu, H., Xia, J., & Makino, S. (2015). How do high-technology firms create value in international M&A? Integration, autonomy and cross-border contingencies. Journal of World Business, 50(4), 718-728.