Whether, how and why home country environments influence emerging market firm acquisition behavior

Rama Krishna Reddy, Frances Fabian and Sung-Jin Park

International Journal of Emerging Markets, 2022, vol. 18, issue 12, 5818-5839

Abstract: Purpose - According to the 2019 World Investment Report, recent events in deglobalization have made many countries, especially developed markets, resist inward foreign direct investment (FDI) as ceding control to foreign countries. At the same time, many emerging market firms (EMFs) have been increasing their acquisitions in developed markets. The authors elaborate three unconventional motives that justify such acquisitions, and test whether conditions in home countries related to these motives predict the pursuit of greater or lesser equity control. Understanding how home country conditions may spur seeking greater equity control can help policymakers and business firm decision-makers improve these dynamics. Design/methodology/approach - Examining data covering the period 2006–2018, the authors test hypotheses using a sample of 4,130 acquisitions by EMFs into developed markets, and test hypotheses to investigate “How does the institutional and resource environment of an EMF's home country relate to the respective EMF acquisition behavior of seeking equity control?” Findings - The authors found that higher institutional quality, poorer factor market development, and higher capital market quality in the home country are related to higher equity positions sought. Practical implications - Acquiring and target firm managers, along with other stakeholders, can gain insights on how to respond to acquisition opportunities by recognizing how home country conditions influence emerging market internationalizing behaviors into developed markets. Originality/value - The compilation of this data uniquely covers 48 different emerging markets and further concentrates on the relatively less understood pre-deal phase for EMNEs entering developed markets.

Keywords: Emerging market firms; Mergers and acquisitions; Equity; Home country institutions (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-08-2021-1274

DOI: 10.1108/IJOEM-08-2021-1274

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