Navigating political risk: Protectionism and ownership strategy in cross-border M&As

Ru-Shiun Liou, Leon Faifman and Kimberly Ellis

Journal of Business Research, 2023, vol. 162, issue C

Abstract: Rising protectionism sentiment has led to increased scrutiny of cross-border mergers and acquisitions (CBAs). Informed by the legitimacy-based view, we posit that heightened protectionism in the host countries triggers legitimacy concerns towards foreign firms and presents a political risk that influences foreign acquirers’ ownership strategy in CBAs. Analyzing CBAs in the recent decade, we find that foreign acquirers tend to acquire greater ownership stakes to mitigate the political risk associated with protectionism. Further, bilateral relationships between the host and home countries involved in CBAs regarding economic dependence, political animosity, and social interactions linked to migration have differential moderating effects either easing or intensifying legitimacy concerns.

Keywords: Political risk; Protectionism; Cross-border mergers and acquisitions; Ownership strategy; Political animosity; Migration; Foreign direct investment (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:162:y:2023:i:c:s0148296323002436

DOI: 10.1016/j.jbusres.2023.113885

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