Shopping as locals: A study of conduit acquisition by multinational enterprises

Shixiang Wang (), Jiang Wei () and Minyuan Zhao ()
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Shixiang Wang: Shanghai University of Finance and Economics
Jiang Wei: Zhejiang University
Minyuan Zhao: Washington University in St. Louis

Journal of International Business Studies, 2022, vol. 53, issue 8, No 5, 1670-1694

Abstract: Abstract Foreign acquirers often encounter severe legitimacy challenges caused by the institutional distance between the home and host countries. In this study, we propose that conduit acquisition, in which an ultimate acquirer initiates a cross-border acquisition through one of its majority-owned subsidiaries already located in the host country or countries similar to the host country, can be used as a strategic response to institutional distance. Invoking institutional theory, we argue that the local presence of the conduit acquirer can help the ultimate acquirer interpret and meet the legitimacy requirements in the host country. This effect is weaker if an ultimate acquirer has alternative sources of legitimacy and is stronger if the acquisition triggers larger legitimacy concerns. Our empirical analyses of 6365 cross-border acquisitions in the United States from 2000 to 2016 support our hypotheses. We further find that conduit acquisition indeed lowers the deal failure rate and reduces the time to completion. By highlighting the organizational structure of cross-border acquisitions, this study points to a new strategic option for multinational enterprises.

Keywords: cross-border acquisitions; institutional distance; multinational enterprises (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/s41267-022-00520-y

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