The Zone of Conformity: A Comparison of Private and State-Controlled Enterprises in M&As

Sunny Li Sun () and Young Jin Ko ()
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Sunny Li Sun: University of Massachusetts Lowell
Young Jin Ko: Sungkyunkwan University

Management International Review, 2023, vol. 63, issue 2, No 2, 247-284

Abstract: Abstract Drawing from the literature on institutional pressure, we argue that firms with different ownership types have different strategic options in domestic and overseas markets, namely the zone of conformity. State-controlled enterprises (SCEs) have a broader range of acceptable actions than do private-controlled enterprises (PCEs) in a domestic market but face more sanctions and stricter conformity requests in an overseas market. The concept of the zone of conformity predicts SCEs have a higher probability of deal failure overseas than in domestic markets and strategically seek less equity ownership of target firms in cross-border deals. The autocracy level of target country moderates the M&A behaviors difference between SCEs and PCEs. Our analysis of 12,497 Chinese mergers and acquisitions supports the study hypotheses.

Keywords: State-controlled enterprises; Institutional legitimacy; M&A deal abandonment; Equity ownership sought (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11575-023-00501-9

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