Ahmad Arslan

Greenfield Investments or Acquisitions: Impacts of Institutional Distance on Establishment Mode Choice of Multinational Enterprises in Emerging Economies

ABSTRACT The authors analyze the impacts of formal and informal institutional distance on establishment mode choice of multinational enterprises (MNEs) using a sample of 343 foreign direct investments (FDIs) made in selected emerging economies of Central and Eastern Europe, Asia, and Latin America by the Finnish MNEs. This study contributes to conceptualization and operationalization of institutional distance as well as its application in international business studies. The empirical analysis revealed that high informal institutional distance results in preference of greenfield investments by the Finnish MNEs as the authors hypothesized. However, the authors also found that high formal institutional distance results in preference of acquisitions, which is opposite the study hypothesis as well as the findings of previous studies addressing similar issues.

Ownership Strategy of Multinational Enterprises and the Impacts of Regulative and Normative Institutional Distance: Evidence from Finnish Foreign Direct Investments in Central and Eastern Europe

This study is one of the first to address the ownership strategy of multinational enterprises from the Nordic region using the concepts of regulative and normative institutional distance. This study contributes to the application of the institutional distance concept in foreign market entry studies. The results of our study challenge some of the findings of the previous studies due to unique sample and settings of the study. Based on a sample of 345 foreign direct investments (FDIs) made by 122 Finnish firms in 11 Central and Eastern European countries during 1990–2007, we found out that high normative institutional distance leads to the preference for wholly owned subsidiaries, which is opposite to our hypothesis and findings of previous studies. Moreover, the impacts of regulative institutional distance and international experience of the firm on ownership strategy are found to be nonsignificant in our study.

Determinants of foreign direct investment ownership mode choice: Evidence from Nordic investments in Central and Eastern Europe

This paper addresses the determinants of foreign direct investment (FDI) ownership mode choice of firms in Central and Eastern Europe (CEE) based on three most important theoretical paradigms of IB studies i.e. transaction cost economics, resource based view and institutional theory. The empirical analysis of 720 FDIs made by the firms from all four Nordic countries in CEE region during 1990-2007 revealed that the probability WOS formation was increased by the high RD while for FDIs made during 2000s, international experience and strength of market conforming values in the target country became significant determinants of ownership mode choice for Nordic FDIs.

Partial or Full Acquisition: Influences of Institutional Pressures on Acquisition Entry Strategy of Multinational Enterprises

Expertly written by leading scholars from a range of different starting points, this compendium presents a synthesis of recent work relating to institutionally-informed accounts from transitional and emerging markets, as well as from mature economies. It specifically focuses on the linkage between institutions and what goes on inside firms, and the relationship between setting, strategic choice and systemic outcomes.

Influences of cognitive dimensions on the collaborative entry mode choice of small- and medium-sized enterprises

Purpose The purpose of this paper is to address internationalisation of small- and medium-sized enterprises (SMEs) by specifically focussing on collaborative entry modes. Despite significant research done on market entry and internationalisation strategies of firms, the use of collaborative entry modes by SMEs during internationalisation has not received a lot of attention. The authors contribute to foreign market entry studies by analysing the influences of cognitive dimensions on collaborative entry mode choice (equity vs non-equity modes) of SMEs in their international markets. Design/methodology/approach The authors analyse the influences of cognitive dimensions on the choice between equity-based vs non-equity-based collaborative entry modes. The empirical sample consists of internationalisation strategies of 345 Italian SMEs, where the authors used a questionnaire to collect the data. The authors use structural equation modelling to analyse influences of factors like asymmetric information, informal institutional distance, time trends of country, perception of size and resources of potential host country partners, and perception of host country partners’ power on this important market entry mode. Findings The results show that high informal institutional distance leads to preference of non-equity-based collaborative entry mode by Italian SMEs. The authors also find that positive time trends of the host country, positive perception of size and resource of the local partner, as well as the local partners’ power leads to preference of equity-based collaborative entry mode by Italian SMEs. Originality/value This study focusses on an ignored aspect of market entry strategies, i.e., equity vs non-equity collaborative entry mode choice of SMEs. The authors use insights from resource-based view and cognitive dimensions literature, to address the influences of five cognitive dimensions on the collaborative entry mode choice of SMEs during their internationalisation.

Influences of Institutional Distance and MNEs’ Host Country Experience on the Ownership Strategy in Cross-Border M&As in Emerging Economies

This article analyzes ownership strategy in cross-border mergers and acquisitions (CB M&As) undertaken by the multinational enterprises (MNEs) in emerging economies. We use new institutional economics and organizational learning theories to hypothesize and empirically analyze the influence of formal and informal institutional distance, and MNEs’ host country experience on the MNEs’ choice between full and partial CB M&As. The empirical analysis is based on a sample of 184 CB M&As launched by MNEs in emerging economies. Our empirical results revealed that high formal and informal institutional distances lead to a preference for partial CB M&As; however, MNEs’ host country experience moderated the relationship between institutional distance and the MNEs’ choice between full and partial CB M&As. We found that MNEs with prior investment experience in the focal emerging market opted for full CB M&As over partial CB M&As despite high formal and informal institutional differences.

Acquisition Entry Strategy of Nordic Multinational Enterprises in China: An Analysis of Key Determinants

ABSTRACT This article addresses the key determinants of acquisition entry strategy (i.e., the choice between full versus partial acquisition) of Nordic multinational enterprises (MNEs) in China. Although general establishment and entry mode strategies have been a highly researched area in international business studies, acquisitions as a specific entry strategy and its different aspects have been scarcely researched. Therefore, the current study aims to fill the gap in literature by analyzing determinants of acquisition entry strategy based on three important theoretical bases: transaction cost economics, resource-based view, and institutional theory. Our study is one of the first to analyze acquisition entry strategy of MNEs from all four Nordic economies (Denmark, Finland, Norway, and Sweden) in China during 1987 through 2012, and this unique empirical context adds further value to the study findings. The empirical results show that high target country experience, high cultural distance, high level of product diversification, and subsidiary location in institutionally developed and open cities of China were positively associated with choice of full acquisitions by Nordic MNEs. On the other hand, high industry research and development intensity and timing of acquisition led to the choice of partial acquisitions by the investing Nordic MNEs.

Equity Ownership in Cross-border Mergers and Acquisitions by British Firms: An Analysis of Real Options and Transaction Cost Factors

The authors investigate the factors influencing the share of equity ownership sought in cross-border mergers and acquisitions (CBM&As). Drawing on real options theory and transaction cost economics (TCE), they address and hypothesize key factors linked to commitment under exogenous uncertainty and the separation of desired and non-desired assets’ influence on share of equity sought by acquiring firms in CBM&As. Empirical analysis based on 1872 CBM&As undertaken by British firms in both developed and emerging economies shows that British MNEs are more likely to pursue a partial acquisition in a target foreign firm when those foreign firms are from culturally distant countries. Further, findings support the view that the high cost of separating desired assets from non-desired assets motivates firms to make a partial acquisition rather than acquire the target completely. This is one of the first studies to use real options theory to address the cost of commitment under exogenous uncertainty, as well as TCE logic to address the separation of desired and non-desired assets in the target firm while analysing equity ownership sought in CBM&As. Empirically, this paper contributes by examining CBM&As by British firms in both developed and emerging markets.

Internationalization of emerging economy firms to developed economies: a discussion on institutional pressures and marketing and supply chain capabilities

Despite extensive research on internationalization, little attention has been paid on dynamic capabilities within the realm of marketing and supply chain management in relation to internationalization of firms. To address this gap, we theoretically address the internationalization of emerging economy firms to developed economies from the integrative perspective of marketing and supply chain management, adopting dynamic capabilities and institutional theories as theoretical bases. We theoretically analyze the relationships between marketing and supply chain capabilities and institutional pressures and advance a framework for the internationalization of emerging economy firms to developed economies. We argue that marketing and supply chain capabilities can positively influence both supply chain learning, which could be pivotal to succeed and survive in developed economies, and conformance to institutional pressures that emerging economy firms are likely to face while internationalizing to developed economies.

Determinants of reverse marketing knowledge transfer potential from emerging market subsidiaries to multinational enterprises’ headquarters

Abstract Emerging markets (EM) are becoming increasingly important for multinational enterprises because of their high growth potential and future prospects. The unique circumstances in EM lead to increased pressure to offer creative marketing solutions that can be leveraged across the multinational network. Setting up subsidiaries to tap into these markets offers companies the opportunity to integrate in the local community and access its knowledge-base for local and global innovations. Literature, however, reveals that EM subsidiaries have been largely ignored concerning their potential for reverse knowledge transfer (RKT), and marketing initiatives are expected to be developed in mature, developed markets. Our paper fills this gap in research and contributes to extant literature by identifying factors at unit, relationship and knowledge levels influencing RKT potential specific to marketing knowledge from EM subsidiaries. The conceptual discussion leads to study propositions and conceptual framework.