Shavin Malhotra

Simultaneous determination of optimal cultural distance and market potential in international market entry

Purpose – The purpose of this paper is to develop and test a theoretical model of managerial decisions involving international market entry.Design/methodology/approach – The authors propose a mathematical model that seeks the optimal level of cultural distance between the host and the home country and the market potential of the host country that maximizes a firms investment in an international market. The authors illustrate the intuition and the managerial application of the model using a large data set of cross‐border acquisitions, then the results of this data set are used to validate the model in a specific data context.Findings – The authors find that cultural distance and market potential have curvilinear and interaction effects on the level of equity participation. The empirical results are further used to conduct sensitivity analysis of decisions for changes in parameters.Research limitations/implications – The authors’ general approach can be used to analyze any two variables that have interacti...

Sticky Decisions Anchoring and Equity Stakes in International Acquisitions

This study proposes an anchoring perspective on international equity ownership decisions. Given the complex, uncertain nature of such decisions, we recognize the potential for heuristics such as anchoring to replace time-consuming and information-intensive analyses; specifically, top managers might draw on the recent international equity ownership decisions of others to determine how much equity stake to purchase in foreign target firms. Drawing on standard regression methods and more recently developed hedonic regression techniques, this study reveals some systematic effects of anchoring in international equity ownership decisions. Anchoring is more likely when international acquisitions occur under informational deficiencies in genuinely uncertain settings but less likely when the acquiring firms are managed by overconfident CEOs.

How Home-Peers Affect the Export Market Exit of Small Firms: Evidence From Canadian Exporters*:

We investigate how home-peer entry density (the number of same-industry firms that originate from the same country and export to the same foreign market) affects the export market exit of small firms. Drawing on panel data from 41,445 Canadian small business exporters, we find a U-shaped relationship between home-peer entry density and small firms’ hazard of exit from an export market; that is, firms’ hazard of exit decreases as the home-peer density increases to a certain point and increases after that point. We also find that this U-shaped relationship is stronger for small firms that internationalize early.

The Acquisitive Nature of Extraverted CEOs

This study examines how extraversion, a personality trait that signifies more or less positive affect, assertive behavior, decisive thinking, and desires for social engagement, influences chief executive officers’ (CEOs’) decisions and the ensuing strategic behavior of firms. Using a novel linguistic technique to assess personality from unscripted text spoken by 2,381 CEOs of S&P 1500 firms over ten years, we show that CEOs’ extraversion influences the merger and acquisition (M&A) behavior of firms above and beyond other well-established personality traits. We find that extraverted CEOs are more likely to engage in acquisitions, and to conduct larger ones, than other CEOs and that these effects are partially explained by their higher representation on boards of other firms. Moreover, we find that the acquisitive nature of extraverted CEOs reveals itself particularly in so-called “weaker” situations, in which CEOs enjoy considerable discretion to behave in ways akin to their personality traits. Subsequent analyses show that extraverted CEOs are also more likely than other CEOs to succeed in M&As, as reflected by stronger abnormal returns following acquisition announcements.

The Influence of Entry Density on the Survivability of SMEs in International Markets

This study investigates how home-peer entry density (i.e., the number of same-industry firms that originate from the same country and export to the same foreign market in the year a firm began to e...