Session 373

Global Diversification: Governance and Performance Implications

Track G

Date: Monday, September 22, 2014

 

Time: 11:00 – 12:15

Paper

Room: Malta


Session Chair:

  • Alvaro Cuervo-Cazurra, Northeastern University

Title: Global Diversification in Spanish MNEs: Dissecting the Interactions between Political Risk and Product Relatedness

Authors

  • Alfredo Jimenez, University of Burgos
  • Diana Benito-Osorio, Rey Juan Carlos University

Abstract: By combining the institutional approach with the resources and capabilities-based view and the dynamic capabilities approach, this paper investigates the mutual impact of political risk and the degree of product diversification relatedness. The results show that previous experience managing high levels of political risk in the foreign direct investment portfolio increases the number of countries where the firm may potentially invest. This multinational flexibility encourages a higher degree of product diversification relatedness by facilitating the replication of synergies, cooperation, exchange of knowledge and the appropriate control of activities in foreign markets. By contrast, the degree of relatedness in product diversification did not show any significant impact on political risk, due to the existence of instruments available to cover or minimize this risk.

Title: How Do International Business Assets Impact on M&A Performance between Multinational Enterprises?

Authors

  • Junichi Yamanoi, Waseda University
  • Akie Iriyama, Waseda University
  • Shige Makino, Chinese University of Hong Kong

Abstract: Departing from extant M&A research focusing on domestic M&As or cross-border M&As, we study domestic M&As between two globalized companies (MNEs), and examine how complementarity and integration difficulty of their international business assets influence the M&A performance. Using the event study method for 136 M&As between two MNEs located in the same home country base, we found that MNEs receive a more positive market reaction when they expand country portfolios through M&A and have greater integration opportunities of their international business assets. Additionally, we found that MNEs receive a more negative market reaction when they need to integrate more culturally and geographically distant operations. The study contributes to the literature by making a new research avenue on increasingly salient phenomena.

Title: Liability of Emergingness and Capability Catch-Up in Cross-Border M&As by Emerging Country Multinationals

Authors

  • Wenjie Chen, George Washington University
  • Alvaro Cuervo-Cazurra, Northeastern University

Abstract: We compare the impact on stock market value gains of cross-border mergers and acquisitions (M&A) in advanced economies by emerging country multinational company (EMNC) acquirers and advanced economy multinational company (AMNC) acquirers. We separate two effects that have been confounded in prior studies. First, we propose the liability of emergingness, in which we argue that EMNCs tend to experience lower value gains than AMNCs when purchasing firms in advanced economies because EMNCs have institutional resources less appropriate for operating in advanced economies than AMNCs. Second, we propose the capability catch-up argument, in which we argue that EMNCs tend to have higher value gains than AMNCs when purchasing high capability target firms in advanced economies because EMNCs can obtain relatively more value from the sophisticated capabilities.

Title: Payment Method and Equity Ownership in Cross-Border Acquisitions: A Contingency Perspective

Authors

  • Ajai Gaur, Rutgers University
  • Shavin Malhotra, University of Waterloo

Abstract: We examine the use of stocks as a payment method in mitigating the problems arising due to high information asymmetry in CBAs. Drawing on insights from information economics, we propose that stock-based payment method creates a bonding arrangement, which allows firms to assume higher ownership in CBAs. This relationship is, however, contingent on the extent of information asymmetry associated with a CBA as well as capability of the acquiring firm to deal with information asymmetry. Thus, we expect the positive relationship between stock payment and equity ownership to be stronger when CBAs are in geographically distant countries or in high technology industries; and weaker when the acquirer has greater international acquisition experience or the target is in the same industry as the acquiring firm.

All Sessions in Track G...

Sun: 08:00 – 09:15
Session 389: Managing the Multinational Organization in an Increasingly Complex World
Sun: 09:30 – 10:45
Session 221: Global Stakeholder Networks
Session 390: Local Determinants of Competitive Advantage and Disadvantage
Sun: 11:15 – 12:30
Session 2: Offshore Outsourcing, Dynamic Capabilities, and the Changing Nature of Firm Boundaries
Sun: 15:45 – 17:00
Session 270: Innovation in MNCs and Global Networks
Session 371: Inter and Intra Organizational Learning Across Borders: A Knowledge Management Perspective
Session 380: Small, Young and Entrepreneurial Firms: A Unique Perspective in Globalization
Sun: 17:15 – 18:30
Session 603: Global Strategy IG Business Meeting
Mon: 08:00 – 09:15
Session 335: Internationalization and Strategic Decisions
Session 379: Emerging Markets: Understanding the Importance of Context
Mon: 11:00 – 12:15
Session 372: The Challenges of Global Operations: Managing R&D and Complexity
Session 373: Global Diversification: Governance and Performance Implications
Mon: 14:45 – 16:00
Session 375: Changing External Environments: How do Multinationals Respond?
Session 381: Firm boundaries in Multinational Organizations: Antecedents and Consequences
Session 414: Global Networks and Business Groups
Mon: 16:30 – 17:45
Session 226: Culture, Norms and Institutions: The contextual influences on Entrepreneurship
Session 374: Antecedents and Consequences of Multinational Location Decisions
Session 382: Drivers of Multinational Performance:What, Where and When?
Tue: 08:00 – 09:15
Session 383: Globalization of R&D: Implications for Learning and Innovation
Tue: 11:00 – 12:15
Session 376: Headquarters Subsidiary Relationship: New Approaches to an Old Question
Session 384: Multinational Location Decisions: New Approaches Across Different Perspective
Tue: 15:30 – 16:45
Session 263: Innovation Models in Emerging Economies
Session 377: Organizing Assets Across Borders: Drivers and Consequences
Session 385: Multinational firms and the External Environment: The Role of Institutions
Tue: 17:15 – 18:30
Session 378: Global Outsourcing & Offshoring: Implications for Multinational Decisions


Strategic Management Society

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