TY - JOUR
T1 - Institutional distance and cross-border acquisitions into emerging markets: The moderating effect of context experience
AU - Depperu, Donatella
AU - Galavotti, Ilaria
AU - Baraldi, Federico
PY - 2024
Y1 - 2024
N2 - Purpose – This study aims to examine the multidimensional nature of institutional distance as a driver of acquisition decisions in emerging markets. Then, this study aims to offer a nuanced perspective on the role of its various formal and informal dimensions by taking into account the potential contingency role played by a
firm’s context experience.
Design/methodology/approach – Building on institutional economics and organizational institutionalism, this study explores the heterogeneity of institutional distance and its effects on the decision to enter emerging versus advanced markets through cross-border acquisitions. Thus, institutional distance is disentangled into
its formal and informal dimensions, the former being captured by regulatory efficiency, country governance and financial development. Furthermore, our framework examines the moderating effect of an acquiring firm’s experience in institutionally similar environments, defined as context experience. The hypotheses are analyzed on a sample of 496 cross-border acquisitions by Italian companies in 41 countries from 2008 to 2018.
Findings – Findings indicate that at an increasing distance in terms of regulatory efficiency and financial development, acquiring firms are less likely to enter emerging markets, while informal institutional distance is positively associated with such acquisitions. Context experience mitigates the negative effect of formal
distance and enhances the positive effect of informal distance.
Originality/value – This study contributes to institutional distance literature in multiple ways. First, by bridging institutional economics and organizational institutionalism and second, by examining the heterogeneity of formal and informal dimensions of distance, this study offers a finer-grained perspective on how institutional distance affects acquisition decisions. Finally, it offers a contingency perspective on the role of context experience.
AB - Purpose – This study aims to examine the multidimensional nature of institutional distance as a driver of acquisition decisions in emerging markets. Then, this study aims to offer a nuanced perspective on the role of its various formal and informal dimensions by taking into account the potential contingency role played by a
firm’s context experience.
Design/methodology/approach – Building on institutional economics and organizational institutionalism, this study explores the heterogeneity of institutional distance and its effects on the decision to enter emerging versus advanced markets through cross-border acquisitions. Thus, institutional distance is disentangled into
its formal and informal dimensions, the former being captured by regulatory efficiency, country governance and financial development. Furthermore, our framework examines the moderating effect of an acquiring firm’s experience in institutionally similar environments, defined as context experience. The hypotheses are analyzed on a sample of 496 cross-border acquisitions by Italian companies in 41 countries from 2008 to 2018.
Findings – Findings indicate that at an increasing distance in terms of regulatory efficiency and financial development, acquiring firms are less likely to enter emerging markets, while informal institutional distance is positively associated with such acquisitions. Context experience mitigates the negative effect of formal
distance and enhances the positive effect of informal distance.
Originality/value – This study contributes to institutional distance literature in multiple ways. First, by bridging institutional economics and organizational institutionalism and second, by examining the heterogeneity of formal and informal dimensions of distance, this study offers a finer-grained perspective on how institutional distance affects acquisition decisions. Finally, it offers a contingency perspective on the role of context experience.
KW - Emerging markets
KW - Experience
KW - Institutional distance
KW - Mergers and acquisitions
KW - Emerging markets
KW - Experience
KW - Institutional distance
KW - Mergers and acquisitions
UR - https://publicatt.unicatt.it/handle/10807/279036
U2 - 10.1108/IJOEM-12-2021-1897
DO - 10.1108/IJOEM-12-2021-1897
M3 - Article
SN - 1746-8809
VL - 19
SP - 1449
EP - 1472
JO - International Journal of Emerging Markets
JF - International Journal of Emerging Markets
IS - 5
ER -