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Shopping as locals: A study of conduit acquisition by multinational enterprises

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Abstract

Foreign acquirers often encounter severe legitimacy challenges caused by the institutional distance between the home and host countries. In this study, we propose that conduit acquisition, in which an ultimate acquirer initiates a cross-border acquisition through one of its majority-owned subsidiaries already located in the host country or countries similar to the host country, can be used as a strategic response to institutional distance. Invoking institutional theory, we argue that the local presence of the conduit acquirer can help the ultimate acquirer interpret and meet the legitimacy requirements in the host country. This effect is weaker if an ultimate acquirer has alternative sources of legitimacy and is stronger if the acquisition triggers larger legitimacy concerns. Our empirical analyses of 6365 cross-border acquisitions in the United States from 2000 to 2016 support our hypotheses. We further find that conduit acquisition indeed lowers the deal failure rate and reduces the time to completion. By highlighting the organizational structure of cross-border acquisitions, this study points to a new strategic option for multinational enterprises.

Résumé

Les acquéreurs étrangers sont souvent confrontés à de sérieux défis de légitimité causés par la distance institutionnelle entre le pays d'origine et le pays d'accueil. Dans cette recherche, nous proposons que l’acquisition de conduite, dans laquelle un acquéreur final amorce une acquisition transfrontalière par l'intermédiaire de l'une de ses filiales en propriété majoritaire déjà situées dans le pays d'accueil ou dans des pays similaires à ce dernier, peut être utilisée comme une réponse stratégique à la distance institutionnelle. Nous appuyant sur la théorie institutionnelle, nous argumentons que la présence locale de l'acquéreur de conduite peut aider l'acquéreur final à interpréter et à remplir les exigences en matière de légitimité dans le pays d’accueil. Cet impact est plus faible si un acquéreur final a des sources alternatives de légitimité. Il est plus fort si l'acquisition déclenche des préoccupations de légitimité plus importantes. Les hypothèses sont corroborées par nos analyses empiriques sur 6,365 acquisitions transfrontalières aux États-Unis durant la période 2000–2016. Nous constatons en outre que l'acquisition de conduite diminue véritablement le taux d'échec des transactions et réduit d’ailleurs le temps de réalisation. En se focalisant sur la structure organisationnelle des acquisitions transfrontalières, cette recherche met en lumière une nouvelle option stratégique pour les entreprises multinationales.

Resumen

Los adquirentes extranjeros con frecuencia se enfrentan a graves problemas de legitimidad causados por la distancia institucional entre el país de origen y el de acogida. En este estudio, proponemos que la adquisición por conducto, en la que un adquirente final inicia una adquisición transfronteriza a través de una de sus filiales de propiedad mayoritaria ya situada en el país anfitrión o en países similares al país anfitrión, puede utilizarse como respuesta estratégica a la distancia institucional. Invocando la teoría institucional, sostenemos que la presencia local del adquirente de conducto puede ayudar al adquirente final a interpretar y cumplir los requisitos de legitimidad en el país de acogida. Este efecto es más débil si el adquirente final tiene fuentes alternativas de legitimidad y es más fuerte si la adquisición provoca mayores problemas de legitimidad. Nuestros análisis empíricos de 6.365 adquisiciones transfronterizas en Estados Unidos entre 2000 y 2016 apoyan nuestras hipótesis. Además, encontramos que la adquisición por conducto en efecto disminuye la tasa de fracaso de las operaciones y reduce el tiempo hasta su finalización. Al resaltar a estructura organizacional de las adquisiciones transfronterizas, este estudio indica una nueva opción estratégica para las empresas multinacionales.

Resumo

Adquirentes estrangeiros por vezes enfrentam sérios desafios de legitimidade causados pela distância institucional entre o país de origem e o país anfitrião. Neste estudo, propomos que a aquisição via canal, na qual um adquirente final inicia uma aquisição transfronteiriça por meio de uma de suas subsidiárias majoritárias já localizadas no país anfitrião ou em países semelhantes ao país anfitrião, pode ser usada como uma resposta estratégica ao distanciamento institucional. Invocando teoria institucional, argumentamos que a presença local do adquirente via canal pode ajudar o adquirente final a interpretar e atender requisitos de legitimidade no país anfitrião. Este efeito é mais fraco se um adquirente final tiver fontes alternativas de legitimidade e é mais forte se a aquisição gera maiores preocupações de legitimidade. Nossas análises empíricas de 6.365 aquisições transfronteiriças nos Estados Unidos de 2000 a 2016 apoiam nossas hipóteses. Nós também descobrimos que a aquisição via canal realmente reduz a taxa de insucesso do negócio e reduz o tempo de conclusão. Ao salientar a estrutura organizacional de aquisições transfronteiriças, este estudo aponta para uma nova opção estratégica para empresas multinacionais.

摘要

外国收购方经常由于母国和东道国之间的制度距离遇到严重的合法性挑战。在本研究中, 我们提出管道收购, 即最终收购方通过其已位于东道国或与东道国类似国家的控股子公司之一发起跨境收购, 可作为对制度距离的战略响应。援引制度理论, 我们认为管道收购方在当地的存在可以帮助最终收购方解析和满足东道国的合法性要求。如果最终收购方有其它合法性来源, 这种影响会减弱, 而如果收购引发更大的合法性担忧, 这种影响会更强。我们对 2000 至 2016 年间美国 6,365 起跨境收购的实证分析支持了我们的假设。我们进一步发现, 管道收购确实降低了交易失败率并缩短了完成时间。本研究通过突出跨境收购的组织结构, 为跨国企业指明了新的战略选择。

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ACKNOWLEDGEMENTS

The authors are grateful to the comments received from the editors Verbeke Alain, Jiatao Li, and three anonymous reviewers. Wang appreciates the support from the National Natural Science Foundation of China (71902109), China Postdoctoral Science Foundation (2019T120327; 2018M641972), and the National Social Science Foundation of China (20AGL008). Wei appreciates the support from NSFC Key Project (71732008), the fourth project (72091312) of Major Program of NSFC (72091310).

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Authors and Affiliations

  1. Shanghai University of Finance and Economics, Shanghai, China

    Shixiang Wang

  2. Zhejiang University, Hangzhou, China

    Jiang Wei

  3. Washington University in St. Louis, St. Louis, USA

    Minyuan Zhao

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  1. Shixiang Wang
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Correspondence to Minyuan Zhao.

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Accepted by Jiatao Li, Area Editor, 22 February 2022. This article has been with the authors for four revisions.

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Wang, S., Wei, J. & Zhao, M. Shopping as locals: A study of conduit acquisition by multinational enterprises. J Int Bus Stud 53, 1670–1694 (2022). https://doi.org/10.1057/s41267-022-00520-y

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