AIB 2012 Conference Proceedings - Academy of International ...

SUNDAY
Emerging Market Multinationals and the Theory of the Multinational Enterprise
Jean-Francois Hennart, Tilburg University; Queens University; Singapore Management University
Can the OLI model explain the pattern of foreign direct investments by emerging market multinationals
(EMMs) I argue that the OLI model suffers from one basic flaw insofar as it assumes that all country-specific
advantages (CSAs) are properties of a country and freely available to all firms operating there. But some CSAs
have owners, usually local firms, and these owners can derive significant gains from the monopoly control of
these resources, which they can then use to bargain for or to purchase the firm-specific advantages (FSAs) they
lack, and compete with FSA-rich MNEs in their own market, and then internationally. I present a model that
shows when local CSA owners are likely to capture most of the gains of putting together FSA-CSA bundles on
emerging country markets, and how this has led to foreign direct investments by EMMs. (For more information,
please contact: Jean-Francois Hennart, Tilburg University; Queens University; Singapore Management
University, Netherlands: j.f.hennart@uvt.nl)
Session: 1.4.5 - Competitive
Track: 1 - Institutions, Governance, and CSR
M&A and International Business
Presented On: July 1, 2012 - 14:30-15:45
Chair: Wenjie Chen, George Washington University
Getting by with a Little Help from My Friends: Does Political Affinity Lead to Lower M&A Premiums
Olivier Bertrand, SKEMA Business School
Marie-Ann Betschinger, Higher School of Economics
Alexander M. Settles, National Research University Higher School of Economics
The role that foreign policy plays in cross-border merger and acquisition (M&A) activities is an understudied
issue. Building on the fields of International Business and International Relations, we argue that political affinity
between nation-states produces a positive environment for cross-border deals since political affinity may lead to
cooperation between governments, easing the transactions of firms from each country. We further theorize that
the bid premium effect can be accounted for in the top-down actions of these government executives in setting
the business environment or bottom-up actions from stakeholders in order to block or facilitate the acquisition.
Using a dataset of 925 cross-border deals for the period of 1990-2008, we find that political affinity between
home (acquirer) and host (target) country leads to lower bid premiums. We also confirm that the relationship
between political affinity and bid premiums is moderated by the level of democratic governance in the host
country. Moreover, effects are heterogeneous across firms: the size of the acquiring firm and the size of the
target firm attenuate the effect of political affinity on the acquisition premium. (For more information, please
contact: Alexander M. Settles, National Research University Higher School of Economics, Russia:
asettles@hse.ru)
Value Creation through Cross-Border Acquisitions by BRIC-Based Firms: An Institution-Based View
Yinuo Tang, University of Pittsburgh
Emerging markets are increasingly important in worldwide economy and by 2020, BRIC countries will contribute
49% of global economic growth. One effective international strategy for emerging markets to engage global
expansion is through cross-border acquisitions. However, whether cross-border acquisitions could create value
for acquirers remains unclear. This study uses a sample of 1002 cross-border acquisition deals in the time frame
AIB 2012 Conference Proceedings
Page 59