Institutional Dichotomy and Cross-Border Inbound Acquisitions: A Study of Three Cases

Reddy, Kotapati Srinivasa (2014): Institutional Dichotomy and Cross-Border Inbound Acquisitions: A Study of Three Cases.

Abstract

The extant literature on cross-border mergers and acquisitions suggested that firm-specific, deal-specific, and country-specific determinants affect both negotiation process and post-merger integration. In particular, a great extent of strategy, international business and finance scholars argued that legal and regulatory infrastructure, level of investor protection, financial markets development, international taxation provisions, and macroeconomic indicators have been most important factors significantly affecting the cross-border acquisitions completion. In fact, we found significant knowledge gap on why cross-border acquisitions often litigate, delay and unsuccessful, especially when target firm is associated with developing country. With this in mind, we develop and analyze three litigated cross-border acquisitions connected to the host country-India: (i) Vodafone acquisition of Hutchison in 2007, (ii) unsuccessful cross-border merger between Bharti Airtel and MTN Group in 2008-09, and (iii) Vedanta Resources acquisition of Cairn India in 2010-11. To do so, we adopt qualitative case study research both to test existing theory and to build new theory. Hence, we accomplish research goals based on our new multi-case research design that assist qualitative researchers to overcome institutional barriers accountable for data collection as well as to study the emerging markets phenomenon. Regarding theory testing, we test seventeen theories propounded in management-related literature. Based on limitations of the existing theories and multi-case proofs, we develop new theory and offer lawful propositions for future research that would advance the current knowledge on institutional role in cross-border acquisitions. In addition, we also recommend an alternative foreign market entry model for making successful business entry in developing countries. We therefore conclude that a given country’s weak regulatory system benefits acquirer, target, or both; simultaneously, the behavior would adversely affect on economic benefit of that host country.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cross-border mergers and acquisitions; Internationalization; Foreign market entry strategies; International diversification; Foreign direct investment; International business research; Institutional theory; Case study research; Emerging markets; Asian markets; India
• Subjects: F - International Economics > F2 - International Factor Movements and International Business; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; G - Financial Economics > G3 - Corporate Finance and Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; K - Law and Economics > K2 - Regulation and Business Law; K - Law and Economics > K2 - Regulation and Business Law > K22 - Business and Securities Law; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M16 - International Business Administration

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