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Institutional Distance, Social Capital, and the Performance of Foreign Acquisitions in the United States

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Date Issued:
2008
Summary:
This dissertation examined the roles of institutional distance and corporate social capital in the unique context of foreign acquisitions in the United States. A conceptual framework was developed which suggests that institutional distance has a dual impact on international acquisition performance. Institutional distance makes it more difficult for foreign acquirers to establish legitimacy in the United States, and therefore adversely affects acquisition success. Institutional distance also has a beneficial effect on acquisition performance to the extent to which it provides valuable opportunities for institutional arbitrage. Corporate social capital was discussed as a strategy to aid foreign MNCs in overcoming the detrimental, and leveraging the beneficial effects of institutional distance on these cross-border transactions. Analysis results based on a sample of 247 large-scale acquisitions in the US by publicly traded foreign acquirers that were made between 2000 and 2005 provided overall support for the hypothesized model. It was found that each of the three dimensions of institutional distance - regulatory, normative, and cultural distance- was negatively associated with the local media endorsement of foreign acquirers. Furthermore, regulatory distance was negatively associated with the investment ratings of foreign acquirers, and normative distance had a positive impact on the number of local lawsuits filed against these firms. Results from this study also showed that the existence of corporate social capital aided foreign acquirers in overcoming the negative effect of regulatory distance on both the firms' investment ratings and their local media endorsement. The findings further revealed that media endorsement of foreign acquirers in the United States was positively related to acquisition performance as indicated by cumulative abnormal returns. Moreover, legitimate foreign acquirers with high investment ratings were able to leverage cultural distance, given that the relationship between investment ratings and acquisition performance was positive for this group of acquirers. The results reported in this study therefore emphasize the importance of organizational legitimacy and corporate social capital for international acquisition performance, and shed light on the detrimental and beneficial roles of institutional distance in this context. In so doing, this dissertation strengthens institutional theory and social capital theory as powerful perspectives in international strategic management.
Title: Institutional Distance, Social Capital, and the Performance of Foreign Acquisitions in the United States.
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Name(s): Rottig, Daniel, author
Reus, Taco H., Thesis advisor
Florida Atlantic University, Degree grantor
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Date Created: 2008
Date Issued: 2008
Publisher: Florida Atlantic University
Place of Publication: Boca Raton, Fla.
Physical Form: application/pdf
Extent: 272 p.
Language(s): English
Summary: This dissertation examined the roles of institutional distance and corporate social capital in the unique context of foreign acquisitions in the United States. A conceptual framework was developed which suggests that institutional distance has a dual impact on international acquisition performance. Institutional distance makes it more difficult for foreign acquirers to establish legitimacy in the United States, and therefore adversely affects acquisition success. Institutional distance also has a beneficial effect on acquisition performance to the extent to which it provides valuable opportunities for institutional arbitrage. Corporate social capital was discussed as a strategy to aid foreign MNCs in overcoming the detrimental, and leveraging the beneficial effects of institutional distance on these cross-border transactions. Analysis results based on a sample of 247 large-scale acquisitions in the US by publicly traded foreign acquirers that were made between 2000 and 2005 provided overall support for the hypothesized model. It was found that each of the three dimensions of institutional distance - regulatory, normative, and cultural distance- was negatively associated with the local media endorsement of foreign acquirers. Furthermore, regulatory distance was negatively associated with the investment ratings of foreign acquirers, and normative distance had a positive impact on the number of local lawsuits filed against these firms. Results from this study also showed that the existence of corporate social capital aided foreign acquirers in overcoming the negative effect of regulatory distance on both the firms' investment ratings and their local media endorsement. The findings further revealed that media endorsement of foreign acquirers in the United States was positively related to acquisition performance as indicated by cumulative abnormal returns. Moreover, legitimate foreign acquirers with high investment ratings were able to leverage cultural distance, given that the relationship between investment ratings and acquisition performance was positive for this group of acquirers. The results reported in this study therefore emphasize the importance of organizational legitimacy and corporate social capital for international acquisition performance, and shed light on the detrimental and beneficial roles of institutional distance in this context. In so doing, this dissertation strengthens institutional theory and social capital theory as powerful perspectives in international strategic management.
Identifier: FA00000611 (IID)
Note(s): College of Business
Dissertation (Ph.D.)--Florida Atlantic University, 2008.
Subject(s): International Economic Relations
Foreign Trade Regulation
Export Marketing--Management
International Business Enterprises--Management
Held by: Florida Atlantic University Digital Library
Sublocation: Boca Raton, Fla.
Held by: Florida Atlantic University Libraries
Persistent Link to This Record: http://purl.flvc.org/fau/fd/FA00000611
Sublocation: Digital Library
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Restrictions on Access: Copyright © is held by the author with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
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Host Institution: FAU
Is Part of Series: Florida Atlantic University Digital Library Collections.