IEMS - Thought Leadership Brief #74

4 SPRING 2023 NO.74 / THOUGHT LEADERSHIP BRIEF Read all HKUST IEMS Thought Leadership Briefs at T: (852) 3469 2215 E: W: A: Lo Ka Chung Building, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon With Support from Our study contributes to the understanding of the failure and success of cross-border M&As conducted by firms from emerging markets. The majority of the studies focus on firm, deal and industry level factors. A recent trend of those studies have paid attention to institutional factors such as regulatory resistance from the national level. i.e. national security concerns of developed countries. We contribute by offering a new lens which highlights the role of the local community’s ideology. Such ideology starts to play an important role after the announcement of the foreign deals. As the public takeover process includes final negotiations of strategic and administrative activities regarding implementation, communication and integration with and inside the community, unanticipated new information could result in renegotiations and jeopardize the deal. The strategic implication for foreign acquirers is that in addition to the regulatory requirements at the national level, such informal processes at the local communities where acquisition take place are also crucial for them to take into consideration even before the announcement of the deal. They need to anticipate the resistance that might arise due to the social-cognitive mechanisms. We also caution that too much media exposure is not necessarily a good thing for foreign acquirers, unless they can receive very positive coverage which may alleviate the concern of threat and unfamiliarity. One caveat is that we only examine Chinese firms’ M&As in the U.S., while the dynamics could be different if other foreign countries undertake the same activities. For example, even the conservative communities may possess a more friendly perception toward companies from the U.S. allies. Comparative studies suggest fruitful research directions. In sum, this study presents a community-based mechanism to explain the failure rates of emerging multinationals’ M&A deals in developed countries. It complements extant institutional studies by focusing on the within-country heterogeneities of political ideologies that shape local community perceptions of and attitudes toward foreign acquirers and influence the cross-border M&A outcomes. Danqing Wang is an assistant professor in the department of management at the Hong Kong University of Science and Technology. She obtained her Ph.D. in management from INSEAD, France. Her research focuses on state-firm interactions and firms’ non-market strategies in emerging economies. Her work has appeared at Administrative Science Quarterly and Academy of Management Journal, and will appear at Journal of International Business Studies and Journal of Business Ethics. She is currently serving on the editorial board of Administrative Science Quarterly and Management and Organization Review. She is the recipient of the WAIB emerging woman scholar award for 2018 and has also received the Faculty Outstanding Teacher award in 2018 when working at the University of Hong Kong.