Conference Agenda

We explore the extent of due diligence in international alliances in the context of both magnitude and direction of institutional distance. Focusing on information asymmetries owing to institutional differences, we suggest that as institutional distance increases, so does the need for more extensive due diligence. We demonstrate that firms from stronger and weaker institutions address information asymmetries by undertaking a greater extent of due diligence, the former for the instrumental reason of information gathering and the latter as a signalling mechanism. We find support for our hypotheses from unique data collected over 15 years. Our findings highlight the value of investigating due diligence for cross-border alliances and of using theories from information economics in the international business (IB) field.

The nature of the firm-specific advantages (FSAs) of emerging economy multinationals (EMNEs) has sparked a vivid debate. However, it is unclear whether EMNEs can benefit from both traditional FSAs- based on technology, marketing, and branding -and non-traditional FSAs- based on their ability to operate in institutional voids- and whether these non-traditional FSAs are sustainable. We develop a theoretical framework that explores the interplay between FSAs based on the EMNEs’ ability to adapt to new challenges, which is also known as adaptability, and traditional FSAs. We argue that traditional FSAs strengthen the impact of the EMNEs’ non-traditional FSAs on outward foreign direct investment (OFDI). We also propose that home country institutions enhance the role of traditional FSAs but lower the effect of the EMNEs’ non-traditional FSAs on OFDI. Our analysis of a panel dataset of 38 countries and 25 years supports our hypotheses regarding the role of FSAs in enhancing OFDI and the negative moderation effect of institutions on the relationship between EMNEs’ adaptability and OFDI. However, contrary to our expectations, we find that traditional FSAs weaken the importance of non-traditional FSAs as determinants of OFDI, thus further suggesting that these non-traditional FSAs are transitory. We propose implications for theory, managers, and policymakers.

In this paper, we use the Varieties of Institutional Systems framework and comparative institutional perspective to compare and contrast the home country institutional factors in two emerging countries: Brazil and China. Our focus is on exploring how these home country institutions would impact outward foreign direct investment and cross-border mergers and acquisitions. In particular, we emphasize two distinct firm ownership characteristics: state ownership and business group affiliation. Our results show some interesting findings between firm ownership characteristics and deal characteristics such as deal structure, location choices, method of payment, and industrial diversification.

Previous research maintains that successful strategic decision-making requires perceptual accuracy regarding the firm’s environment. Nevertheless, scholars have reported errors and biases in managers’ perceptions of their firms’ internal and external environment. In international business research, it is found that managerial misperceptions of differences in foreign countries can lead to adverse performance outcomes. In this study, we aim to extend our knowledge of the effect of managers’ misperceptions of country differences on foreign location choice. More specifically, we examine the impact of managers’ under/ and overestimating formal and informal institutional distance between the home and host country on appraising a foreign location's attractiveness for the firm’s future investment. This study also examines the role of managers’ cognitive traits as the underlying reason behind managerial misperceptions that inevitably affect managerial decisions. Drawing data from a vignette experiment on 208 international managers originating in China, our ordinary least squares regression analysis sheds light on the subtle nuances of managerial decision-making. This research enriches our understanding of how and why managerial misperceptions of institutional distance influence foreign market attractiveness and underscores the significance of cognitive traits in rectifying such misperceptions.