This study examines the intersection of political connections, financial slack, and state ownership in influencing cross-border mergers and acquisitions, using data from 3,248 Chinese listed firms during 2006-2017. Based on transaction cost theory, this paper demonstrates that political connections generally increase the transaction costs of cross-border mergers and acquisitions and decrease firms’ propensity for it. This negative impact is mitigated by the presence and interplay of financial slack and state ownership. The findings reveal that, while political connections can constrain international expansion, financial slack and state ownership can alleviate these constraints, offering new insights into the alignment of non-market and market strategies. We expand the research on transaction cost theory and international business by considering the impact of opportunity costs on transaction costs and extending the perspective of transaction costs from the influence of the host country’s institutional environment to the characteristics of the acquiring firms.

Studies have independently explored market and non-market determinants of firm’s engagement in cross border acquisitions. However, we know much less about whether and to what extent Chinese companies’ combined market and non-market efforts influence their decision to engage in cross-border acquisitions. Our study posits that prior competitive behavior illustrates firm’s willingness and ability to partake in cross-border acquisitions, with the strength of this relationship being contingent on the firm’s level of political engagement through state ownership at either the local or central government levels. This moderation effect highlights how firms’ market-based activities and the non-market positions jointly shape firms’ cross-border acquisition decisions as well as the differential influence of state and local governments on these decisions. Based on a dataset of 1,225 acquisitions spanning from 2001 to 2020, we find empirical support for our proposed arguments.

This study examines the strategic responses of foreign and domestic firms to political uncertainty triggered by political turnover in China through Corporate Social Responsibility (CSR). Drawing on resource dependency theory, we propose that foreign and domestic firms adopt distinct approaches to manage their political dependence due to differing capabilities in leveraging political ties and CSR activities. Analyzing 29,273 observations from 3,599 public companies in China over the period 2009-2019, we find both foreign and domestic firms are likely to take government-preferred CSR to navigate this uncertainty as political ties are likely to be disrupted by political turnover. However, the nature of their responses varies with the level of political turnover; we find domestic firms intensify their government-preferred CSR efforts following national political turnovers, whereas foreign firms react to both city and national-level turnovers. We hypothesize that domestic firms, due to their superior ability to secure political legitimacy, are likely to achieve better financial outcomes post-turnover through strategically aligned CSR practices. These insights offer practical implications for both foreign and domestic firms in adopting specific CSR strategies to manage their political dependence and navigate political uncertainty.

In the face of environmental grand challenges such as plastic pollution, multinational corporations (MNCs) are increasingly developing collective action in the form of meta-organizations to support plastic waste management infrastructure and implement political strategies. This paper examines how MNC-led collective action is addressing plastic pollution in emerging economies. Based on a qualitative study of five cases of meta-organizations in West Africa and Southeast Asia, we situate our findings at three different levels. At the organizational level, we describe how subsidiaries of MNCs develop meta-organizations that focus on the issue of plastic pollution by combining political strategies and corporate social responsibility (CSR) activities. At the inter-organizational level, meta-organizations are used by MNCs to promote a particular type of mandatory regulation, which we refer to as a “hybrid” regulation. For this regulation to be successfully adopted and implemented by national governments, meta-organizations are highly dependent on the national context, with multi-stakeholder deliberation being strongly influenced by the deliberative strategy adopted by governments. By identifying multi-level mechanisms, we highlight how and why corporate-led meta-organizations adopt political strategies and/or CSR activities and develop different degrees of partialness.