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Home Country Institutions Behind Cross-Border Acquisition Performance

by Zhu, Hong, Ma, Xufei, Sauerwald, Steve & Peng, Mike

ARTICLE | Journal of Management | Vol. 45, 2019


How do home country institutions influence cross-border postacquisition performance? We develop an institutional framework showing that informal and formal institutions not only have
important individual effects but also work together in complex and interesting ways. While collectivism and humane orientation (two major informal institutions) can facilitate postacquisition
integration and firm performance, shareholder orientation and property rights protection
(two formal institutions) constrain postacquisition integration and firm performance. As acquirers
are simultaneously embedded in their home countries’ informal and formal institutions, we
further hypothesize that the positive effects of collectivism and humane orientation can be
weakened by incompatible formal institutions that hamper postacquisition collaborative efforts.
We find strong support for our hypotheses in a multilevel analysis of a sample of 12,021 crossborder acquisitions involving 43 home and target countries between 1995 and 2003.
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