| As latecomers to global business competition, emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions to swiftly acquire strategic assets, such as brands and distribution channels, compensating for their competency deficiency. Developed markets with well-established firms and well-developed market-supporting institutions become important destinations for EMNCs' strategic asset-seeking investments. Institutional distance, national differences in the institutional environment, constitutes a major source of competitive disadvantage for foreign firms competing with indigenous firms. Foreign firms need to overcome the challenges of unfamiliarity, relational, and discriminatory hazards to establish legitimacy in the host market. Compared to established multinationals that originate from other advanced markets (AMNCs), EMNCs potentially face additional legitimacy threats derived from their countries of origin. Facing large institutional distance, AMNCs are likely to take less ownership to rely on a local firm's legitimacy, but EMNCs may lack the opportunity to find a willing local partner. The findings of the current study generally support that the negative association between institutional distance and ownership position is less apparent for EMNCs than for AMNCs. Furthermore, not all emerging markets are homogeneous in their country development. EMNCs, originating from countries with higher levels of human capital development and global connectedness are less impacted by institutional distance in their ownership strategy. The findings of the current study also suggest EMNCs' firm level characteristics have minimal effects in alleviating the influence of institutional distance on their ownership decisions. Additionally, controlling for institutional distance, I find that EMNCs with a higher level of ownership position experience better sales growth in subsequent years. |
