The Effect Of Liability Of Foreignness On Cross-border Merge & Acquisition Performance

Why are Chinese latecomer firms obsessed with "Going out" when they face with Ownership-Specific Liabilities,Local-Specific Liabilities and Internal-Specific Liabilities in the cross-border Mergers and Acquisitions(M&A)?Institutional theory points out that organizational success depends on factors other than efficient coordination and control of productive activities.Independent of their productive efficiency,organizations which exist in highly elaborated institutional environments and succeed in becoming isomorphic with these environments gain the legitimacy and resources needed to survive.When the "going out" are adopted by the vast majority of enterprises in the organizational field,the focal firms will also choose cross-border M&A to obtain institutional legitimacy by mimetic isomorphism.Based on the O-L-I disadvantage perspective and the organization legitimacy views,this paper studies the mechanism among Liabilities of Foreignness(LOF),mimetic isomorphism and the cross-border M&A performance of the emerging economies latecomer firms.In this paper,I analyze data from 150 cases of cross-border M&A about 106 Chinese listed firms from 2004 to 2015 and get following results:?The cross-border M&A of Chinese latecomer firms have a negative impact on the performance;?The LOF's negative impact on cross-border M&A performance caused by information asymmetry is significantly stronger than the negative impact by the lack of legitimacy;?The mimetic isomorphism for institutional legitimacy has significant moderating effect on firms' cross-border M&A performance relation both similar-firm-mimetic index and successful-firm-mimetic index.Under the special situation in China,similar mimetic isomorphism can significantly weaken the negative impact on corporate performance caused by LOF,but successful mimetic isomorphism can significantly strengthen the negative impact on corporate performance caused by LOF.This shows that firms can obtain more organizational legitimacy by mimetic isomorphism and then improve their cross-border M&A performance.On the contrary,when latecomer firms are limited by their own resources and scale constraints,the efficiency mechanism will be stronger than the institutional mechanism.And blind successful mimetic isomorphism will be harmful to Corporate performance.This unique O-L-I liabilities views and organizational legitimacy theoretical perspective will contribute a mechanism of cross-border M&A performance improving to cross-border M&A performance study area by taking mimetic isomorphism in organizational field as a moderator.