The second summaryfrom the literature review is that MNEs from developed economies entering hostcountries characterize by transparent regulatory institutions, stable politicalenvironment, and less corruption will have a preference for a full acquisitionthan partial and staged acquisition for strategic asset-seeking and efficiency-seekingmotives. TABLE 6 (INSERT HERE) Table 6 above shows all efficiencyand strategic asset-seeking investments.From the table, there are seven cases of acquisitions made in advanced anddeveloped economies with exception to acquisition in South Africa (case 11). These acquisitions (Case 3, 4, 5, 9) were motivated by strategic asset-seekingand efficiency-seeking motives (Case 8, 10, 11). Out of the seven acquisitions, six were acquired fully (Case 4, 5, 8,9, 10, 11) and one was acquiredpartially (Case 3). An emerging theme ofthis study is that there are two types of strategic asset-seeking motives, onein which the technology/strategic asset is already proven in the market (e.g.
,brands, product, and process technology, key technological and innovativecompetencies) referred to as exploitative-strategic asset-seeking motives andone that the strategic seeking-asset is still under development referred to as”explorative strategic asset-seeking”. Case 3 expressed explorativestrategic asset seeking as “Acquisition involving acquiring a company inwhich its technology is under development. For example, start-up high-tech companies or developmentcompany”.
According to the acquiringmanager, “There were some preliminary studies of some new technology but it is notproven in the market yet, and we saw the high potential there, we decided toestablish some partial ownership to acquire fully later if the expectation isfulfilled. Perhaps we will acquire fullyif it gives some new technology that we do not have currently in-house but it isalready established and qualified in the market.” Furthermore, the acquiring managerexpressed that “In this type of acquisition,without the retention of the key personnel’s and incentives to keep themmotivated, the realization and the development of the strategic seeking-assetwill be utmost impossible.” Case 4 expressed exploitativestrategic asset-seeking as “Obtaining knowledge of the target firm (MunktellInc) membrane product, forward integrated value chain,access to its brand and possibilities touse its assets and patents for different types of products.” There were three cases of efficiency-seeking motives (case 8, 10, 11) andin all these acquisitions, the acquiring firm had host country knowledge before the acquisitions.The acquisition targets were competitors of the acquiring firms. The acquiringmanagers expressed host country knowledgein the form of having an earlier subsidiary operating in the host country for severalyears before the acquisition under study. Notably,the acquisitions took place in advancedand developed economies with exception to SouthAfrica.
The acquisition in South Africa(Case 11) was made during thepost-apartheid regime which constituted a period of national reconciliation,black empowerment and a period often sparkswith a violent protest for equality.However, the manager said “UPM has beendoing business in South Africa before the acquisition. The expansion of our existingbusiness to compliment UPM raflatac’scurrent product range influenced our choice for full acquisition”. With regards to formal institutional distance, the acquisitionstook place in host countries that share similarformal institutional framework mostly within the EU (exception to theUnited States and South Africa).
Countries within the EU share common formal institutional framework on acquisitions and are bound by similar laws of mergers and acquisitions (M&A). The US is an advanced economy with advanced M&A institutional framework. Also, the case firms did not inform of anyformal institutional framework that negatively impacted their acquisitionrather for those within the EU, the acquisitionmanagers only said they had towait for approval from the EU competition authority. With regards to informal institutional distance, the case companies did not cite any cultural issue thatimpacted their choice for full acquisitions or the partial acquisition in case 3.
Rather, when probed further, for example, acquisitions in Sweden (case 4, 8, 9), the acquiring managersstressed that it was not an issue. “Sweden is cultural close to Finland, and thus culture was not an issue.With regards to the case acquisition inthe US (case 3), the interviewee response was thus: “We are strong in the US market, and,we nominated three members to the Board. One of themis American, one of them is Finnish, but he has lived and still lives in theUSA for a long time, and he knows the US culture. The third member has alsoworked in the US for 40 years.
So, the culturaldifference was not an issue.” Thus far, only one case study (case 11) involved efficiency-seeking acquisition ininformal institutional distance environment. The case firm had knowledge ofhost country before the acquisition. While it is expected that efficiency-seekingacquisition will opt for full acquisitions, the presence of host countryknowledge strengthens the expected choice of full acquisition in formal andinformal institutional distance country.
Also, the strategic asset-seeking acquisitions tookplace in developed economies, although both formal and informal close institutionalcountries to Finland, there was no mention of institutional impact on theiracquisition strategies. It is however assumed that managers cite institutionalissues when they negate their intended strategies. In this case, only thenature of the strategic asset (exploitative vs. explorative) is what gives riseto the choice of partial vs. full acquisitions. Based on the following, it isproposed that: Proposition2a:Multinationals from the developed economywill opt for full acquisitions thanpartial acquisition for exploitative strategic-seeking motives.
Proposition2b:Multinationals from the developed economy will opt for partial acquisitions than full acquisition for explorativestrategic-seeking motives. Proposition2c: Hostcountry knowledge increases the likelihood that multinationals will opt for full acquisition than partial acquisition for efficiency-seeking motives when entering formal and informal institutional distance hostcountries.