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Comparison Between Institutional Differences and Organizational Learning - Institutional Theory - Institutional Theory and Agency Theory

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Comparison among the three papers

Here are the three papers listing according to the public time.The first one:Cross-border acquisition abandonment and completion: The effect of institutional differences and organizational learning in the international business service industry, 1981–2001. The second one:Completion of Chinese overseas acquisitions: Institutional perspectives and evidence. The third one:The value of institutional shareholders: Evidence from cross-border acquisitions by Chinese listed firms. The report is about the comparison between the three papers from four aspects which are theory,gap,research methods and conclusion.And finally I will give some possible improvements.

  1. Theory

The first paper is based on institutional differences and organizational learning.The second paper is based on institutional theory. The third paper is based on institutional theory and Agency theory.

1.1The first paper

It is based on institutional differences and organizational learning.our study is based on North’s (1990) political economy of institutions and economic behavior, which emphasizes the critical interaction between institutions and organizations. North’s key argument is that the success of organizations over time is not only determined by agents’ skills and organizational learning, but also fundamentally influenced by the governance structure of the broader environment.

1.2The second paper

 It uses a different approach to study the international acquisition activities by drawing insights from institutional theories (North, 1990; Scott, 1995), which emphasize the effects of institutional pressures on the success and survival of organizations.

1.3The third paper

    It is still based on institutional theory.Organizations’ strategy and practice are to a large extent shaped by the home and host countries’institutional context (Buckley, et al., 2007; Mudambi & Navarra, 2002; Peng & Heath, 1996; Peng et al., 2008; Wright, et al., 2005).The moderating effect of institutional environment.Moreover,it is also based on Agency theory. Agency theory has long considered corporate governance to be important factor in the motivations for firms’ overseas acquisition activities (Erel, et al., 2012; Rossi & Volpin, 2004), and the determinants of value creation in CBAs (Bris et al., 2008; Bris & Cabolis, 2008; Chen & Young, 2010; Martynova & Renneboog, 2008).

  1. Gap

2.1 The first paper

    It focuses on the period between the deal announcement and deal resolution. the role of national cultural differences in the intermediate acquisition phase does not reveal the entire complexity of acquisition deal-making. The other two papers don’t consider the period.we determined the duration of an acquisition/merger deal as the time between the public announcement and the deal completion. However, the latter event can be regarded as a signal of a deal maturity, rather than of completion, if we perceive an acquisition deal as fully completed only after the finalization of the post-merger integration phase,a bias of our results may be caused by the nature of the examined acquisitions: we looked at deals between firms originating from developed market economies; a greater variation or complexity in deals’ institutional environments could possibly alter the results of the study.Despite some significant advances in the financial and legal literatures, researchers have generally not considered the complexities of the bargaining process associated with M&A deals after the signing of an initial agreement (Hotchkiss et al., 2005). Researchers interested in the success of mergers and acquisitions mostly examine the financial performance of a post-acquisition or post-merger entity (Porth, 1992; Ramaswamy, 1997). Although studying post-acquisition performance is certainly useful, we argue that more attention to pre-merger activities is needed, because empirical evidence suggests that firms still abandon up to 25% of their  acquisition  attempts  at  some  point  in  the  pre-completion stage (Holl & Kyriazis, 1996).

2.2 The second paper

This study seeks to apply institutional theories to examine the likelihood that an acquisition deal of a Chinese-based acquirer is completed. As the success of an acquisition is influenced by factors at the country-, industry- and firm-levels, we examine the institutional effects with a multi-level analytical approach. At the country level, we believe that the completion of acquisition is affected by the institutional quality in the host countries. At the industry level, we speculate that industries subject to more stringent institutional constraints result in lower probability of acquisition completion. At the firm level, we conceive that acquired and acquiring firms with different ownership arrangement face different institutional constraints. Moreover, we expect that the effects of a firm’s specific factors on the likelihood of the acquisition completion are moderated by the institutional profile of the host country. Overall, the likelihood of a Chinese firm to succeed in a cross-border acquisition is argued as an outcome of the multi-level institutional contingencies, depending upon the institutional quality of the host country, institutional stringency in association with the nature of the target industry and firm, and the acquiring firm’s disadvantage (or advantage) implied by the Chinese institutional environment.

 At the country level, the institutional quality is derived from ICRG. We choose seven ICRG political risking measures – government stability, socioeconomic conditions, investment profile, law and order, democratic accountability, prevalence of corruption and bureaucratic quality – to create a single measure, institutional quality. This measure is obtained through the approach of factor analysis, which identifies the latent structure of the seven variables4 and ultimately computes a factor score for each country in each year, based on the factor loadings of all variables on the factor. Thus, this measure captures the general quality of institutions. Higher scores on this measure mean higher quality of institutions.

2.3 The third paper

The extant conceptual framework and empirical evidence emerged from CBAs mostly by acquirers from the developed countries mainly focus on two taxonomies: (1) the motivation, for instance, the factors that drive firms to undertake mergers and acquisitions abroad(Bris & Cabolis, 2008; Erel et al., 2012; Rossi & Volpin, 2004), and (2) the financial performance/consequences, for instance, the existence of value creation of CBAs for acquiring firms and the factors influencing this value creation(Barbopoulos et al., 2012; Black et al., 2007; Bris & Cabolis, 2008; John et al., 2010).

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