Institutional Distance Factors Influencing on Firm Performance: A Hypothetical Framework from Cross-Border Mergers and Acquisitions

11 Pages Posted: 26 Sep 2017

See all articles by Md. Hasan

Md. Hasan

Universiti Utara Malaysia; Green University of Bangladesh

Yusnidah Ibrahim

Universiti Utara Malaysia - College of Business

Md Mohan Uddin

United International University

Date Written: November 1, 2016

Abstract

Cross-border mergers and acquisitions (CBMAs) have long been used as an important strategy for firms’ international strategic expansion. Thus, CBMAs have become an increasingly important approach utilized by a large number of firms in multiple regions across the globe. It has gained in popularity over the last few decades. However, the occurrence of CBMAs has grown dramatically in the last few decades, academic research on this type of strategic action has not kept pace with the changes. Though there is considerable research in the area, it is unfortunately fragmented, leaving gaps that need to be addressed. Herein, the researchers have scrupulously reviewed the relevant literatures which pledge strategic supports for firm performance following CBMAs strategy under cross-national distance. The relevant literature on this topic is also tabulated and grouped by institutional based view to indicate major findings. Most importantly, the study identifies gaps in the literature and highlight ten institutional distance factors that provide directions that influence on firm performance following CBMAs in different institutional settings in different countries because institutions vary across countries because of their path-dependent nature. It has influence on firm performance following CBMAs. It is a fast and direct way for firms in one country to acquire advanced strategic assets in another country in order to improve their competitive advantage. This study is an effort to discuss the institutional distance (ID) factors that could influence on firm performance following CBMAs. Using the institution-based view (IBV) as a theoretical lens, this study emphasizes on the impact of formal and informal ID factors on firm performance following CBMAs. The study argues that formal institutional distance (political, economic, political, administrative, and infrastructural) could positively affect acquiring firm performance, while informal institutional distance (cultural, demographic, knowledge, connectedness, and geographical) could negatively affect acquiring firm performance. So, favourable institutional distance is obviously important for firms in demonstrating positive performing following CBMAs.

Keywords: Institutional Distance; Institutional Based View; Cross-Border Mergers and Acquisitions; Firm Performance; Infrastructure Distance between Countries

JEL Classification: G34; F23; M16

Suggested Citation

Hasan, Md. and Ibrahim, Yusnidah and Uddin, Md Mohan, Institutional Distance Factors Influencing on Firm Performance: A Hypothetical Framework from Cross-Border Mergers and Acquisitions (November 1, 2016). Available at SSRN: https://ssrn.com/abstract=3042397 or http://dx.doi.org/10.2139/ssrn.3042397

Md. Hasan (Contact Author)

Universiti Utara Malaysia ( email )

Sintok, Kedah
Malaysia

Green University of Bangladesh ( email )

220/D, Begum Rokeya Sarani
West Kafrul, Dhaka 1207
Bangladesh

Yusnidah Ibrahim

Universiti Utara Malaysia - College of Business ( email )

Sintok, Kedah 06010
Malaysia

Md Mohan Uddin

United International University ( email )

H-80 R-8/A Satmasjid Rd
Dhanmondi
Dhaka, 1209
Bangladesh

HOME PAGE: http://www.uiu.ac.bd

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