Global Meets Local: Community, Political Ideology, and Chinese Cross-Border M&As in the U.S.

Abstract

A growing body of research has investigated institutional-level factors at the national level in explaining the failure to complete announced cross-border M&As. In this study, we extend this research by employing a community-based lens and examining the political ideology in the local community where the target is headquartered. Drawing on recent research on the psychology of political ideology, we argue that M&A deals pursued by Chinese acquirers in the U.S. suffer lower likelihood of completion in conservative communities due to the negative attitudes and resistance caused by greater uncertainty and threats perceived by local constituents. We further argue that the negative effect of conservative political ideology on M&A completion is strengthened by the Chinese acquirer’s media exposure prior to the deal as well the economic stress that the community is experiencing. In contrast, we expect positive coverage of media on the Chinese acquirer attenuates the negative impact of conservative political ideology on deal closure. Our analysis based on a dataset of M&A deals in the U.S. announced by Chinese publicly listed firms from 2000 to 2016 confirmed our hypotheses. By integrating the psychological perspective of political ideologies and the institutional-based view into the cross-border M&A process, our research unveils the black box of informal institutions and extends the research on subnational institutional heterogeneity.