Emerging market MNE cross-border acquisition equity participation: The role of economic and knowledge distance

We theorize that in an attempt to facilitate the transfer of tacit assets during cross-border acquisitions, Emerging Market Multinationals (EMNEs) pursue higher levels of equity participation when targets are based in locations that are institutionally distant in terms of knowledge protection and economic development. Furthermore, we propose that these direct relationships are stronger for EMNEs than they are for MNEs. We test these propositions by comparing the cross-border acquisition activity of firms based in BRIC countries versus the U.K. While we do find a positive linear relationship between knowledge distance and equity participation, the link with economic distance is curvilinear. We also find that both dimensions of distance have greater positive effects on equity participation for EMNEs in comparison. The key implications are that institutional distance may be a positive for EMNEs and that their behavior does seem significantly different than traditional MNEs. This offers support for EMNE-specific internationalization theories. (C) 2015 Elsevier Ltd. All rights reserved.