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The Zone of Conformity: A Comparison of Private and State-Controlled Enterprises in M&As
1Robert J. Manning School of Business, University of Massachusetts Lowell, 72 University Ave, 01854 Lowell, MA USA.
Abstract:
Drawing from the literature on institutional pressure, we argue that firms with different ownership types have different strategic options in domestic and overseas markets, namely the zone of conformity. State-controlled enterprises (SCEs) have a broader range of acceptable actions than do private-controlled enterprises (PCEs) in a domestic market but face more sanctions and stricter conformity requests in an overseas market. The concept of the zone of conformity predicts SCEs have a higher probability of deal failure overseas than in domestic markets and strategically seek less equity ownership of target firms in cross-border deals. The autocracy level of target country moderates the M&A behaviors difference between SCEs and PCEs. Our analysis of 12,497 Chinese mergers and acquisitions supports the study hypotheses.
Supplementary Information:
The online version contains supplementary material available at 10.1007/s11575-023-00501-9.
