Cross-national uncertainty and level of control in cross-border acquisitions: A comparison of Latin American and U.S. multinationals

This study examines how cross-national uncertainty impacts the level of control Latin American and U.S. multinational enterprises (MNEs) negotiate in cross border acquisitions (CBAs). Cross-national uncertainty is measured using three metrics—cultural distance, geographic distance and institutional distance. Hypotheses, grounded in transaction cost economics, are tested using a sample of 9000 CBAs made by Latin American and U.S. MNEs between 1996 and 2013. Data are analyzed using logit, tobit and random-effect regressions. Empirical results show MNEs' propensity to use shared as opposed to full ownership increases as cultural, geographic and institutional distances increase. However, the above relationships are significantly weaker for Latin American MNEs than for U.S. MNEs. Specifically, compared to U.S. multinationals, Latin American firms show a greater propensity to opt for full ownership (high levels of control) as cross-national uncertainty increases. The study contributes to the literature by empirically testing the Springboard perspective—a recent viewpoint on the internationalization of emerging market multinationals.