Light‐touch integration: A study on cross‐border acquisitions by emerging market multinationals

Research Summary Emerging‐market multinational enterprises (EMNEs) are known for their “light‐touch” integration after cross‐border acquisitions. That is, compared with their developed‐country counterparts, EMNEs are more likely to retain the top management team (TMT) of the target firms. In this paper, we argue that this difference in retention rate can be explained by country, cohort, and firm effects. While the literature mostly associates EMNEs with where they are from (country effect), EMNEs are also new to cross‐border acquisitions (firm effect) and among the first in their peers to venture abroad (cohort effect). Analysis on a sample of 1862 absorption‐type cross‐border acquisitions supports our hypotheses that while the country effect persists, the difference in retention rate narrows significantly as EMNEs and their peers gain more relevant cross‐border acquisition experience. Managerial Summary The retention of top management team in target firms is a critical aspect of post‐acquisition integration (PAI). In this study, we examine the reasons behind the curious observation that, compared with acquirers from developed countries, multinational enterprises from emerging markets (EMNEs) are more likely to keep the target firm TMT intact, even in deals where extensive integration is in line with the overall acquisition objectives. Our analyses show that the legitimacy constraints associated with EMNEs' less developed home countries indeed present initial challenges to their integration efforts. However, these differences narrow significantly as EMNEs and their peers accumulate more experience in similar cross‐border acquisitions. This study highlights the dynamic nature of PAI strategies and the large variance among firms beneath the “EMNE” label.