CROSS-BORDER M&A DEAL INCOMPLETION: INSTITUTIONAL PROCESSES AND OUTCOMES by Nilufer Yapici A Dissertation submitted to the Faculty of the College of Business in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Florida Atlantic University Boca Raton, FL August 2014 ACKNOWLEDGEMENTS The author wishes to express her sincere thanks and love to her husband, Yapici, Herrmann and Peterson families and her friends for their support and encouragement throughout the writing of this dissertation. The author is grateful to her advisor and committee for providing guidance along the process. The encouragement of entire management faculty in Florida Atlantic University is greatly appreciated. iii ABSTRACT Author: Nilufer Yapici Title: Cross-border M&A Bid Incompletion: Institutional Processes and Outcomes Institution: Florida Atlantic University Dissertation Advisor: Bryant A. Hudson Degree: Doctor of Philosophy Year: 2014 My objective in this dissertation was to understand the processes leading to incompletion of the high profile cross-border deals. A conceptual framework was developed which suggests that announcement of a cross-border merger and acquisition (M&A) deal starts a string of institutional processes that leads to incompletion of the bid. I proposed that less powerful host country actors threatened by the MNC’s bid proposal politicize the transaction turning the deal into a transgression. These actors publicize this transgression, initiating a scandal, to gather support of multiple audiences in their attempts to thwart the threat that the MNC poses. Thanks to their efforts in appealing to audiences and publicization of the deal as a transgression, these actors mobilize audiences who reveal hostile reaction against the MNC and the proposed bid. Such mobilization and hostile reaction, in turn, lead to proposed bid’s incompletion. Qualitative analysis results based on a sample of seven high profile cross-border iv transactions provided support for the conceptualized processes, namely politicization, scandal, mobilization and hostile reaction, while indicating a different order of process progression compared to the linear one conceptualized. I found that in all cases the process of scandal subsumed the other processes that kept scandal alive. In turn, scandal fed these processes giving more leverage to the mobilization efforts and/or increasing the hostility of the actors opposing the deal. The findings revealed that these processes happened simultaneously and that in cases where mobilization did not emerge, hostile reaction substituted for the lack of mobilization. Additionally, analysis showed that not only less powerful actors but also powerful actors, elites, sought to initiate a scandal when the host country political, legal or bureaucratic processes did not work for them in thwarting the deal. This dissertation by examining social construction, power and politics within the host country institutional environment in the context of high profile cross-border deals, presented a framework that explained how and why the hostility leading to deal incompletion emerges in the host country. In so doing, this dissertation strengthens institutional theory, theory of scandal, social movements theory and elite theory as powerful perspectives in international strategic -management. v CROSS-BORDER DEAL INCOMPLETION: INSTITUTIONAL PROCESSES AND OUTCOMES List of Tables ................................................................................................................... viii! List of Figures .................................................................................................................... xi! Introduction and Overview ................................................................................................. 1! Theoretical Framework ...................................................................................... 4! Methodological Framework ............................................................................... 5! Conclusion .......................................................................................................... 6! Literature Review ................................................................................................................ 7! International Management Research Studying Liability of Foreignness ........... 7! International Business Research Studying Cross-Border M&As ....................... 9! Conclusion ........................................................................................................ 14! Conzeptualitzation ............................................................................................................ 17! Theoretical Foundations: Institutional Resistance and Institutional Configurations .................................................................................................. 17 Conceptualization of Institutional Processes and Outcomes Leading to Deal Incompletion ..................................................................................................... 20! Methodology ..................................................................................................................... 45 Sample Selection and Data Collection .............................................................................. 45 vi Data Analysis ................................................................................................... 49 Reliability Measures and Tests ......................................................................... 58! Variables and Measurement ............................................................................. 75! Findings ............................................................................................................................ 86! Synopsis of Cases ............................................................................................. 87! Section I: Propositions and Empirical Findings ............................................. 106! Section II: Emergent Findings ........................................................................ 110! Discussion ....................................................................................................................... 141! Emergent Model ............................................................................................. 147! Contributions .................................................................................................. 152! Managerial Implications ................................................................................. 159! Conclusions .................................................................................................... 159! Future Study ................................................................................................... 160! Appendices ...................................................................................................................... 248! References ....................................................................................................................... 344! vii TABLES Table 2.1: Research on Mergers and Acquisition: Phenomena ........................................ 10 Table 2.1a: Cross-Border M&A Research ...................................................................... 162 Table 3.1: DP World Bid for P&O: Timeline ................................................................... 41 Table 4.1: SDC Incomplete Deals with Different Ultimate Parent Country .................. 173 Table 4.1a: SDC Data Incomplete Deals Explanation and Reason ................................ 175 Table 4.2: Deals Completed at a later date or Sought for less than 50% stake .............. 179 Table 4.2a: Friendly Deals with inadequate data ............................................................ 179 Table 4.3: Hostile Bids ................................................................................................... 180 Table 4.4: Host Country Spain ........................................................................................ 180 Table 4.5: From Yin (2008), Chapter 2: Section 3, Figure 2.3 ....................................... 181 Table 4.6: Categorization of evidence by numbers and source per case ........................ 182 Table 4.7: Dedoose Coding: Coded Passages and Code applications per case .............. 182 Table 4.8: Coding for Main Processes Example: CNOOC-Unocal Case ....................... 183 Table 4.9a: Table of Disagreements: DPW acquisition of six U.S. ports ....................... 200 Table 4.9b: Table of Disagreements: CNOOC bid for Unocal ....................................... 201 Table 4.9c: Table of Disagreements: News Corporation bid for BSkyB ....................... 204 viii Table 4.10a: PhD Coder Video Coding .......................................................................... 207 Table 4.10b: Practitioner Coder Video Coding .............................................................. 208 Table 5.1.1a: The Denouncers, Threatened Actor and Their Reaction by Case ............. 209 Table 5.1.1b: Industry Condition for the Target and the Threatened Actor where Applicable ................................................................................................ 210 Table 5.1.2: Politicization: Frame Alignment Processes and Co-opting Allies ............. 211 Table 5.1.3: Scandal: Main Elements and Characteristics .............................................. 212 Table 5.1.4: Audience Interest .......................................................................................