Reusing Uppsala lens in cross‐border M&As of emerging markets

• Author: Francisco Figueira de Lemos,Manish Popli
• Published date: 01 January 2018
• DOI: http://doi.org/10.1002/jsc.2178
• Date: 01 January 2018

RESEARCH ARTICLE

DOI: 10.1002/jsc.2178

Strategic Change. 2018;27(1):35–42. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 35

Abstract

Risk can be assessed and managed by acquirers from emerging markets in their internaonal

acquisions by evoking the role of commitment as outlined in the original Uppsala model. It is

proposed that commitment may be maneuvered depending on the move, industry context, and

the prior experience of the acquirer from incountry joint‐ventures for incumbent rms.

1 

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 INTRODUCTION

The increased internaonalizaon of rms from emerging markets

(EM) is revealing mergers and acquisions (M&A) as their preferred

entry mode in developed economies. Challenging the established the‐

ory, which recommends entry‐modes through representave oce,

sales team, or local joint ventures, the lack of internaonal experience

of EM rms in developed markets is not restraining high equity entry

modes, such as M&As. As a maer of fact, a rich body of IB literature

supports that EM rms take M&A route to internaonalize in order

to plug their resource gaps and to complement their country specic

advantages of low‐cost factor condions (Hennart, 2012; Madhok &

Keyhani, 2012). However, the lack of consensus compels to an inces‐

sant debate on whether the internaonal expansion strategy of rms

from the emerging markets such as India and China can be explained

through exisng theories of internaonal business (IB) or not (Cuervo‐

Cazurra, 2012; Ramamur, 2012).

While instuonalism IB theorists (Dunning & Lundan, 2007;

Narula, 2006, 2012) support that there is no reason for not explain‐

ing internaonalizaon of EM rms by exisng theories, other line of

thought advocates for novel theorecal developments (Luo & Tung,

2007; Mathews, 2002, 2006). This laer view argues that internaon‐

alizaon trajectories of EM rms cannot be explained with the exisng

theorecal paradigms on the ground that EM rms are not evoluon‐

ary in terms of their entry‐mode and locaon choice. A recent stream

of research, however, presents another view (Cuervo‐Cazurra, 2012;

Hennart, 2012; Meyer & Thaijongrak, 2013; Ramamur, 2009) that

outward foreign direct investment from EM rms is a mix of conven‐

onal and idiosyncrac dimensions that scholars should compare and

contrast to extend and/or develop theorecal extensions. Meyer and

Thaijongrak (2013) argue that most of the theorizaon context of

internaonalizaon of EM rms have taken a cross‐seconal approach

rather a longitudinal one. To that end, in this arcle, we deliberately

zoom in on the cross‐border M&As of EM rms and propose that the

basic tenet of risk management, as conceptualized in the Uppsala

model (Figueira‐de‐Lemos, Johanson, & Vahlne, 1977, 2011; Johan‐

son & Weidersheim‐Paul, 1975) may hold true for EM rms as well.

In the last two decades or so, many emerging markets have

undergone promarket reforms inducing hypercompeon in their

home turfs (Hermelo & Vassolo, 2010). Driven by these compe‐

ve pressures, many Chinese and Indian rms directly jumped upon

M&A mode to acquire strategic resources and capabilies (Child &

Rodrigues, 2005; Deng, 2009). The extant literature modeling this EM

rm behavior has primarily focused on the lack of foreign knowledge

and have essenally tried to make a case that EM rms internaon‐

alize rapidly, take high risks and acquire large size rms in culturally

disnct countries (Athreye & Kapur, 2009; Mukundhan & Nandaku‐

mar, 2013; Nayyar, 2008). Surprisingly, the studies that theorecally

or empirically demonstrate how EM rms manage their risks in their

internaonalizaon pursuits are sll very scarce (as an excepon, see

Elango & Panaik, 2011). Taking the part of the established theory, the

risk‐management behavior of EM rms is analyzed through the lens of

Uppsala model. Specically, we zoom in on the cross‐border M&As of

EM rms and develop a set of proposions to argue that though the

internaonalizaon trajectories of EM rm are revoluonary in terms

of entry mode or locaon, Uppsala model (Johanson & Vahlne, 1977)

Reusing Uppsala lens in cross‐border M&As

of emerging markets*

Manish Popli1 | Francisco Figueira de Lemos2

1 Indian Instute of Management, Indore,

India

2 Department of Business Studies, Uppsala

University, Uppsala, Sweden

Correspondence

Manish Popli, Indian Instute of

Management, Prabandh Shikhar, Rau

Pithampur Road, Indore, MP 453556, India.

Email: manishp@iimidr.ac.in

* JEL classicaon codes: M16.