Do Emerging Market Multinationals' Acquisitions in Advanced Economies Create Value? An Empirical Analysis From A Springboard Perspective

This study explores the value generated by Emerging Market Multinational Companies (EMNCs) through cross-border mergers and acquisitions (M&As) in advanced economies, using Luo and Tung's (2007) AAA Framework as theoretical underpinnings (i.e., the Springboard perspective). The AAA Framework—comprising ambidexterity, amalgamation, and adaptability—suggests that EMNCs engage in cross-border M&As to overcome home market limitations and enhance global competitiveness. By entering advanced markets, EMNCs gain access to critical resources such as technology, managerial expertise, and brand recognition, which are often scarce in their home countries. Additionally, international expansion allows these multinationals to diversify revenue streams and reduce risks associated with volatile emerging markets. The study empirically tests the AAA framework through an event study and cross-sectional regression of 178 publicly traded acquiring EMNCs from 15 emerging markets, focusing on investor reactions and acquisition outcomes. The study reveals nuanced insights for the springboarding acquirer EMNCs. Ambidexterity, R&D intensity (proxy for exploration) had negative effect on value, contradicting the theory's expectation that exploration drives value creation, while asset turnover (proxy for exploitation) shows no significant effect, challenging the assumption that operational efficiency enhances short-term market reactions. In terms of amalgamation, the findings show that operating margin, a proxy for internal resource integration, has a negative impact, and the growth rate, a proxy for external resource integration, is insignificant. It suggests that resource integration does not straightforwardly translate into value during M&As. In terms of amalgamation, the findings show that operating margin, a proxy for internal resource integration, has a negative impact, and the growth rate, a proxy for external resource integration, is insignificant. Leverage, a control variable, positively impacts value, supporting the theory’s view of EMNCs using aggressive strategies, while size-related variables like market cap and total assets are insignificant, emphasizing strategic intent over scale. Industry similarity and institutional distance negatively impact market perception, highlighting the challenges of integration and the importance of institutional compatibility in EMNCs' international expansion.