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Emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions (M&As) to acquire strategic assets that compensate for their resource deficiencies. Therefore, developed markets have become important destinations for EMNCs. Institutional distance constitutes a major source of competitive disadvantage for foreign firms competing with indigenous firms. The purpose of this paper is to examine the ownership pattern of cross-border M&As in the USA, and determine if EMNCs respond to institutional distance differently than advanced-market multinational companies (AMNCs).

Based on the extant literature in institutional theory as well as internationalization strategy, a quantitative study was carried out. Hypotheses were proposed and tested using fixed effects panel regressions.

This paper finds that both AMNCs and EMNCs take smaller ownership positions when there is greater cognitive and normative distance. The negative association is stronger for AMNCs than for EMNCs. Further, the larger the regulative distance in the positive direction, meaning a higher level of development in the host market than in the home market, the more AMNCs and EMNCs are led to opt for a higher ownership position, with EMNCs being less influenced by regulative distance.

Though findings are robust and stable, this study is limited to observations that only have US target firms.

By integrating the literature from institutional theory and strategy, this paper offers a clearer understanding and distinction of the acquisition decisions made by EMNCs and AMNCs.