Ownership Hybridization as a Coping Mechanism
Tega Ogbuigwe, one of our PhD students, shares her research which received the Best Doctoral Paper Award at the 2019 Australia and New Zealand International Business Academy (ANZIBA) conference. She also won the Most Promising Thesis Proposal award.
What are the defining characteristics of emerging markets from an international business perspective? Some academics and practitioners would suggest that less sophisticated institutional frameworks, vaguely defined rules and regulations, government interference, transitions from centrally planned to market economy, and capital market imperfections are some of the characteristics that define an emerging market. But what impact do these conditions have on the overseas investments of firms from emerging markets?
Foreign investments are by nature complex and challenging business activities. These complexities are further heightened for emerging market firms due to their home country institutional characteristics and how these characteristics are perceived in other countries.
Faced with actively involved governments, scarce resources and foreign regulatory scrutiny, emerging market firms are starting to adopt organisational forms that enable strategic and operational flexibility by simultaneously developing political and market capabilities.
My research proposes that hybrid owned firms (firms co-owned by the state and private entities) are better able to overcome institutional challenges during foreign acquisitions compared with non-hybrid firms (purely state and private owned). I argue that through ownership hybridization (mixing state and private ownership), emerging market firms can benefit from the unique resources brought into the mix by both types of ownerships, as well as strengthen their ability to overcome institutional challenges in foreign acquisitions. The next question becomes, what is the optimal level of hybridization? For example, would a firm that has a 30/70 percent split (30% state ownership, 70% private ownership or vice versa) be better equipped to make foreign acquisitions compared with a firm that has a 50/50 percent split? These are just some of the issues that will be explored.
I’ll be focusing on Chinese firms because China is currently one of the fastest growing economies in the world and accounts for a substantial proportion of global and emerging market foreign investment. What makes this even more significant is the current US-China trade war, which continues to present huge implications for foreign investments by Chinese firms. Accordingly, this research will explore ownership hybridization as a coping mechanism to such institutional challenges and establish a holistic conceptualization of ownership structures and their interaction with various institutional settings.