Speed of Institutional Reforms, Competitive Dynamics, and Cross-border Acquisitions: Evidence from Emerging Economies

Abstract

This study examines how variations in the speed of institutional reforms across emerging economies shape the strategic internationalization responses of domestic firms, particularly through cross-border acquisitions (CBAs). We argue that a faster pace of reforms intensifies competitive pressures – both from global entrants and domestic challengers – prompting incumbent firms to pursue CBAs as a means of adapting to heightened uncertainty and preserving strategic advantage. Building on the awareness–motivation–capability framework, we further theorize how firm-level factors moderate this baseline relationship. Specifically, we find that negative performance feedback, higher levels of technological and marketing resources, and greater financial slack amplify the likelihood of CBAs in the face of rapid reforms. Our findings, based on a large multi-country dataset of 12,251 unique firms from 35 emerging economies between 1995 and 2021, support these predictions. This research presents an integrative impact of the institutional and firm-level factors as antecedents of aggressive internationalization by firms in emerging economies.