Corporate name change: Investigating South African multinational corporations' postacquisition performance

• Published date: 01 November 2019
• Author: Ru‐Shiun Liou,Rekha Rao‐Nicholson
• Date: 01 November 2019
• DOI: http://doi.org/10.1002/tie.22086

RESEARCH ARTICLE

Corporate name change: Investigating South African

multinational corporations' postacquisition performance

Ru-Shiun Liou

1

| Rekha Rao-Nicholson

2

1

John H. Sykes College of Business, The

University of Tampa, Tampa, Florida

2

Newcastle University London, London, UK

Correspondence

Rekha Rao-Nicholson, Senior Lecturer in

International Business, Newcastle University

London, 102 Middlesex Street, London E1

7EZ, UK.

Email: rekha.nicholson@newcastle.ac.uk

Abstract

It has long been argued a multinational corporation (MNC) needs to be able to lever-

age the firm-specific advantages to overcome the liability of foreignness in the host

markets so the MNC can enjoy the benefit of internationalization while competing

with the indigenous firms in the host market. However, emerging-market MNCs,

which have the nontraditional ownership advantages, such as flexibility and cost-

advantage, may require different international strategies to realize the anticipated

profit in their cross-border acquisitions. This article takes an organizational identity

approach to study how the foreign identity of South African MNCs constitutes the

source of liability and negatively impacts their postacquisition performance. We find

South African MNCs that adopted a corporate name change for their acquired sub-

sidiaries experienced worse postacquisition return on asset than the South African

MNCs who did not do so. On the other hand, facing a large economic distance,

South African MNCs that facilitate the acquired subsidiary corporate name change

enjoy better postacquisition performance.

KEYWORDS

corporate name change, cross-border acquisitions, economic distance, emerging market

multinational firms, postacquisition operating performance, south African multinational firms

1|INTRODUCTION

While emerging market multinational corporations (EMNCs) do not

possess the traditional conceptualization of ownership advantages

such as advanced technology and managerial know-how, recent inter-

national business scholarship suggests EMNCs have various owner-

ship and leadership advantages that may be utilized to overcome the

liability of foreignness and newness in the global business competition

(Grosse, 2003; Klein & Wöcke, 2009; Mathews, 2002; Rao-Nicholson,

Khan, & Stokes, 2016). Asian EMNCs are known to be able to lever-

age their cost-advantages and make incremental improvement

through their partnership with the advanced market multinationals

(Mathews, 2002). In the same way, these EMNCs are believed to use

their organizational ambidexterity, among other capabilities, in their

foreign acquisitions to better align their targets to their organizational

requirements (Rao-Nicholson, Khan, Akhtar, & Tarba, 2016). Latin

American EMNCs demonstrate greater flexibility in navigating the

unstable political environment and take advantage of internationaliza-

tion opportunities (Grosse, 2003). While some researchers have stud-

ied the unique institutional context of the African continent, much

less is known about African multinationals' international business

strategy that is critical in their postacquisition performance (Ellis, Lam-

ont, Reus, & Faifman, 2015; Jekanyika Matanda, 2012).

According to a recent study on EMNCs' mergers and acquisitions

(M&As) events between 1991 and 2004, while 60% of EMNCs' acqui-

sition targets are located in emerging economies, the remainder of the

targets is in developed economies (Aybar & Ficici, 2009). Similarly,

after the 2007 financial crisis, EMNCs acquired targets in developed

countries (Rao-Nicholson & Salaber, 2016). On average, the

announcement of most cross-border expansions in developing

Ru-Shiun Liou and Rekha Rao-Nicholson contributed equally to this study.

DOI: 10.1002/tie.22086

Thunderbird Int. Bus. Rev. 2019;61:929–941. wileyonlinelibrary.com/journal/tie © 2019 Wiley Periodicals, Inc. 929