How to Synergize Different Institutional Logics of Firms in Cross-border Acquisitions: A Matching Theory Perspective

When cross-border acquisitions take place, whose institutional logics should dominate the control in the daily operation of the acquired entity--the acquirer or the acquiree? To answer this question, this paper investigates how Geely, a Chinese automaker, successfully acquired Volvo from Sweden, a developed country, and managed the differences in the institutional logics of the two firms by transforming its dominant institutional logic. Through the lens of matching theory, we employ an inductive approach and conduct a longitudinal case study of Geely's acquisition. We find that matching commercial and social logic is an inevitable requirement to cope with external institutional pressures in cross-border acquisitions. We further reveal that the structured interaction between compatibility and complementarity facilitates the matching process between commercial logic and social logic, resulting in a synergistic logic via the three different mechanisms of compatibility, complementarity, and co-evolution. Our findings challenge previous research that focuses on conflicts as the foremost drivers of the transformation of different institutional logics in organizations. Based on our findings, we develop a matching process model that offers insights for firms from developing economies to navigate dominant institutional logic transformation and thrive in the marketplace through their strategic cross-border acquisitions. Keywords Commercial logic * Social logic * Compatibility * Complementarity * Co-evolution * Cross-border acquisition
1 Introduction Cross-border acquisition often requires firms to adjust their dominant institutional logic to address the institutional discrepancies between the acquirer or the acquiree. But how to synergize different institutional [...]