The Impact of Institutions on Collaborative Innovations and the Role of Equity-Based Entry Modes

This paper examines the impact of institutional variables on multinational enterprises’ choice between majority and minority acquisitions in their foreign affiliates and how this choice influences their propensity to collaborate with local firms. Using the institutional theory and the transaction costs theory, we develop a number of hypotheses. In particular, we suggest that majority acquisitions will be more likely than minority acquisitions and greenfields to enter collaborative R&D projects in countries that belong to the Civil Law/Eastern European legal tradition, or countries where the protection of minority shareholders is poor. These hypotheses are tested using an unbalanced panel of subsidiaries controlled by British multinationals, located in 39 countries. The results confirm our theoretical predictions.