Economic nationalism and foreign acquisition completion: The case of China

• Economic nationalism has both positive and negative effects on FDI acquisition completion.
• When a target is in an essential industry or a SOE, the acquisition attempt is less likely to be completed.
• A deal which brings technology and capital, or helps to restructure poorly-performing firms, is more likely to be completed.
• A deal with an acquirer from a country with good foreign relations with China is more likely to be completed.

Extending institutional theory, we incorporate a neglected but important component of formal institution, economic nationalism, into a model that specifies its effects on cross-border acquisition success. We suggest that economic nationalism has a dynamic nature and sees the interaction between protectionism and liberalism. As such, it exerts both positive and negative effects on foreign investments, contingent on how these investments are perceived as aligned with the national interests as reflected by national security considerations, foreign relations, and growth strategy. Using a data set containing 7275 announced cross-border acquisition deals in China during 1985–2010, the study finds that (1) when an acquisition activity targets essential industries or state-owned enterprises, it is less likely to be completed because of provoked national economic security concerns; and (2) when an acquirer brings technology and/or capital, or/and helps to restructure poorly-performing firms, or/and the acquirer comes from a country with good foreign relations with China, the acquisition is considered as safe and helpful for the country's development, and it is more likely to be completed.