Question 1.

A research project is carried out to explore the business models of Italian small and medium-sized    enterprises    (SMEs)    and    the    associated    impact    on    their internationalization speed. Researchers aim to examine whether the SMEs with a global niche business model internationalize faster than those with a mass market business  model.  Italy  is an open economy with global companies,  many of them SMEs, and hence a good context to investigate speed of international expansion. Specifically, the researchers randomly selected 1000 Italian firms founded around the year 2000, and obtained their e-mail addresses from the official register of Italian companies  compiled  by  Unioncamere,  the  Association  of  Italian  Chambers  of

Commerce.

Define the population of the research project. Evaluate the applied sampling strategy and the representativeness of the sample. Propose an alternative sampling strategy and justify its effectiveness.

[15 marks]

Question 2.

A  multinational  enterprise  (MNE)  aims  to  acquire  a  foreign  firm  as  part  of  its internationalization strategy. Three target firms (Companies A, B, and C) are selected in different countries. Their sales performances in the past 5 years are reported in Figure 2.1.

Meanwhile, by analyzing the data on cross-border acquisitions within the industry, the top  management team  (TMT) find that the  post-acquisition  performance  may  be affected by the linguistic distance and cultural distance between their company and the target firm. They visualize the industry data in Figures 2.2 and 2.3 to illustrate the relationship  between  cultural/linguistic  distances  on  post-acquisition  performance. Accordingly, the TMT collect the cultural distance and linguistic distance with each of the three target firms and report in Table 2.1.

Figure 2.1 Boxplot of Sales of the target firms

Figure 2.2 Scatter plot between Cultural distance and Post-acquisition performance

Figure 2.3 Scatter plot between Linguistic distance and Post-acquisition performance

Table 2.1 The cultural and linguistic distances between MNE and targeted firms

Based on the information provided, please advise the MNE which company to acquire and explain your answer.

[25 marks]

Question 3.

The project is to investigate how formal and informal institutional features influence the likelihood that a cross-border acquisition deal will be completed, as well as the time taken for its completion after announcement. The two dependent variables are:

• Acquisition completion, which is a dummy variable that takes the value 1 if the announced acquisition is completed and 0 if it is not,

• Acquisition duration, which is calculated as the difference (in days) between the dates of completion and announcement of an acquisition.

The formal institution is a hierarchy of rules (constitutional law, statute law, common law and bylaws) together defining the formal structure of rights in a specific exchange, and determining how costly it is to make the exchange. It consists of two factors:

•   Expropriation risk (contract repudiation and risk of expropriation)

•   Procedural complexity (the number of days necessary to complete a contractual procedure and the strength of legal system)

To obtain the formal institutional distance, the researcher calculated the distance between  the  formal  institutional  factors  of  the  two  partners’  home  countries: expropriation risk distance and procedural complexity distance (larger value means larger distance).

The informal institution also includes two factors:

•   Uncertainty avoidance involves the extent to which ambiguous situations are threatening to individuals, rules and order are preferred, and uncertainty is tolerated in a society,

•   Power distance  refers to  how  power  is distributed  between  managers and subordinates, and to what the expectations are regarding the equality of power.

To obtain the informal institutional distance, the researcher calculated the differences between  the  informal  institutional  factors  of  the  two  partners’  home  countries: uncertainty avoidance difference and power distance difference (larger value means larger difference).

The acquisition experience is measured by the number of acquisitions completed by the acquirer within the same industry.

Cash payment is  a  dummy  variable  that  indicates  whether  the  transaction  was

predominantly cash-financed (1) or stock-financed (0).

The researcher develops six hypotheses:

Hypothesis 1a. There is a negative relationship between acquisition completion and the formal institutional differences between the partners’ home nations.

Hypothesis 1b. There is a positive relationship between acquisition duration and the formal institutional differences between the partners’ home nations.

Hypothesis 2a. There is a negative relationship between acquisition completion and the informal institutional differences between the partners’ home nations.

Hypothesis 2b. There is a positive relationship between acquisition duration and the informal institutional differences between the partners’ home nations.

Hypothesis 3a. Acquirer’s prior cross-border acquisition experience moderates the effect of institutional differences on acquisition completion: the negative relationships in H1a and H2a become weaker as cross-border acquisition experience increases.

Hypothesis 3b. Acquirer’s prior cross-border acquisition experience moderates the effect of institutional differences on acquisition duration: the positive relationships in H1b and H2b become weaker as cross-border acquisition experience increases.

The  six  hypotheses  are  tested  using  data  from  2389  announced  cross-border acquisition deals in the international business service industry (1981–2001). Among them,  only  467  deals  have  available  data  on  the  dates  of  announcement  and completion. The  researchers  conducted  a  binary  logistic  regression  and  a  linear regression analysis to study the impact of (formal and informal) institutional differences on  acquisition  completion  and  acquisition  duration,  respectively.  The  results  are reported in Table 3.1.

You are required to answer the following questions:

a) Write down the statistical models for Model 1 and Model 4, respectively.

[6 marks]

b)  Suggest whether the  results  in  Table  3.1  are  consistent with  any  of the  six hypotheses. Please support your answer with the detailed analysis (in terms of the direction and statistical significance of the key explanatory variables).

[14 marks]

c)  The  managers  want  to  know  how  the  results  of  this  project  can  help  them successfully  complete  cross-border  acquisitions.  How  would  you  respond?  Your answer should focus on the aspects covered in the hypotheses.

[10 marks]

Table 3.1 Regression results

Acquisition completion (N=2398)                                          Acquisition duration (N=467)

Model 1               Model 2               Model 3                      Model 4                 Model 5                 Model 6

*p<0.05, **p<0.01 and ***p<0.001 (standard errors in parenthesis).

Question 4.

A    research   team    is   examining   the   factors    influencing   the    international entrepreneurship  decision  (dummy  variable,  1  if  the  entrepreneur  pursues  an international  opportunity  and  0  otherwise). A  sample  of 4132  entrepreneurs  are surveyed. The variables involved in the study include:

•   International  experience  of  the  entrepreneur  (dummy  variable,   1  if  the entrepreneur has international experience in the past 5 years and 0 otherwise);

•   Resources (natural logarithm of firm assets);

•   Gender (dummy variable, 1 for male and 0 for female);

•   Network (the number of entrepreneurial connections);

•   Fear of failure (the number of failed international entrepreneurial actions in the past).

The researchers conduct a linear probability model due to the fact that the dependent variable is dummy. The results are reported as follows:

Figure 4.1 Histogram of the residuals