Navigating the New Reality: Populism and Ownership Strategy in Cross‐border Acquisition

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Abstract The rise of populism has generated a new reality and grand challenges in international business (IB). Foreign investors should adopt a more dynamic and forward‐looking strategic approach to mitigate risks and capitalize on opportunities in the evolving environment. This study explores the effect of populism in target countries on multinational enterprises’ (MNEs’) initial ownership participation in cross‐border acquisitions (CBAs). Building on an integrated real options–institutional framework, we develop a theoretical framework to explore the effect and how legal origin in target countries and local experience act as mitigating factors. Using data on the populism discourse of national chief executives in 57 target countries and CBA deals by MNEs from 74 acquirer countries during 1996–2020, we found a negative effect of populism on initial ownership participation in CBAs. However, this negative effect of populism is less pronounced in target countries with a civil‐law tradition or for acquirers with rich local experience.

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