Corporate Social Irresponsibility and Ownership Level in Cross-Border Acquisitions

The perils of legitimacy threats for CBAs are widely acknowledged in the literature. However, prior research has focused on legitimacy threats stemming from factors not in the direct control of MNEs. In this study, we explore if and how acquirers’ CSI salience, a legitimacy threat stemming directly from the past actions and behaviors of the focal firm, influences a critical international expansion decision—the level of ownership obtained in cross-border acquisitions (CBAs). Drawing on neo-institutional theory, we argue that CSI salience reduces the level of ownership obtained in CBAs as it captures more stakeholder attention and is factored into their legitimacy evaluations. In addition, we examine how characteristics of the host country’s legitimating environment may attenuate or accentuate the legitimacy threat from CSI as they reflect how host country stakeholders notice, assess, and respond to CSI and the capacity of host institutions to monitor and enforce compliance. We find support for our hypotheses in a sample of 16,650 CBAs by 10,738 unique acquirers, and offer valuable insights into the interplay of CSI salience, legitimacy, and CBA ownership to research and practice.