Control mechanisms of MNEs and absorption of foreign technology in cross-border acquisitions

This study investigates the impact of control mechanisms exercised by MNEs on knowledge (technology) absorption in cross-border acquisitions (CBAs). The empirical examination was undertaken in Korea, which is a newly industrialized emerging market, where knowledge acquisition from foreign investing firms is particularly important to leapfrog into advanced economies. We find that most of the control mechanisms (i.e., ‘staffing the top management positions’, ‘participation in the policy making and planning process’, ‘interaction of the subsidiary's top management with the MNE’ and ‘participation of foreign expatriates in key functional areas’) have a positive association with organizational learning. In addition, we also uncover that provision of training programs for a fixed period creates more synergy when it is combined with constant and continuous education in daily activities. This study contributes significantly to the body of control mechanism literature and the understanding of CBAs, and also provides practical implications for MNEs intending to enter foreign markets by partially purchasing the equity shares of local firms.