Institutional, cultural and industry related determinants of ownership choices in emerging market FDI acquisitions

•Ownership choices in emerging market FDI acquisitions (full, majority, and minority) is an under-researched area.•Why foreign MNEs engage in partial equity acquisition, as opposed to full acquisition, in emerging markets.•Sample of acquisitions over an 11-year period in two large emerging markets (India and China) by acquirers from 33 nations.•Institutions, culture, and industry relatedness impact the choice of acquisition (full, majority, versus minority).•Novel aspects of acquisition strategies in emerging nations are provided for IB scholarship and managerial practice. In this study, we tackle a relatively un-researched question: What explains partial FDI acquisitions? The choice between full, majority, and minority ownership is explained on the basis of three locational factors – the differences, or “distances,” between the countries of the acquirer and target firm – operationalized in terms of (i) institutions, (ii) culture, and (iii) sectoral relatedness. The sample comprises 1389 acquisitions in India and China by acquirers from 33 nations over an 11-year period. We find that the likelihood of minority acquisition over majority or full becomes higher when acquisitions involve low institutional distance or high uncertainty avoidance distance. However, the likelihood of minority acquisition over full or majority becomes lower when acquisitions involve industry relatedness. The results add to our understanding of the advantages and disadvantages of partial versus full FDI acquisitions in emerging markets. This study adds to the nascent literature that uses country or location “distance” metrics to show how the multinational firm, being “multiple embedded” (Meyer et al., 2011), can take advantage of the dual location of home and host countries.