Foreign Investment Motives of Russian Acquirers: An Extended OLI Perspective

Abstract

We apply the OLI framework to examine investment motives and internalization preferences of Russian multinationals in 2007-2013. To examine investment motives we use panel data of 322 observations; to test internalization choice we use cross-sectional data of 318 M&A deals. Our analysis shows that classic investment motives - market, resource, asset-seeking - provide a limited explanation of what attracts Russian acquirers abroad. We extend the OLI-model to include institutional distance and find that it plays a critical role in explaining Russian M&A activity. We employ a specific ownership advantage, government ownership, and discover that partial government ownership discourages Russian firms from pursuing full ownership in M&As. Further, Russian multinationals benefit from internalization advantages in tandem with location advantages derived from natural-resource endowments.