Foreign equity investment via CD & LD
Description
Data Description Title: Cultural Distance (CD) in Equity Size Investment Decisions Moderated by Learning Distance (LD) in the ICT Sector Author: Tariq H. Malik This dataset was compiled to examine how cultural distance (CD) and learning distance (LD) shape equity size decisions in cross-border ICT investments. It integrates cultural dimensions, firm experience, and legal context to explain how uncertainty influences ownership structures. Source & Coverage: Data are drawn from Orbis (Moody’s Unit) covering 2007–2009, including 51,198 equity deals, 19,712 investors, and 32,987 targets across 152 home and 154 host countries. The ICT sector includes hardware, software, telecommunications, media, and biopharma-related ICT firms. Variables: Dependent variable: Equity size (% of ownership acquired), log-transformed and standardized. Independent variables: Cultural Distance (CD): Hofstede’s five-dimension index (PDI, IDV, MAS, UAI, LTO), standardized 1–10. Learning Distance (LD): Experience gap between investor and target, derived from prior deal counts (i-LD, t-LD, LDₐᵦₛ). Controls: Investor type (industrial/institutional/individual), partner-specific and host-country experience, OECD membership combinations, sector dummies, legal system distance (0–4), and year effects (2008, 2009).
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Steps to reproduce
Steps to Reproduce Data Access and Collection Obtain access to the Orbis (Moody’s Unit) database. Extract equity investment deal-level data for the period 2007–2009. Filter for firms in the ICT sector, including hardware, software, telecommunications, media, and biopharma-related ICT companies. Collect firm identifiers (investor ID, target ID), deal characteristics, and country-level information for both home and host nations. Data Cleaning and Preparation Remove incomplete or duplicate deal records. Classify firms into investors and targets. Assign country codes to home and host nations. Create time dummies for 2007 (baseline), 2008 (crisis), and 2009 (recovery). Standardize categorical variables for investor type (industrial, institutional, individual). Variable Construction Dependent Variable: Calculate Equity Size as the percentage of ownership acquired. Apply log-transformation and standardization on a 1–10 scale. Independent Variables: Cultural Distance (CD): Compute composite CD using Hofstede’s five cultural dimensions (PDI, IDV, MAS, UAI, LTO). Take the log of the composite score and standardize to a 1–10 scale. Learning Distance (LD): Count total prior equity deals for each investor and target. Construct variables: i-LD = Investor deals – Target deals; t-LD = Target deals – Investor deals; LDₐᵦₛ = |i-LD|. Control Variables: Legal system distance (categorical scale 0–4). OECD membership combinations (OECD–OECD, OECD–non-OECD, non–OECD). Industry dummies (telecom, biopharma, media). Partner-specific and host-country experience metrics. Statistical Modeling Build multilevel mixed-effects models with three levels: Level 1: Deal event Level 2: Firm-level attributes (investor/target) Level 3: National context (home/host country) Estimate direct effects of CD and LD on equity size. Add interaction terms for CD × LD. Robustness Checks Test for multicollinearity using Variance Inflation Factor (VIF). Estimate non-linear interaction effects (CD², LD²). Run alternative specifications with fixed effects at the firm and national levels. Compare models across crisis years to check temporal stability. Visualization of Results Generate predicted margins plots and interaction graphs (Figures 2–8 in the study). Plot fitted slopes of CD, LD, and their interaction against equity size to illustrate relationships. Replication Output Confirm: Negative association between CD and equity size. Positive association between LD and equity size. Significant moderating role of LD on the CD–equity link.
Institutions
- Liaoning University