A discursive perspective on the (de)legitimation strategies concerning a contested emerging-market multinational acquisition in a developed country

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A Discursive Perspective on the (De)legitimation Strategies Concerning a Contested Emerging-Market Multinational Acquisition in a Developed Country

International Management Master Thesis

MSc. Business Administration University of Amsterdam

Name: Coretta Adriaans Student ID: 10602747

Date: June 29, 2015

Supervisor: Francesca Ciulli Reader: Dr. Ilir Haxhi

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Statement of Originality

This document is written by Student Coretta Adriaans who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Smithfield and Beyond: Examining Foreign Purchases of American Food Companies Hearing ... 53 Normalization ... 54 Authorization ... 55 Rationalization ... 56 Moralization ... 59 Narrativization ... 60 CFIUS Clearance ... 61 Normalization ... 62 Authorization ... 62 Rationalization ... 63 Moralization ... 65 Narrativization ... 66

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Discussion ... 66 Proposition 1(a) ... 68 Proposition 1(b) ... 68 Proposition 1(c) ... 68 Proposition 2 ... 69 Proposition 3 ... 69 Conclusion ... 71 References ... 75 Appendix ... 90

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Abstract

The increasing engagement of multinational enterprises (MNEs) in controversial transactions (Joutsenvirta & Vaara 2009), signals the need for research in the field of MNE legitimacy. Furthermore, few studies have addressed the role legitimacy plays during contested cross-border merger and acquisitions (M&As), particularly when the acquiring firm is from an emerging economy. This paper adopts a critical discourse analysis (CDA) perspective in order to understand how relevant actors use discursive strategizing to (de)legitimize contested emerging market multinational enterprise (EM MNE) M&As. A longitudinal study was used to analyze the acquisition of American-based Smithfield, by Shuanghui, a Chinese EM MNE. The discursive strategies of various actors were determined by using Vaara, Tienari, and Laurila’s (2006) five legitimation strategies, while the discourses’ themes were allowed to emerge from the data. All five of Vaara et al. (2006) strategies were evident in the text. Found, as well, were 10 themes: economic, nationalistic, security/safety, political, quality, competition, internationalization, environmental, responsibility, and growth. The discourse analysis showed that actors on opposing sides of the debate often utilized the same strategies as their counterparts to frame similar topics in their favour. Alternatively, the results may indicate that those in support of the acquisition tend to rely on the same strategies throughout the course of the M&A process, while those against the acquisition utilize various delegitimation strategies to block the transaction. Furthermore, a lack of

discursive strategizing by the EM MNE may indicate a preference for the acquired MNE to build legitimacy for the contested transaction.

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Acknowledgements

I would like to express my sincerest gratitude to my supervisor, Francesca Ciulli, for her support and excellent guidance throughout the entire research process. Your positive attitude, constructive feedback, and openness for in-person discussions have been invaluable for the completion of my thesis. Furthermore, I would like to thank Dr. Ilir Haxhi for taking the time to read my work.

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Introduction

As multinational enterprises (MNEs) become increasingly involved in controversial operations (Joutsenvirta & Vaara, 2009) and international acquisitions continue to rise

(Tienri, Vaara, & Bjorkman, 2003), legitimacy is becoming a more important and relevant topic of interest. Furthermore, the increasing presence of emerging market multinational enterprises (EM MNEs) on the world stage through foreign direct investment (FDI) activities (Deng & Yang, 2015) creates a new avenue for legitimacy research. Legitimacy can be defined as “a generalized perception or assumption that actions of an entity are desirable, proper, or appropriate within some socially-constructed system of norms, values, beliefs, and definitions” (Suchman, 1995, p. 574). Due to its subjective nature, legitimacy is often perceived differently by various host countries

(Suchman, 1995), which can, in turn, create complications for some MNEs. If relevant parties in a host environment do not accept the MNE, the firm may be perceived as illegitimate (Suchman, 1995). Certain actors involved in a cross-border transaction may try to disrupt the deal through delegitimizing tactics if they feel as though their beliefs or interests may possibly be jeopardized (Persson, Lundberg, & Elbe, 2014). In this

situation, the MNE may find it difficult to do business and be forced to pull out of the country if it cannot implement strategies to create or repair its legitimacy. As a result, the lack of literature on MNE legitimacy (Joutsenvirta & Vaara, 2009; Vaara et al., 2006;

Vaara & Tienari, 2008), especially in situations where a firm from an emerging market economy is involved, is becoming more concerning and, henceforth, necessitates the need for research in this growing area of interest.

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Legitimacy is particularly critical for MNEs because of the unique challenges firms face abroad. Critical differences between purely domestic firms and MNEs in relation to legitimacy include: the severity of exposure to contrasting institutional environments; the number of actors interested in the firm’s action; the internal and external organizational conflict created by contrasting legitimacy strategies utilized in different contexts; the bounded rationality challenges enhanced by liability of foreignness and institutional distances; and the likelihood of cross-border legitimacy spillovers (Kostova & Zaheer, 1999). These differences create the need for a study that focuses not just on

organizational legitimacy, but on MNE legitimacy, specifically. Kostova and Zaheer (1999) highlight the importance of MNE legitimacy by arguing that legitimacy must be actively monitored by the MNE in all national environments. Furthermore, it is

worthwhile to pay specific attention to the legitimacy of EM MNEs, as relevant

differences between developed country MNEs and EM MNEs exist. EM MNEs can be defined as “international companies that originated from emerging markets and are engaged in outward FDI, where they exercise effective control and undertake value-adding activities in one or more foreign countries” (Luo & Tung, 2007, p. 482). Differences in how EM MNEs expand, decide on foreign investments, and sustain themselves abroad (Luo & Tung, 2007) can have a significant impact on the way in which the legitimacy of the firm is perceived and the strategies adopted in response.

It is also important to acknowledge the type of FDI strategy used, as each entry mode can provide a different set of challenges in terms of managing legitimacy. Mergers and acquisitions (M&As) are often used by EM MNEs who are entering developed markets,

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as it allows them to acquire strategic assets such as brand names, technology, and managerial know-how (Deng & Yang, 2013, 2015; UNCTAD, 2014). The aggressive investment nature of M&As can be perceived as highly threatening to domestic

corporations, especially if the acquirer is seen as an untrustworthy foreigner (Saha, 2012).

The perception of emerging economies as not being accountable or transparent can make it difficult for EM MNEs to gain trust (Luo & Tung, 2007). As a result, the legitimacy of EM MNEs may be challenged more extensively than a developed country MNE due to this equity-based entry mode. Therefore, it is important to take into consideration the unique challenges each entry-mode possesses as equity-based FDIs may be viewed as more threating to certain actors than non-equity-based FDIs. As a result, the analysis of EM MNE legitimacy in relation to M&As matters.

The way in which certain actors try to influence the legitimacy of MNE transactions can be well analyzed through the use of a discursive perspective (Joutsenvirta & Vaara, 2009; Persson et al., 2014; Tienari et al., 2003; Vaara & Tienari, 2008). This perspective was chosen due to its ability to bring greater sense to the complex, and sometimes

contradictory, nature of legitimation (Vaara & Tienari, 2008). Discourse can be explained as a “structured collection of meaningful texts” (Phillips, Lawrence, & Hardy, 2004, p. 636). In order to analyze various discourses, a critical discourse analysis (CDA) perspective will be used. CDA can be best understood as “a discourse-analytic methodology that examines the role played by language in the construction of power relationships and reproduction of domination” (Vaara et al., 2006, p. 792). The use of a CDA perspective is appropriate for analyzing controversial MNE operations, as it is

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effective in capturing the textual level discursive dynamics that change in the data over time (Vaara & Tienari, 2008). Furthermore, it pays attention to the fact that certain discourses can be utilized in a way that reduces or increases the legitimacy of a firm (Fairclough, 2003; Vaara & Tienari, 2008; van Dijk, 1998). This methodology helps to both expand on existing legitimation research and improve the critical social analysis of MNEs (Vaara & Tienari, 2008).

This study will examine the discursive strategies chosen and dynamics developed by key actors during the acquisition of a major firm in a developed economy by an EM MNE. Through a CDA perspective, it will be possible to identify the (de)legitimizing strategies that the critical actors and EM MNE utilize throughout the process. In summary, the research question being addressed is:

Which discursive strategies do relevant actors and an EM MNE adopt to (de)legitimize an acquisition made by the EM MNE in a developed country? What kinds of dynamics do these discourses create in the public discussion, and how do they change over time?

The case being investigated involves the largest Chinese acquisition of a company in the United States (Gelles, Davies, & Waldmeir, 2013). At a purchase price of 4.7 billion USD, Shuanghui, a meat processing business located in Luohe, Henan, China, announced that it would acquire Smithfield Foods, Inc. on May 29th, 2013 (Mattioli, Cimilluca, & Kesmodel, 2013). By utilizing a CDA perspective, it will be possible to analyze the discourses that emerge from the secondary data. This archival data will include

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newspaper articles, company press releases, official statements, letters, and opinion pieces. A longitudinal study will be used to analyze the case, as it will allow the

dynamics concerning the discourses used by critical actors and the EM MNE to emerge.

This paper aims to contribute to existing literature by providing insight into the way specific actors influence the (de)legitimization of an EM MNE acquisition in a developed country through the use of discursive strategizing. Depending on the interests of the actors involved, certain discourses may be used to portray the EM MNE’s actions in either a positive or negative light, furthermore affecting the legitimacy of the firm. As a result, it is important to expand research into the area of MNE legitimacy and the unique challenges EM MNEs face in developed economies. Firstly, this paper aims to provide scholars with greater knowledge on how to anticipate and manage legitimacy challenges created by relevant actors. This includes understanding which strategies and themes relevant actors most frequently rely upon to (de)legitimize a merger or acquisition.

Secondly, the analysis will develop more concrete knowledge on how EM MNEs are able to mitigate legitimacy challenges created through their M&A activities in developed nations. Thirdly, a greater understanding will be gained on the prominence of certain actors, and the weight of their influence on the overall success of a cross-border transaction. Lastly, a more nuanced understanding of the role the EM MNE plays in establishing legitimacy for the cross-border transaction will be discovered. Filling this gap is essential in order for EM MNE managers to better operate their company and ensure their long-term survival on the global stage.

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The paper begins with a literature review on legitimacy and legitimization theories, followed by a section specifically dealing with CDA. MNE and EM MNEs are also discussed further, as well as the unique FDI form of M&As. The paper will then proceed to the methods section where the research design, case selection, and data analysis will be explained. In the following sections, results will be presented and discussed. The

conclusion will offer implications for managers and areas of future research.

Literature Review

The literature review starts with relevant research on legitimacy and MNEs. Afterwards, the unique features of EM MNEs and M&As are discussed. Relevant discursive strategies are explained and current findings on discourse and MNE legitimacy are explored. The literature review ends with final expectations.

Legitimacy

As previously mentioned, Suchman (1995) defines legitimacy as “a generalized perception or assumption that actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (p. 574). He attributes its complexity to the fact that legitimacy is formed in a subjective way. The approval of the firm by its environment is known as organizational legitimacy and is considered paramount for the longevity of an organization (Dowling & Pfeffer, 1975; Hannan & Freeman, 1977; Kostova & Zaheer, 1999; Meyer & Rowan, 1977). Managing legitimacy has its merits, as legitimate organizations are viewed as trustworthy and meaningful to their audiences (Suchman, 1995).

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MNE Legitimacy

Critical differences between MNEs and domestic firms create the need for research on MNE legitimacy. The importance of studies focused particularly on MNE legitimacy is highlighted in Kostova and Zaheer (1999) work. Since MNEs operate in multiple countries, they are at a substantially higher risk of facing conflicting institutional environments than strictly domestic firms (Kostova & Zaheer, 1999). In particular, the very likely possibility of an MNE investing in a country with incongruent institutional standards can translate into special legitimacy struggles for the firm (Kostova & Zaheer, 1999). Therefore, the challenge of legitimizing the firm’s presence in multiple contexts is a hurdle unique to MNEs. This issue is further complicated by the number of actors exerting their influence to (de)legitimize a foreign firm’s presence in their country (Kostova & Zaheer, 1999). The number of interest groups increases substantially as the number of countries entered by the MNE rises (Kostova & Zaheer, 1999). If the firm is viewed poorly, local interest groups can prove to be problematic for the MNE in

maintaining its overall legitimacy (Kostova & Zaheer, 1999). Since MNEs are confronted with these unique challenges not faced by purely domestic firms, there is a particular need to focus on MNE legitimacy research.

Van Leeuwen and Wodak (1999) describe four strategies, which can be used in discourse to influence legitimacy. These strategies include: authorization, rationalization, moral evaluation, and mythopoesis (van Leeuwen & Wodak, 1999). Vaara, Tienari, and Laurila (2006) further expand upon van Leeuwen and Wodak’s (1999) classifications to

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These strategies are re-categorized into normalization, rationalization, moralization (moral evaluation), authorization, and narrativization (mythopoesis). Whether

intentionally implemented or not, these strategies utilize various discourses to establish legitimacy. Normalization is a legitimation strategy that renders something normal or natural. Prospective and retrospective cases and events are used to define this standard. Authorization is a strategy that references to an authority to build legitimacy. In the case of M&As, Vaara et al. (2006) found that industry experts, competition officials, corporate representatives, analysts, and the markets were often cited as authority figures.

Rationalization focuses on the utility or purpose of certain practices or actions to build legitimacy. The anticipated benefits or outcomes provide the rationale for this strategy. Moralization develops legitimacy by emphasizing specific values, while narrativization focuses on the use of storytelling to gain legitimacy. The use of stories promotes

preferred behaviour and can be used to portray certain people or companies as villains or heroes. The four other tactics are often accompanied by the narrativization strategy, and it is likely to see at least two prominent legitimation tactics emerge, as they are often

intertwined. In this paper, the five legitimization strategies of Vaara et al. (2006) will be considered to analyze the data. The framework is suitable for this study as both the case of Vaara et al. (2006), and the case analyzed in this paper focus on how discourse influences the (de)legitimation of a cross-border transaction. As Vaara et al.’s (2006) strategies are already used in MNE legitimacy studies (Vaara & Tienari, 2008), it is possible that this framework can be extended to EM MNE research.

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EM MNE

Luo and Tung (2007) define emerging market multinational enterprises (EM MNEs) as “international companies that originated from emerging markets and are engaged in outward FDI, where they exercise effective control and undertake value-adding activities in one or more foreign countries” (p. 482). Emerging markets are described as “countries whose national economies have grown rapidly, where industries have undergone and are continuing to undergo dramatic structural changes, and whose markets hold promise despite volatile and weak legal systems” (Luo & Tung, 2007, p. 483). Furthermore, foreign direct investment (FDI) can be defined as “a form of international inter-firm cooperation that involves significant equity stake and effective management decision power in, or ownership control of, foreign enterprises” (De Mello, 1999, p.135). Although EM MNEs and developed country MNEs share common characteristics, including their desire to engage in FDI, critical dissimilarities do exist relating to how they expand, their motivation for going abroad, and also concerning the challenges they face to sustain themselves in a new country (Luo & Tung, 2007). These key differences necessitate the need for research specifically dedicated to EM MNE legitimacy.

In terms of internationalization, EM MNEs are worth specific attention, as ‘pull’ rather than ‘push’ factors tend to be a strong motivator for their global expansion (Luo & Tung, 2007). The use of springboarding activities is a common tactic by EM MNEs as a means of aggressively acquiring critical assets from mature MNEs in order to overcome their latecomer disadvantage (Luo & Tung, 2007). Categorized as either asset-seeking or opportunity-seeking, EM MNEs’ springboarding activities retain some unique

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characteristics unfamiliar to developed country MNEs (Luo & Tung, 2007). EM MNEs expand into developed countries through the use of springboarding in order to obtain a variety of benefits such as advanced technology, manufacturing capabilities, and brands; they learn to counter-attack global rivals, bypass stringent trade barriers, and ease

domestic institutional constraints (Luo & Tung, 2007). Unlike developed country MNEs, EM MNEs are less likely to pursue cost reduction strategies abroad, as they currently benefit from low costs in their home market. Furthermore, an EM MNE’s desire to improve its critical resources, rather than to rely on its current assets, highlights a major difference between conventional MNE theory and EM MNE behaviour (Luo & Tung, 2007). Conventional MNE internationalization strategies, such as Johanson and Vahlne’s (1977) internationalization process theory, where firms gradually enter markets of

increasingly psychic distance, are not commonly used by EM MNEs (Luo & Tung, 2007). EM MNE entry modes and project locations are not evolutionary or path

dependent (Luo & Tung, 2007). As outlined by Luo and Tung (2007), EM MNEs often use leapfrogging in order to engage in high commitment activities such as acquisitions or greenfield investments. Although a variety of reasons compel EM MNEs to use

springboarding as a method to internationalize, it has been noted that the selling of

strategic resources by companies in developed countries has been a strong motivator (Luo & Tung, 2007). Yet, the selling of strategic assets can raise concerns in terms of national security and result in deeply contested mergers or acquisitions (Saha, 2012). The origins of EM MNEs and the rate at which they attempt to acquire critical resources or advanced technology (Luo & Tung, 2007) can heighten the legitimacy debate created by critical actors. These springboarding activities may create special legitimacy struggles for EM

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MNEs, as their aggressive expansion strategy may appear more threatening to foreign interest groups. As a consequence, these specific actors may react more defensively to an EM MNE than they typically would during a merger or acquisition between two

developed country MNEs. Given their motives and ways of internationalizing, it is clear that EM MNEs ultimately experience challenges that MNEs do not face. Yet, MNE literature lacks the robustness to fully predict or explain the legitimacy struggles of EM MNE FDIs. This gap necessitates additional research in the field of legitimacy with a focus on EM MNEs.

In terms of sustaining themselves abroad, EM MNE’s face several unique challenges (Luo & Tung, 2007). Weak corporate governance, typically associated with EM MNEs, makes them appear less transparent or trustworthy, creating more difficulty in securing global stakeholders or appearing legitimate in the eyes of relevant interest groups (Luo & Tung, 2007). The after effects of springboarding activities can magnify the difficulties typically faced by EM MNEs abroad, such as managing culture and integrating complex international logistics, as they tend to have very limited international experience (Luo & Tung, 2007). Therefore, the lack of global experience, managerial skill, and professional knowledge are all major concerns specific to EM MNEs (Luo & Tung, 2007). These limitations may make it fairly difficult for EM MNEs to be taken seriously by critical actors (Luo & Tung, 2007). In turn, these unique challenges can create special legitimacy concerns for EM MNEs, which MNE theory is unable to fully explain. Many EM MNE FDI activities are often in the form of acquisitions (Deng & Yang, 2015), therefore, it is important to discuss the specific appeal of this entry mode for EM MNEs.

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Mergers and Acquisitions

Acquisitions are a desirable form of FDI as they encourage technological learning, organizational learning, and assist in the transfer of firm-specific intangible assets

between corporations (Vermeulen & Barkema, 2001, as cited in Deng, 2009). Dierickx & Cool (1989) also highlight the ability of M&As to close a firm’s resource gap.

It is important to specifically address EM MNE acquisitions, as critical differences exist between developed country MNEs and EM MNE M&A activities. Deng and Yang (2015) examined cross-border M&As by EM MNEs and found that the reason to enter a host nation was heavily swayed by whether the foreign country had a developed or developing economy. Variations in institutional environments, economic development, financial market size, and corporate governance between developed and developing economies has created the need to understand the driving FDI motives of EM MNEs (Deng & Yang, 2015). Studies have shown that strategic objectives such as the attainment of product differentiation, marketing expertise, technology, and managerial know-how tend to drive EM MNEs to acquire companies in developed countries (Jullens, 2013; Rabbiosi et al., 2013, as cited in Deng & Yang, 2015). This entry mode also allows EM MNEs to secure a steady flow of resources (Pfeffer & Salancik, 2003, as cited in Deng & Yang, 2015). The lower opportunity cost of obtaining critical resources, as well as the ability to increase the EM MNE’s bargaining power through controlling key resources are major drivers of this entry mode (Chen et al., 2012; Gaffney et al., 2013; Haleblian et al., 2009; Williamson, 1991, as cited in Deng & Yang, 2015). Overall, the motives behind an EM

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MNE’s decision to engage in a merger or acquisition, versus any other form of FDI, could raise concerns and cause critical actors in the host country to react adversely. Ultimately, various discourses could develop in which an EM MNE’s legitimacy is questioned. Therefore, it is important to dedicate studies on legitimacy with a specific focus on EM MNE’s M&As. As previous research (Persson, et al., 2014; Tienari et al., 2003) has shown that discourse plays a key role in influencing the legitimization of a merger or acquisition, a discursive perspective will be chosen to analyze this case.

Discursive Approach

Discourse can be explained as a “structured collection of meaningful texts” (Phillips, Lawrence, & Hardy, 2004, p. 636) that actors often use to legitimate their viewpoint (Tienari et al., 2003). Furthermore, discourses can be manipulated in a way that gives new meaning and supports the goals of the interest group utilizing them (Tienari et al., 2003). The importance of using a discursive approach to analyze MNEs is due to its ability to “[uncover] crucial and often ignored sociopolitical processes involved in the legitimation of contested [MNE] undertakings” (Joutsenvirta & Vaara, 2009, p. 86). In order to analyze the discourses that emerge from the data, a critical discourse analysis (CDA) perspective will be taken. CDA can be best understood as “ a discourse-analytic methodology that examines the role played by language in the construction of power relationships and reproduction of domination” (Vaara et al., 2006, p. 792). It can be analyzed at the textual, discursive practices, and social practices level (Fairclough, 2003). A CDA perspective is useful in this type of study, as it is able to show the extent to which certain actors use rhetorical moves to manipulate others (Vaara et al., 2006, p. 793). As a

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result, particular things can be cast in either a positive or negative light, depending on the actor’s intention (Vaara et al., 2006).

Discourse and MNE Legitimacy

Previous literature has stressed the importance and benefits of adopting a discursive perspective in evaluating cross-border transactions whose legitimacy was contested (Joutsenvirta & Vaara, 2009; Persson et al., 2014; Tienari et al., 2003; Vaara & Tienari, 2008). Tienari, Vaara, and Bjorkman (2003) examined a cross-border acquisition in which discursive strategies of various actors in the media were examined through a discourse analysis. The authors found that actors with opposing viewpoints often used the same discourse(s) to legitimize their position. Furthermore, it was also evident that various actors used different or even contradictory discourses to advance their goals. In 2008, Vaara and Tienari once again investigate MNE legitimacy by examining a case involving a production unit shutdown from a discursive perspective. A CDA perspective was chosen, and Vaara et al. (2006) strategies were utilized to examine a media text from a Finnish newspaper in which (de)legitimizing attempts were made. The study

highlighted the important role discursive strategies play in the legitimation or

delegitimation of controversial MNE activities. Joutsenvirta and Vaara (2009) further contribute to existing literature on MNE legitimacy by examining Finnish media texts regarding a contested greenfield investment project from a CDA perspective. The study adopted a longitudinal perspective by examining the data over four key time periods. Joutsenvirta and Vaara’s (2009) work added to existing literature by examining the discursive legitimation struggles concerning an FDI project and the dynamics created

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over time. Persson, Lundberg, and Elbe (2014) also adopt a longitudinal perspective to examine a contested cross-border acquisition in the financial industry. Multiple important actors were analyzed through the media to investigate how they attempted to legitimize their own actions while delegitimizing the actions of others. Through discourse analysis, the paper showed that actors draw on various discourses that change over time to

influence legitimacy. This article comes closer to filling the gap on EM MNE legitimacy involving M&As, however, the acquiring company examined in this case had strong connections to a developed economy. It is debatable as to whether this study fully explores the dynamics created when an EM MNE acquires a developed economy MNE; many of the unique issues concerning an EM MNE were diluted as the firm had a strong London, England, connection. Furthermore, this particular case examined both internal and external actors, including the media, to influence the legitimacy of the business relationship development process. Overall, the articles showed the tendency for actors to rely on just a few types of discourses to influence legitimacy. Additionally, the number of actors against the transactions tended to be equally matched to those in support of the deals, or slightly less.

In all, limited, but existing research on MNE legitimacy predominately focuses on developed economies. It would be useful to study situations in which the acquiring company is based in an emerging economy. Critical differences between EM MNEs and MNEs, as well as the different forms of FDI investments necessitates research in this area. Furthermore, studies in which different M&A cases and sources of discourse are analyzed would provide a more nuanced understanding of the role certain actors play in

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influencing the legitimation process. This would include the exclusion of the media as an actor. Finally, research on the way in which discourse changes over time and creates certain dynamics is limited as the number of papers adopting a longitudinal approach is sparse.

Conclusion

The literature reviewed in this section shows that there is a need to fill an important gap in research on EM MNE M&As in developed countries and the (de)legitimization processes unfolding from them. Research adopting a CDA perspective is, therefore, needed in order to gain insights into the discourses and topics adopted by relevant actors to affect the legitimacy of a cross-border transaction over time. This study will use the five legitimation strategies set out by Vaara et al. (2006) to evaluate the acquisition of a developed country MNE by an EM MNE.

It is anticipated that the highly aggressive nature of EM MNEs and their weak corporate governance associations (Luo & Tung, 2007) will produce strong, negative reactions from certain actors in the M&A legitimation process. Due to the elevated number of aspects perceived as threatening to multiple interest groups, actor responses are expected to create more polarized discursive strategizing than typically experienced by developed country MNEs M&As. Furthermore, the EM MNE’s weak home-market regulations and desire to acquire strategic assets from developed country MNEs (Luo & Tung, 2007) are expected to play a heavy role in the themes that emerge from the data. As a result, it is expected that the EM MNE will face a high number of actors against the deal and be

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forced to mitigate concerns relating to a wider range of themes than typically experienced by developed country MNE acquisitions. As Vaara et al. (2006) legitimation strategies will be used, it is expected that those who support the controversial acquisition will most frequently rely upon rationalization and authorization. This assumption is based on the idea that the deal is most likely pushed forward due to its business profitability.

Rationalization may also be used to highlight the benefits the developed country MNE could provide to the EM MNE in terms of improved technology and quality controls. Furthermore, the support from various regulators through authorization would help to provide a strong backing for the acquisition. This is particularly important as EM MNE acquisitions are seen as highly untrustworthy in comparison to developed country MNE acquisitions due to the unique characteristics of their home market (Saha, 2012). Support from well-respected authorities would help to allay the fears of critical actors. On the other hand, it is anticipated that narrativization, moralization, and rationalization will be used most frequently to delegitimize the acquisition. As EM MNE M&As are often viewed as highly threatening by developed countries who are targeted for foreign investment (Saha, 2012), storytelling can be used as a persuasive tool to block the transaction. Through narrativization, those against the deal can describe various exaggerated situations in which their targeted audience is disadvantaged by the

acquisition. A part from using moralization and rationalization to highlight the drawbacks of consolidating major corporations, these strategies may be used to easily target the poor regulations and corporate governance specifically associated with EM MNEs.

Moralization could then be used to (de)legitimize the acquisition further by focusing on how these weak EM MNE characteristics could result in negative moral implications for

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certain individuals, communities, economies, or environments. It is also anticipated that upper management of the EM MNE will be a major player in the legitimization of the acquisition, as it is crucial for them to justify the transaction, as well as gain acceptance from the relevant parties (Hardy, Palmer, & Phillips, 2000). A longitudinal study has been adopted, as it is expected that there will be changes in the way certain discourses are used by certain actors or the EM MNE, itself, to (de)legitimize the acquisition.

Data & Methods

Research Design

The research design adopted in this study is a holistic case study design in which a single case is used. This method is appropriate, as quantitative studies are difficult to use when evaluating contemporary events (Yin, 2013). Furthermore, as no control can be exerted over the course of events and the changing dynamics, an experiment is not possible (Yin, 2013). A single case study is selected, as it is a critical event that is being investigated. As a result, it is expected that what happens in this particular situation can be anticipated in other similar situations. Ultimately, the findings can be generalized to a certain extent (Patton, 2005).

Case Selection

The case analyzed in this research involves the largest Chinese acquisition of a company in the United States (Gelles et al., 2013). On May 29th, 2013, Shuanghui, a meat

processing firm located in Luohe, Henan, China, announced that it would acquire Smithfield Foods, Inc. (Smithfield, 2013). At a purchase price of 4.7 billion USD, the acquisition was unprecedented as it was the largest Chinese acquisition of an American company to date (Mattioli, Cimilluca, & Kesmodel, 2013). Due to the nature of the

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companies and the origin of the acquirer, many interest groups became fiercely involved in the discourses concerning the proposed purchase. Although the case is quite recent, the nature of the transaction created a strong presence of media articles outlining different actors’ views on the proposed deal. This case has been selected for three main reasons. Firstly, the case is unprecedented in a sense that it was the largest Chinese acquisition of an American company in history (Mattioli, Cimilluca, & Kesmodel, 2013), highlighting its importance as a critical case. Secondly, the substantiality of the acquisition brought about fierce debate in which the Committee on Foreign Investment in the United States (CFIUS) became involved. The importance of the acquisition is clear, as CFIUS deals explicitly with cases that have the potential to compromise national security (De La Merced, 2013). Thirdly, the number of actors involved and the plethora of statements stemming from relevant parties have provided a solid foundation to evaluate the dynamics of the discourses over time.

The next section will present a small political-economic background on China and the United States, followed by a brief history on Smithfield and Shuanghui, the two

companies at the center of this cross-border acquisition. The American and Chinese food industry will be outlined, followed by a section on trade agreements between the two nations. Before the deal is analyzed, recent notable FDI attempts in the United States will be discussed. These sections aim to provide a greater understanding behind the tensions and motives of relevant actors in the Smithfield-Shuanghui acquisition.

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Economic & Political Context USA & China Food Industry

The United States is considered the most food secure country in the world, while China lags behind in 42nd_{place (The Economist’s Intelligence Unit, 2015). Americans, on} average, spend 13.9 percent of their household income on food, while the Chinese typically spend triple (38.3%) the amount. As half of the world’s pigs are produced and consumed by the Chinese (Bittman, 2013), pork’s importance to China is visible through its influence on the Chinese central bank’s monetary policy (Munshi, 2013). Despite U.S. restrictions on fresh Chinese pork and beef imports, due to hoof and mouth disease concerns, China shipped 4.1 billion pounds of food to the United States in 2012 (USDA FAS, 2015). In the same year, the United States sold $886 million USD worth of pork to China (USMEF, 2015). Slow reporting of avian influenza outbreaks (USDA FAS, 2015), coupled with food health violations, has enhanced the negative image of China’s food safety (Bittman, 2013). Notable food safety scandals include the addition of melamine to baby formula in 2008, fox and rat meat passed off as lamb in 2013, hydrogen peroxide being used to process chicken claws in 2014, and the infamous scandal in which 16,000 dead pigs were found floating down the Huangpu River in 2013 (Munshi et al., 2013). The food quality in China has deteriorated to the point where urban Chinese consumers have also expressed distrust with their domestic food supply and opt for imported food whenever possible (Bittman, 2013).

Trade between USA & China

Trade barriers between the United States and China are not only limited to imports and exports, but have impacted FDIs as well. The restriction on investments in America has long been an agitation for China (Bussey, 2013). Despite current restrictions, Chinese

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investments in the United States have increased dramatically in recent years and have been strongly supported by the Chinese government (Bussey, 2013). In 2012, Chinese buyers spent $11.57 billion USD on 49 deals to acquire American companies and shares (Dealogic, 2012). China’s cumulative investment in the United States exceeded $21.4 billion USD in 2012 and reached over $35.7 billion USD in 2013 (Rhodium Group, 2014). The United States’ investment in China exceeded $53.7 billion USD in 2012 and toppled over $61.5 billion USD in 2013 (Statista, 2015).

FDI in the USA

The proposed acquisition of Smithfield by Shuanghui has not been the first cross-border transaction involving an American company to fall under intense scrutiny. In 2006, Dubai Ports World’s attempt to purchase U.S. shipping ports on the East Coast was thwarted by national security concerns voiced by prominent U.S. senators (Sanger, 2006). In another case, American President Barack Obama blocked the attempted investment of a Chinese company in the Oregon wind-farm projects amidst national security concerns involving an American Navy base in 2012 (Mauldin & Kendall, 2014). Furthermore, CNOOC abandoned its efforts to purchase Unocal in the United States amongst major opposition from politicians in 2005 (Barboza & Sorkin, 2005). In terms of Chinese M&As in the United States, computer espionage concerns, monetary policy differences, and military competition further complicate the decision on how to regulate foreign investment between the two nations (Mauldin & Boles, 2013).

Company History Shuanghui

Shuanghui began as a government-owned, pork packing plant in Henan province, China, in 1958 (WH Group, 2015). In 1994, it became a state-owned enterprise known as the

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Shuanghui Group (WH Group, 2015). In 1998, Shuanghui subsidiary Henan Shuanghui Investment & Development Co.1, the largest Chinese meat processor and publicly traded meat product company, was listed on the Shenzhen Stock Exchange (WH Group, 2015). Shuanghui Group2 was privatized in 2006 after Goldman Sachs and CDH Shine acquired the company (Barboza, 2013).

In 2013, Shuanghui slaughtered 15 million hogs, operated 20 processing plants in 13 Chinese provinces, produced 2.7 million tons of meat, and employed approximately 60,000 workers (Campaign for Contract Agriculture Reform et al., 2013). Furthermore, Shuanghui invested over $800 million USD to build four more processing plants

(Campaign for Contract Agriculture Reform et al., 2013) in hopes to increase its sales to over 100 billion Yuan by 2015 (Burkitt, 2013). In 2013, Shuanghui’s sales exceeded a record $20 billion USD (WH Group, 2015). Currently, Shuanghui does not export any products to the United States, as it only serves the market in China (WH Group, 2015). Like other top Chinese executives, the current chairman of Shuanghui, Mr. Wan Long, has been a member of China’s National People’s Congress for over 15 years (Burkitt, 2013).

1_{Currently, Henan Shuanghui Investment & Development Co. is known as Shuanghui Development and} has the majority of its shares owned by the Shuanghui Group (WH Group, 2015).

2_{In 2014, Shuanghui Group changed its name and is currently known as WH Group Limited. WH Group} Limited headquarters is based in Hong Kong, with Shuanghui Development headquarters in China, Smithfield headquarters in the United States, and Campofrio Food Group headquarters in Europe (as a result of a previous Smithfield acquisition).

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By 2013, the use of private farmers to supply Shuanghui had come under increased scrutiny in the light of numerous food safety scandals (Mattioli et al., 2013). The poor regulation of Chinese farmers had been a major contributor to the growing problem (Mattioli et al., 2013). In 2011, clenbuterol, a food additive banned in the United States and China, was found in Shuanghui pork (Munshi, 2013). As a result, Shuanghui recalled factory stock, announced stricter controls, and five employees were sentenced to lengthy prison terms in China (Munshi, 2013). Other food safety scandals involving China have caused the country to become synonymous with food safety concerns (Bittman, 2013). As a result, companies who originated from China have strong, negative associations in terms of food quality to overcome.

Smithfield

Smithfield Foods, a publicly traded Virginia-based company founded in 1936, is the largest pork processor and hog producer in the world (Smithfield, 2013). Smithfield houses a variety of popular packaged meat brands and is the leader in many of its brand categories in the United States (Mattioli et al., 2013). Smithfield has become known for producing the world’s leanest, most profitable pork as a result of advances in genetic research funded in part by American tax dollars (Bittman, 2013). As a $30 billion USD global food company, Smithfield controlled just over a quarter of the American pork market with a market share of 26% in 2013 (Campaign for Contract Agriculture Reform et al., 2013). In the same year, over 46,000 people were employed by the company in four different countries and 25 states (Smithfield, 2013). The United Food and Commercial Workers represented over half of Smithfield’s American employees, including the 4,808 workers at the Smithfield Packing Plant in Tar Heel, North Carolina (UFCW, 2013). Furthermore, Smithfield operated 25 American plants, seven

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international plants, 460 farms, and contracted with 2,100 hog farms spread across 12 states (Campaign for Contract Agriculture Reform et al., 2013). In 2013, Smithfield raised over 15.8 million hogs on American soil (Darlin, 2013). In the 2012 fiscal year, 27.7 million animals were slaughtered at the Smithfield Packing Plant in Tar Heel, North Carolina (Gelles et al., 2013). Smithfield, alongside four other pork-processing

companies, dominated 73% of the meat packing industry (Campaign for Contract

Agriculture Reform et al., 2013). A part from Smithfield’s domestic market, the firm had a strong consumer base in Romania, Poland, and the United Kingdom (Smithfield, 2013). In 2013, it was estimated that 25% of Smithfield’s exports were destined for China (Mattioli et al., 2013). Smithfield and Shuanghui already shared a trading relationship before the acquisition, as Smithfield provided roughly 10 percent of Shuanghui’s pork (Ho et al., 2013).

Data Collection

The data collected consisted of secondary data which was gathered from newspaper articles, company press releases, official statements, letters, and opinion pieces, as they contained important quotes from relevant actors trying to (de)legitimate the acquisition. Persson, Lundberg, and Elbe (2014) argued for the importance of using media coverage to analyze the debate concerning the legitimacy of an international merger or acquisition, as it can show the “struggle between different actors (both internal and external) drawing on discourses as a means to affect opinion and perceptions of legitimate behaviours” (p. 1071). The benefits of using news articles to gather data is further strengthened, as the media represents a major platform for discursive strategizing of key interest groups

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(Tienari et al., 2003). Three major newspapers were selected based upon their circulation and political orientation. Archival data from The New York Times (left-wing/liberal), Financial Times (economically liberal, politically center), and The Wall Street Journal (right-wing/conservative) were collected to develop an in-depth study. They are considered to be quite reliable sources, with The Wall Street Journal having the largest circulation in the United States, followed by The New York Times (Alliance for Audited Media, 2013). The Financial Times, based in the United Kingdom, is equally robust as it has one of the highest circulations for business newspapers in the world (PwC, 2011). In total, 80 articles were collected from The New York Times, The Financial Times

(London), and The Wall Street Journal by searching for the terms ‘Shuanghui’ and ‘Smithfield’ in Lexis Nexis’ electronic database. Furthermore, additional data was collected from the two merging companies, lawmakers, unions, senators, industry experts, non-governmental organizations (NGOs), consumers rights groups, advocacy organizations, relevant councils, committees, and consultancy groups etc. (Appendix

Table 1). These actors were selected as their opinions were voiced in the collected

newspaper articles and they represented various perspectives in relation to the proposed acquisition. After the prominent actors were identified, company press releases were collected from Smithfield and Shuanghui’s websites, opposition letters signed on behalf of multiple interest groups were be obtained, and official statements and opinion pieces were gathered from the remaining sources. In total, 25 documents were collected.

Reay and Hinings (2005) outline three important benefits of analyzing archival data. Archival data provides a large quantity of publicly available documentation that can

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illustrate important changes throughout the course of events. Secondly, archival data provides a rich information source that represents multiple viewpoints of various actors. Lastly, this source represents a primary platform for communication between key actors. Although the media is an outlet for certain actors to spread influence, it has also become evident that the media can assist in the (de)legitimization process as it can put forward an outspoken view of its own (Persson et al., 2014). Since analyzing the media as an actor can create complications in terms of evaluating the viewpoints of other actors in an article, journalists were not included as one of the key interest groups. As a result, statements made by journalists to influence the (de)legitimation of the acquisition were disregarded.

Articles were analyzed from May 29th, 2013, the date the acquisition was announced, up until September 26, 2013, the date the acquisition was finalized. Overall, the data set was divided into 4 key time periods (Appendix Table 2).

The most important time period during the proposed acquisition occurred in the first quarter, between May 29, 2013, and June 19, 2013, as a significant number of actors utilized various discourses through several media platforms to impact the legitimacy of the cross-border transaction. During this time period, multiple sources posted articles on the same day, highlighting the monumentality of the proposed transaction. After the acquisition was permitted by CFIUS on September 6th, 2013, and ultimately approved by Smithfield shareholders on September 26, 2013, it was discussed less frequently in key news sources and began to fade from media attention.

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Data Analysis

This study utilizes critical discourse analysis (CDA) to examine documents produced by various actors. A CDA perspective is often used in this type of research (Vaara & Tienari, 2008: Vaara et al., 2006), as it is useful in examining how rhetoric can be manipulated to impact the legitimacy of corporate actions (Joutsenvirta & Vaara, 2009). Furthermore, M&As tend to have socially constructed power structures, something CDA is effective in evaluating (Vaara & Tienari, 2008). In addition, an inductive and deductive approach will be adopted. Legitimation strategies of various actors will be determined using Vaara et al.’s (2006) strategy categorizations, while the themes of the discourses will be allowed to emerge from the data. The inductive approach will be used for the second part of the analysis, as it is difficult to pre-determine relevant themes that will develop. To begin, thematic analysis will be used. Relevant statements will be gathered from the documents, classified by actor, and further categorized into one of the five legitimation strategies previously outlined by Vaara et al. (2006). Although Vaara et al.’s (2006) strategies are defined in terms of how to build legitimacy, this study will also use the same definitions to categorize how actors attempt to reduce legitimacy. Texts will then be classified based on the main theme of the passage. In total, 10 themes were found: economic, nationalistic, security/safety, political, quality, competition,

internationalization, environmental, responsibility, and growth. Finally, the quotes will be categorized as either trying to legitimize or delegitimize the acquisition. As it is a

longitudinal study, the data will be placed in chronological order. This method will assist in creating a narrative account of the case being investigated (Eisenhardt & Bourgeois,

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1988; Maguire & Hardy, 2009). Furthermore, it will provide richer detail as it can show changes in the discourses over an extended period of time (Persson et al., 2014). Through utilizing a systematic method of analysis and by adhering to the strict case study protocol, researchers should be able to replicate the analysis, obtaining the same results. Only the most relevant statements will be found in the analysis section. Additional statements, which add further support, can be found in the appendix (Appendix Table 5, 6, 7, & 8).

Table 1: Definitions of (De)legitimation Strategies

(De)legitimation Strategy Definition

Normalization _{• (De)legitimation by “rendering something normal or natural”} (Vaara et al., 2006, p.797).

Authorization _{• (De)legitimation by “reference to authority” (Vaara et al.,} 2006, p.799).

Rationalization _{• (De)legitimation by “reference to the utility or function of} specific actions or practices” (Vaara et al., 2006, p.800).

Moralization • (De)legitimation that “refers to specific values”(Vaara et al., 2006, p.801).

Narrativization _{• (De)legitimation by telling a story in which “evidence of} acceptable, appropriate, or preferential behaviour” is present (Vaara et al., 2006, p.802).

• Furthermore, “particular companies or persons [are]

portrayed as winners, losers, heroes, adversaries, or culprits” to impact legitimacy (Vaara et al., 2006, p.802).

Quality of Research Design

Construct validity will be attained through using multiple sources of evidence. Newspaper articles from both left and right-winged perspectives will ensure a well-rounded assessment. Furthermore, government and company statements will add to the robustness of the assessment and develop a stronger chain of evidence. Internal validity will be addressed through strong explanation building and the acknowledgement of rival

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explanations. The use of well-cited and broadly accepted theory in the field of MNE legitimacy for the investigation of the single case study analysis should strengthen the external validity.

Results

The Deal

The deal, announced on May 29, 2013, stated that Smithfield Foods would sell itself to Shuanghui International for $34 USD per share (Munshi et al., 2013). The purchase price equalled approximately $4.7 billion USD, while the price per share gave Smithfield a valuation of $7.1 billion USD, including debt (Mattioli et al., 2013). The proposed

acquisition of Smithfield by Shuanghui was the largest food and beverage sector takeover pursued by a Chinese company overseas (Dealogic, 2013). The terms of the acquisition indicated that the deal was to be settled before November 29th, 2013 (Smithfield, 2013). For the acquisition to be approved, support was required from Smithfield shareholders, specific foreign antitrust and anti-competition laws, the Committee on Foreign

Investment in the United States (CFIUS), and must have also satisfied other relevant closing conditions (Smithfield, 2013).

CFIUS analyzed the acquisition in terms of its potential impact on national security (De La Merced, 2013). CFIUS is most commonly summoned to analyze key sectors such as energy or technology and has had little history examining M&As in the food industry (De La Merced, 2013).

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The approval of the deal meant that Smithfield’s common stocks would no longer be publicly traded, and the company would become a wholly-owned, independent subsidiary of Shuanghui International Holdings Limited (Smithfield, 2013). Smithfield employees, facilities, headquarters, collective bargaining agreements, and philanthropic initiatives were not to be affected by the deal (Smithfield, 2013).

Acquisition Announcement

(Period 1: May 29, 2013 – June 19, 2013)

As previously discussed, the Smithfield-Shuanghui acquisition was announced on May 29, 2013. Period one (Appendix Table 3, 4, & 5) showed that both parties used

normalization and rationalization strategies to influence the legitimacy of the acquisition. Opposition groups also frequently used narrativization as a strategy. Economic and security/safety issues were discussed extensively by both parties. Themes of quality were also evident in several of the supporting actors’ arguments.

Normalization Support

Actors in support of the deal frequently used normalization to legitimize the cross-border acquisition. Smithfield CEO, Larry Pope, attempted to render Smithfield’s high quality and safety of products as a normal characteristic of the brand. Phrases such as ‘world-leading,’ ‘most-trusted,’ ‘best-in-class,’ and ‘business as usual,’ were all used to reinforce the positive associations between Smithfield and food quality. This was visible in Mr. Pope’s May 29, 2013, statement:

"We have established Smithfield as the world's leading and most-trusted vertically integrated pork processor and hog producer, and are excited that Shuanghui recognizes

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our best-in-class operations, our outstanding food safety practices, and our 46,000 hard-working and dedicated employees. It will be business as usual — only better — at

Smithfield” (Smithfield, 2013).

Larry Pope used this strategy to ensure concerned parties that the food safety and quality at Smithfield would have maintained its high standards and not have been compromised by foreign ownership. By focusing on the high quality and safety of Smithfield products, Mr. Pope attempted to legitimize the transaction by rendering these features as something normal, therefore, reducing any concerns.

Normalization was also used by the United Food and Commercial Workers International Union (UFCW) to discuss the security and safety of American jobs. President Joseph T. Hansen of the UFCW stressed that nothing would have changed for Smithfield

employees when he used the phrases ‘continue to provide’ and ‘build on that same spirit’ in his speech:

“As the representative of more than 16,000 Smithfield Foods workers in 14 states, the UFCW is pleased that current Smithfield management will stay in place, and that all collective bargaining agreements will continue to provide strong wages and benefits for

Smithfield workers following the sale. (…) We intend to work with Smithfield’s new owners to build on that same spirit of open dialogue and cooperation” The Chinese market for fresh pork is a rapidly exploding market, and this purchase reflects that country’s economic need for high quality, U.S.-made pork. The UFCW is pleased that workers in our communities can benefit from the growth and expansion of the U.S. pork

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Mr. Hansen emphasized that Smithfield’s wages were strong, and that the acquisition by a Chinese company would have not impacted this long-standing employee benefit. His statement was an effort to legitimize the acquisition by reinforcing the idea that the employees would have continued to enjoy their union benefits long after the acquisition was approved. His statement attempted to reduce job security concerns, therefore, reducing (de)legitimization efforts made by opposition parties. Furthermore, Mr. Hansen simultaneously incorporated rationalization tactics to further rally support in terms of anticipated economic and growth benefits.

Oppose

Normalization was also frequently used as a tactic to delegitimize the cross-border acquisition. Senator Debbie Stabenow, Democrat of Michigan, and chairwoman of the Senate Agriculture Committee, referred to “China and Shuanghui’stroubling track record on food safety” in an attempt to render safety issues as a normal and recurring issue for the company and its place of origin (De Le Merced, 2013). Debbie Stabenow’s statement referenced to recent food safety scandals in China that include the addition of clenbuterol, a banned substance, to Chinese meat and the discovery of dead hogs in the Huangpu River. Mrs. Stabenow attempted to delegitimize the acquisition by using past cases as a way to predict future events by deeming the historic events as a normal type of behaviour for the firm.

Wenonah Hauter, Executive Director of Food & Water Watch, also used normalization as a strategy to delegitimize the acquisition by referring to an example in which Shuanghui previously violated food safety standards:

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“In 2011, Shuanghui was embroiled in a food safety scandal for producing and selling pork laced with the banned veterinary drug clenbuterol, which is linked to serious human

health risks. Overseas ownership can only complicate and shield potential future food safety problems from U.S. oversight” (Hauter, 2013).

By continually referring to the security and safety problems associated with Shuanghui, Wenonah Hauter attempted to delegitimize the Smithfield-Shuanghui acquisition by reinforcing the idea that the previously mentioned food safety scandals were not unique incidences, but were characteristic of Chinese firms such as Shuanghui:

“The globalized food system poses real food safety risks, and free trade deals with global partners encourage a race-to-the bottom in food safety standards, leaving U.S. consumers at the mercy of inadequate foreign food safety systems like China’s. We should all be leery of deals like this that further consolidate our food system, especially

when they involve companies with a history of food safety problems and countries with abysmal track records for food and worker safety. The horrendous Chinese poultry plant

fire currently making headlines provides another powerful example of how the factory farm model endangers lives” (Hauter, 2013).

Authorization Support

Actors who supported the acquisition did not immediately use authorization as a strategy.

Oppose

Democrat of Connecticut, Representative Rosa DeLauro, referenced to both American consumers and federal regulators as authorities on the Smithfield-Shuanghui transaction. By highlighting that the deal “may only make it more difficult to protect the food supply” and, henceforth, harm American consumers, Rosa DeLauro attempted to delegitimize the

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acquisition by arguing that the authorities, the federal regulators, were compelled to ensure the safety of another relevant authority, American consumers, in this matter (De Le Merced, 2013):

''I have deep doubts about whether this [deal] best serves American consumers and urge federal regulators to put their concerns first” (De Le Merced, 2013).

Republican Senator Chuck Grassley also utilized the strategy of authorization to delegitimize the acquisition by referencing to CFIUS. He inferred that the Chinese government was actively involved in Shuanghui’s business dealings and, therefore, CFIUS was required to analyze the deal carefully. CFIUS is typically consulted when a merger or acquisition is seen as a potential national security threat. The call for this specific authority figure by a government official served to delegitimize the acquisition by highlighting the monumentality of the deal and placing doubt in the public’s mind over the nation’s security:

"What role does the Chinese government play in Shuanghui, like it does in so many other 'private' companies? These are important questions for CFIUS to get answered”

(McGregor, R, 2013).

Rationalization Support

Those who supported the acquisition frequently used rationalization as a strategy to build legitimacy. Larry Pope often referred to the anticipated benefits of the cross-border transaction as he points to the fact that the acquisition would have allowed the Chinese to secure a safe pork supply:

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"It's not about importing Chinese products. They want to access what they see is a safe supply in the US - it poses no risk to our customers at all” (Munshi et al., 2013).

Mr. Pope also referred to the positive economic benefits the acquisition would have had on various groups:

"This transaction provides Smithfield shareholders with significant and immediate cash value for their investment, and ensures that Smithfield will continue to execute on its strategic priorities while maintaining our brand excellence, community involvement, and

our commitment to environmental stewardship and animal welfare. Our board of directors is pleased with the outcome of the process we followed leading to this transaction, and we unanimously believe that this combination with Shuanghui is in the

best interests of the Company, our shareholders and all Smithfield stakeholders”

(Smithfield, 2013).

Normalization was also found in his statement, as he emphasized that Smithfield would continue to remain as a high quality brand.

Furthermore, Mr. Pope suggested less immediate, but future, economic benefits, as the acquisition would have created "a stronger Smithfield with more resources to grow" (Kesmodel, 2013), including an increased market potential:

"Asia has a rapidly growing middle class. There are 2 [billion] people who like our product. That's six times the size of the US market” (Gelles et al., 2013).

Other economic benefits were mentioned in terms of Shuanghui’s ability “to access the technology it needs to take its food safety and productivity to a higher level” (Davies, 2013).

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Shuanghui chairman, Wan Long, was also vocal during this time period in terms of the future economic benefits the successful acquisition would have provided. Through the use of rationalization, he attempted to legitimize the cross-border transaction by arguing that the acquisition would create “a company with an unmatched set of assets, products, and geographic reach” (Smithfield, 2013).

Oppose

Although not as intensely used, those against the acquisition also relied on rationalization as a strategy to reduce the legitimacy of the cross-border transaction. Senator Chuck Grassley of Iowa used rationalization as a strategy to delegitimize the transaction by pointing out the future economic implications. He stated his concern that the acquisition would have lead to elevated pork prices. Furthermore, he used authorization as a tactic to delegitimize the acquisition when he asked the Justice Department to “take a close look at this agreement"(Mauldin et al., 2013).

Wenonah Hauter also used rationalization to delegitimize the transaction when she referred to the consolidation of food suppliers and the inability to closely monitor far-off food manufacturers. She described rational concerns in order to increase the fear of foreign ownership by companies who were consistently described as unsafe:

“Consumers also suffer from this consolidation trend, as we saw in the massive egg recall of 2010. With just a handful of farms producing most of our food, food safety problems on even a few factory farms can end up in kitchens across the globe” (Hauter,

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Moralization Support

During this time, those in support of the acquisition seldom used moralization.

Oppose

Moralization as a strategy to reduce the legitimacy of the Smithfield-Shuanghui acquisition was rarely used during this time period. It could be argued that hints of moralization were found in the text when Connecticut Democrat, Rosa DeLauro,

referenced to the specific value of blocking the acquisition. She argued whether the deal “best served American consumers and [urged] federal regulators to put their concerns first” (De Le Merced, 2013). This statement can be seen as using both moralization and authorization, as the speaker called on an authority (federal regulators) and their moral responsibility to protect American consumers.

Narrativization Support

During this timeframe, groups who supported the cross-border transaction rarely told stories to increase the legitimacy of the deal, however, Smithfield CEO, Larry Pope, was found to use the strategy on occasion. He stated that, "[w]e're not exporting tanks and guns and cyber security, these are pork chops" (Gelles et al., 2013). He attempted to ridicule actors who viewed the transaction as a national security threat in order to improve the perceived legitimacy of the transaction by reducing any security and safety concerns.

Oppose

Conversely, narrativization was used quite frequently by various opposition groups. Virginia Representative Randy Forbes spoke of a grim future in which the security of the

A discursive perspective on the (de)legitimation strategies concerning a contested emerging-market multinational acquisition in a developed country

Table of Contents

Abstract

Introduction

Literature Review

Data & Methods

Results