An analysis of Chinese acquisitions of Italian firms in the manufacturing sector

Abstract

\ud \ud Outward foreign direct investment (OFDI) from emerging economies has begun to increase significantly and has been growing at a faster pace than FDI from the developed world. This research seeks to assess the impact of Chinese acquisitions and their implications for the Italian firms in the luxury manufacturing sector. This paper presents a cross-case analysis of two Chinese acquisitions in order to provide some in-depth insights into the strategic drivers moving the Chinese firms to invest in the luxury manufacturing sector, the post-acquisition benefits and challenges as well as the distinctive integration strategies. The study contributes to our understanding of how emerging market firms acquire and integrate firms from advanced economies, and how such acquisitions contribute to the acquiring firms' performance and competitiveness. To this end, strategic drivers, post-acquisition benefits and challenges as well as integration strategies were identified

Post-Acquisition Integration Strategies– Some illustrative evidence from Chinese acquisitions of Italian luxury firms

“…While China's dominant position as a recipient of global FDI flows has been well documented, the overseas investment activities of Chinese companies have received considerably less attention (Vecchi & Brennan, 2014;Vecchi, 2016). However, a recent wave of cross-border acquisitions by Chinese firms has brought increased interest to this topic.…”

“…First, the scope and pace of the international expansion by emerging economy firms has been exceptional. Second, the patterns of international expansion by emerging economy firms have raised questions about their originality and whether existing theories of international expansion strategies are adequate or need to be modified (Vecchi 2013a(Vecchi , 2013b(Vecchi , 2014a(Vecchi , 2014b(Vecchi , 2016Vecchi and Brennan, 2014).…”

“…M&As are often used as a strategic vehicle that enable EMNCs to acquire both tangible and intangible strategic assets to ultimately overcome their competitive disadvantages in being latecomers to the international business activity and lacking the resources and capabilities to be successful in the international arena (Luo and Tung, 2007;Rui and Yip, 2008;Deng, 2010). M&As are thus perceived as shortcuts (Vecchi, 2016) to catch up with DMNCs (Madhok and Keyhani, 2012), to also secure well-established Western brands, and to gain immediate access to advanced technology (Vecchi 2013a(Vecchi , 2013b(Vecchi , 2014a(Vecchi , 2014b(Vecchi , 2016Vecchi and Brennan, 2014;Brennan, 2015). Differently from other modes of entry, M&As give EMNCs more direct control over the operation of, and its associated returns (Child and Rodriguez, 2005), by therefore offering significant value-creation opportunities that may not otherwise be available to them (Rabbiosi et al 2012).…”

“…Italy has a traditional competitive advantage in the production of luxury products (Vecchi, 2008(Vecchi, , 2013(Vecchi, , 2016. The Italian luxury market has long been regarded as the origin of mainstream luxury goods and includes firms like Ferragamo, Prada, Gucci just to name a few.…”

The European Response to Chinese Outbound Foreign Direct Investment: Introducing a Dynamic Analytical Framework

“…Countries such as Germany and the UK have traditionally been very welcoming of foreign investment. Contrariwise, some other countries -notably France and Italy (Vecchi, 2016;Vecchi and Brennan, 2014) -have been less consistent in welcoming foreign investment, with concerns about ceding to foreign entities the control of companies that were considered national champions. More recently, there have been signs of increasing skittishness around Chinese investment into Germany and the UK indicating a potentially more fraught environment for such investment (Brennan, 2017), thus posing additional challenges for Chinese investment in Europe (Brennan, 2015).…”