Control and Ownership Decision in Technology Sourcing Cross-Border M&A on the Resource-Based View and Institution-Based View

Abstract

Chinese companies have actively expanded overseas. However, more and more companies, such as TCL, have found that technology sourcing cross-border M&A cost too much to threaten their survival, rather than achieving their goals. From reviewing previous literatures, we found that control, not the ownership, is the critical determinant. Control is the result of the bargaining power between the acquirer and the target company. Drawing on resources-based view, transaction cost theory and institutions theory, this paper reviews the influencing factors of bargaining power in the control and ownership, and proposes a model of control and ownership for Chinese enterprises technology sourcing cross-border M&A.

Expanding Boundaries from a Supply Chain Perspective: Determinants of Backward Integration Through Mergers and Acquisitions.

“…The fact that other factors also influence backward integration is also indicated by the statistical value of the model summary R2 = 0.334, which in essence means that 33.4% of the explanatory power of backward integration through mergers and acquisitions can be attributed to the determinants of vertical integration. As already stated in Chapter 5.1.1, according to the literature review, the following factors can also influence whether M&A are undertaken or not: operational synergies (Gupta & Gerchak, 2002); financial synergies (Gaughan 2010); economies of scale (Christensen et al 2011;Hassan & Mayrhofer, 2018); bargaining power (Carney, 2009;Huang, Huang, & Chen, 2013); market expansion (Carney, 2009); new market entry opportunities (Seth, Song, & Pettit, 2000;Sudarsanam, 2003;Weber, 2019); vertical constraints (Chemla, 2003); or CEO compensation (Bliss & Rosen, 2001;DeYoung, Evanoff, & Molyneux, 2009). These were not included because only constructs and variables from the RBV and TCT strands, which form the theoretical basis of the study, were included.…”

“…M&A therefore create the opportunity for firms to realise cost efficiency and sustainable competitive advantage through economies of scale (Carney, 2009). This effect is accompanied by improved bargaining power, as orders may rise and bulk-buying discounts are more likely to be attained than before the merger or acquisition (Carney, 2009;Huang, Huang, & Chen, 2013). In addition, the elimination of redundant operating units and departments has a positive effect on cost reduction (Dao & Bauer, 2021;Jensen & Ruback, 1983).…”

“…The relationships between the constructs, the supply chain and M&A are illustrated in Figure 9. Other factors that emerged from the literature review, such as synergies (Eun & Resnick, 2010), bargaining power (Carney, 2009;Huang, Huang, & Chen, 2013) and market share (Carney 2009) are included as examples in Figure 9 to illustrate that there are further factors that can be considered as determinants which could be taken up in future research. However, they are excluded from this thesis, as it focuses on (E)RBV and TCT as a theoretical basis.…”

“…However, this also means that other factors have an influence, but are not part of this study due to the focus on RBV and TCT and the constructs derived from them. Other possible factors, as discussed in Section 2.2.2, can be summarised as follows: operational synergies, for example, production or administrative efficiencies (Gupta & Gerchak, 2002); financial synergies, for instance, tax benefits, additional growth opportunities, or co-insurance of debt (Gaughan 2010); long-and short-term economies of scale (Christensen et al, 2011;Hassan & Mayrhofer, 2018); bargaining power, as order quantities can increase (Carney, 2009;Huang, Huang, & Chen, 2013); expanding market share or maintaining leading market share (Carney, 2009); entering new markets (Seth, Song, & Pettit, 2000;Sudarsanam, 2003;Weber, 2019); vertical constraints that may contribute to firms' operating costs (Chemla, 2003); and CEO compensation (Bliss & Rosen, 2001;DeYoung, Evanoff, & Molyneux, 2009). The value of the adjusted R 2 is 0.284 in the previous model and serves to explain the extent to which the model is generalisable, as well as reflecting the fit of the overall model (Field, 2013;Sarstedt & Mooi, 2014).…”

“…The introduction of further control variables, for example inter-firm trust (Chiles & McMackin, 1996), as well as the possible inclusion of further determinants, for example bargaining power (Huang, Huang, & Chen, 2013) or vertical constraints (Chemla, 2003), in the conceptual model, and thus the implementation of a different set of variables, as already outlined in Figure 9 and discussed in section 5.5.1, could represent possibilities for future research.…”