Cross‐border M&As and the performance of Chinese acquiring firms

Abstract

China used to be a major destination of foreign direct investment (FDI) and Chinese firms have long been acquired by foreign companies. In the recent decade, after thirty years since the implementation of the "Reform and Opening-up" policy 1 , Chinese firms began to take an active part in investing abroad through cross-border M&As, a major form of internationalisation. Under the 1 The economic reform featured by "socialism with Chinese characteristics" and "socialist market economy" led by chairman Deng Xiaoping that started in December 1978.

Do Cross-Border Mergers and Acquisitions by Emerging Market Enterprises Enhance Long-Term Productivity? The Host Country Market Size Effect Moderated by Technological Absorption Efforts

“…Studies indicate that cross-border M&As enable firms to leverage local resources to acquire new technologies and market-specific non-transferable advantages, thus enhancing synergistic effects and fostering unilateral or bilateral knowledge diffusion within the firm. This diffusion significantly improves the total factor productivity (TFP), especially when the target company is located in a more competitive country, which offers ample learning opportunities that can spill over to domestic productivity [18,22]. Additionally, cross-border M&As stimulate domestic investments that further boost productivity [23], emphasizing that learning benefits require substantial and purposeful efforts and do not occur automatically [19].…”

“…Knowledge management theory highlights the importance of technological absorption capacity in boosting acquired firms' productivity [17], noting the significant timing impact of cross-border acquisitions. Although immediate productivity improvements may be unclear, the long-term benefits, especially in developed regions, are more significant [4,18], emphasizing the need to control the acquisition timeline. This study sought to address how market size effects, at varying technological distances, influence productivity, aiming to close this research gap and provide a foundation for more effective cross-border acquisition strategies.…”