Patent- and trademark-seeking outward foreign direct investment by Chinese firms: The role of business group affiliation

Abstract

We examine the relationship between business group affiliation (BGA) of Chinese firms and their foreign acquisitive behavior in terms of technology and brand-oriented strategic assets. Drawing on new internalization, business group, and international business theory, we assert that Chinese business group affiliated firms will more likely pursue foreign acquisitions to seek strategic assets including patents but less likely to pursue foreign acquisitions to seek trademarks. Patents have non-location-bounded (NLB) properties that mean they can be exploited by the business group—not just the firm—back in the domestic market, while trademarks have location bounded (LB) properties that mean they are less easy to exploit by a business group domestically. Using a sample of 779 Chinese cross-border acquisitions between 2006 and 2015, we find support for arguments relating to the differences in relative attractiveness of targets holding patents vs. trademarks for Chinese firms linked to business groups. We discuss how this better helps us understand emerging market MNEs and related theory.

International trade and investment: A review and research agenda

“…Most of the conceptual articles used case studies to articulate the concepts or develop a model (Brandwayn, 1993;Hamada, 1989;Pempel, 2000;Vos & Van Den Berg, 1996). The reviewed studies consist of different tools and techniques used for the analysis, like difference in difference analysis, stress testing, the GARCH model, Bayesian econometric procedures, the Granger causality test, and so forth, but 30% of the studies used regression (Bae & Elkamhi, 2021;Branstetter & Feenstra, 2002;Contractor et al, 2021;Pathak et al, 2015;Shi et al, 2022). Investment-related studies are linked to various domains like corruption, future viability, entrepreneurship, trade openness, and risk management (Contractor et al, 2021;Cuervo-Cazurra et al, 2020;Grosse et al 2021;Pathak et al, 2015), which provide extensions to the studies conducted by Liao et al (2022) and Sivalogathasan and Wu (2014).…”

“…Investment-related studies are linked to various domains like corruption, future viability, entrepreneurship, trade openness, and risk management (Contractor et al, 2021;Cuervo-Cazurra et al, 2020;Grosse et al 2021;Pathak et al, 2015), which provide extensions to the studies conducted by Liao et al (2022) and Sivalogathasan and Wu (2014). While international trade-related studies have associations with sustainability, working hours, human resources, and mergers and acquisitions (Blonigen & Ohno, 2019;Brandwayn 1993;Burgoon & Raess, 2011;Khor & Tan, 2023;Shi et al, 2022).…”

“…The growth in international trade has been three times compared to 1950s and is also driven by noncommodity exports like technology-related products (Riad et al, 2012;Slopek, 2018). Table 4 shows that there has been a strong support from China, one of the world's largest exporters and importers, regarding the acquisition of strategic assets that are technology-driven (Shi et al, 2022). Hence, international trade is an activity which is of strategic significance to accommodate with economic dynamics.…”

“…Several researchers have investigated various facets of international trade and investment. Contemporary literature on various aspects of international trade and investment is available, like globalization and investment (Burgoon & Raess, 2011; Rock et al., 2009), the role of foreign direct investment (FDI) in developing economies (Branstetter & Feenstra, 2002; Contractor et al., 2021), the strategic significance of international trade (Brandwayn, 1993; Shi et al., 2022), export competition and productivity (Razin et al., 2003; Vos & Van Den Berg, 1996), international cooperation among developing nations (Che et al., 2015; Kleinberg & Fordham, 2010), and risk assessment (Bae & Elkamhi, 2021; Liu et al, 2017, ). With the onset of the COVID 19 pandemic in 2020, the impact on international trade and investment was observed to be similar to that of the 2008−2009 financial crisis and significantly worse than that of the recession of 2015 (UNCTAD, 2022b), which has prompted more research endeavors focused on investigating this particular domain.…”

Are Chinese MNEs more strongly attracted to global cities and knowledge intensive city clusters than developed market MNEs when undertaking greenfield strategic asset seeking related FDI?

“…There has been much interest in the international strategic asset seeking (SAS) behaviours of emerging market (E) multinational enterprises (MNEs), partly driven by theoretical controversies regarding the applicability of mainstream international business (IB) theory, as well as current international geopolitics (Shi et al, 2021b). Chinese MNEs (CMNEs), at times supported by the state through various "selective" industrial policies (i.e.…”