Cross-border acquisition activity by Chinese multinationals and domestic-productivity upgrading
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Cross-border acquisition activity by Chinese multinationals and domestic-productivity upgrading Wenxin Guo 1 & Joseph A. Clougherty 2 Accepted: 10 October 2020/ # Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract We investigate the impact of cross-border acquisition activity on the domestic productivity of Chinese multinationals. Chinese MNEs have engaged in cross-border acquisitions in an attempt to explore for new capabilities, technologies and management practices so as to enhance productivity and compete in increasingly competitive domestic markets. Empirical scholarship, however, has yet to establish that crossborder acquisition activity by emerging-market multinationals generally contributes to domestic-productivity upgrading, as learning from foreign-acquisition targets, transferring and assimilating this learning, and ultimately upgrading the productivity of home operations represents a challenging and complicated process. We accordingly apply and advance the literature on reverse-knowledge transfers and capability upgrading by first considering the relevance of cross-border acquisition activities on domestic productivity in an emerging-market context, and by second extending the literature’s understanding of the target-firm characteristics which abet domesticproductivity upgrading. Employing firm-level panel data based on 329 Chinese multinationals over the 2000–2010 period, we find outward cross-border acquisition activities generate increased domestic productivity. In addition, we find domesticproductivity upgrading to be larger when acquiring high-tech (versus low-tech) targets and that this effect is further enhanced when acquiring related (versus unrelated) targets. Keywords Emerging markets . Cross-border acquisitions . Learning . Domestic
productivity During the past two decades, China has liberalized its economic policies and taken a more outward-looking approach; as a result, Chinese multinational enterprises (MNEs)
* Joseph A. Clougherty [email protected] Wenxin Guo [email protected] Extended author information available on the last page of the article
W. Guo, J. A. Clougherty
have rapidly internationalized and actively engaged in outward foreign direct investment (Hoskisson, Eden, Lau, & Wright, 2000; Narula & Dunning, 2000; Li, Li, Lyles, & Liu, 2016). Scholars have pointed out that one important rationale behind China’s rapid internationalization is the need to learn from international experiences and develop global competitiveness (Hitt, Li, & Worthington, 2005, Hitt, Li, & Xu, 2016; Luo & Tung, 2007, Luo & Tung, 2018; Ramamurti, 2008; Li et al., 2016; Jiang, Jiao, Lin, & Xia, 2019; Chen et al., 2019). In fact, the Chinese central government established the ‘Go Global’ policy in 1999 to spur mainland firms to invest in overseas operations (Buckley, Clegg, Cross, Liu, Voss, & Zheng, 2007). Specifically, government controls over outward foreign direct investment (FDI) were loosened and preferential treatments such as direct grants, tax benefits, low- or no-i
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