Do Chinese firms benefit from government ownership following cross-border acquisitions?

Wenjun Tu,Xiaolan Zheng,Lei Li,Zhiang (John) Lin

doi:10.1016/j.ibusrev.2021.101812

Abstract

Chinese firms’ increasing cross-border acquisitions (CBAs) in recent years seem to challenge the explanatory power of received theories of multinational enterprise (MNE) due to their relatively unique characteristics and the active role of the Chinese government. In this study, we seek to revisit and contextualize the OLI paradigm in conjunction with the institution-based view and examine how Chinese firms’ post-CBA long term performance is associated with government ownership. Our study shows that Chinese firms with more government ownership demonstrate better post-CBA long term performance. However, the above relationship is differentially moderated by such firm-level boundary conditions as political connections and financial slack, and the country-level institutional boundary conditions (i.e., the host country formal institutions and the home-host country cultural distance). We discuss our findings in detail and explore theoretical and practical implications for both Chinese firms and other emerging economy (EE) firms.

Highlights

International business (IB) scholars have long noted that emerging economy (EE) firms have tried to aggressively pursue strategic assets and/or market access through cross-border acquisitions (CBAs) since the beginning of the new millennium (Luo & Tung, 2007; Morck, Yeung, & Zhao, 2008)
Unlike firms from advanced economies (AEs) which pursue internationalization to exploit their existing ownership or firm-specific advantages (FSAs) such as advanced technologies and brand names in the global arena (Dunning, 1981; Dunning & Lundan, 2008), EE firms without traditional FSAs in terms of proprietary rights and intangible asset advantages often leverage domestic country-specific advantages (CSAs) such as inexpensive labor, land, natural resources, and government or institutional support to compensate for their latecomer disadvantages in international competition (Child & Rodrigues, 2005; Hong, Wang, & Kafouros, 2015; Lu, Liu, Wright, & Filatotchev, 2014)
By re-conceptualizing government ownership as a relatively unique CSA, we provide a cogent explanation about the roles of government ownership in the post-CBA operations of Chinese firms thereby making a context-specific extension of the OLI paradigm initiated by Hennart (2012)

Summary

Introduction

International business (IB) scholars have long noted that emerging economy (EE) firms have tried to aggressively pursue strategic assets and/or market access through cross-border acquisitions (CBAs) since the beginning of the new millennium (Luo & Tung, 2007; Morck, Yeung, & Zhao, 2008). Unlike firms from advanced economies (AEs) which pursue internationalization to exploit their existing ownership or firm-specific advantages (FSAs) such as advanced technologies and brand names in the global arena (Dunning, 1981; Dunning & Lundan, 2008), EE firms without traditional FSAs in terms of proprietary rights and intangible asset advantages often leverage domestic country-specific advantages (CSAs) such as inexpensive labor, land, natural resources, and government or institutional support to compensate for their latecomer disadvantages in international competition (Child & Rodrigues, 2005; Hong, Wang, & Kafouros, 2015; Lu, Liu, Wright, & Filatotchev, 2014). Domestic CSAs are often not freely available to all firms located in the home country and may be exploited to gain home market competitiveness and facilitate subsequent international expansion

Methods

Results

Discussion

Conclusion