Do Emerging-market Acquirers Gain Productivity via Cross-border M&As?Evidence from Chinese Acquirers

Abstract

Scholars have pointed out that emerging-market cross-border mergers and acquisitions might represent a strategic move to learn from and assimilate the acquired foreign assets in order to upgrade domestic productivity. Yet little research has been done to investigate whether they have achieved this strategic motive in spite of the importance of this question. This chapter empirically examines whether Chinese acquirers' enhance their domestic productivity subsequent to cross-border M&A experiences (in line with the ambition of China's 'Go Global' policy). I posit that Chinese acquirers seek to obtain strategic assets from the foreign targets and utilize these assets to enhance home productivity. Based on data from 409 Chinese acquirers over the period 2000-2011, I find that (1) the cross-border M&A activity in the prior two to four years is positively related to the Chinese acquirer's domestic total factor productivity. (2) This home productivity increase mainly stems from acquiring developed-nation targets as opposed to developing-nation targets. (3) Cross-border M&As are the superior vehicles to engage in learning as compared to international alliances. These findings suggest that Chinese acquirers are able to learn and enhance their capabilities after cross-border M&A experiences. That is, Chinese governments' 'Go Global' policy has been generally successful.