Exploring the mediating effect of managerial ability on knowledge diversity and innovation performance in reverse cross-border M&As: Evidence from Chinese manufacturing corporations

Abstract

There has been an increasing trend that multinational corporations from emerging economies (EMNCs) undertake cross-border mergers and acquisitions (M&As) with corporations in developed economies. As a burgeoning pattern of outward direct investment, reverse cross-border M&As enable EMNCs to access technological resources that are conducive to enhancing innovation efficiency. Deal activity involving Western corporations buying into emerging economies has been extensively studied; conversely, the nature and consequences of reverse cross-border M&As can hardly be explained by internationalization theories. Furthermore, extant studies paid less attention to how diversified knowledge resources affect EMNCs' innovation performance. In contrast, heterogeneous and diversified knowledge has been proven to be vital for generating novel knowledge combinations. We also believe that managerial ability will affect how acquirers reorganize and integrate knowledge, thereby influencing post-acquisition innovation performance. Drawing from the knowledge-based view and upper echelon theory, this study adopted the data of Chinese listed manufacturing corporations that engaged in reverse cross-border M&As from 2010 to 2018 to explore the influencing mechanisms between the two dimensions of knowledge diversity and innovation performance of multinational manufacturing corporations from emerging economies, while managerial ability was additionally analyzed as a mediator of the above relationships. The empirical findings suggested that manufacturing corporations with higher knowledge diversity present better post-acquisition innovation performance. Managerial ability plays a fully mediating effect between the knowledge heterogeneity and innovation performance of EMNCs but imposes a partially mediating effect between technological diversity and innovation performance. The findings help enrich the understanding of the integrating process of reverse cross-border M&A and the endogenous function mechanism of how knowledge diversity and managerial ability affect the promotion of EMNCs’ innovation performance.