Foreign Cuisine or Local Delicacies? How Sectors Matter in the Acquisition-Productivity Linkage

Abstract

This paper examines the impacts of cross-border and domestic acquisitions (M&A) on the productivity of firms under sectoral differences and firm heterogeneity. Studying the M&A pursued by Chinese listed firms during 2000- 2013, I find that, in high-tech sectors, cross-border M&A are positively associated with firm productivity (especially among leading firms, whose prior productivity was relatively high). However, in low-tech sectors, domestic M&A are positively associated with firm productivity (especially among lagging firms, whose prior productivity was relatively low). This paper contributes to the literature on emerging market firm internationalization by shedding light on when cross- border or domestic M&A could be an appropriate catch-up strategy for enhancing firm productivity.