How Do International M&amp;As Affect Rival Firm’s Sustainable Performance? —Empirical Evidence from an Emerging Market

Xiaoting Hu,Ximing Yin,Zhanming Jin,Jizhen Li

doi:10.3390/su12041318

Abstract

International mergers and acquisitions (M&As) have been increasingly used by emerging market enterprises (EMEs) as a springboard for strategic assets to overcome latecomer disadvantages and build sustainable competitive advantages. While current literature only focuses on the M&As’ impacts on acquirers, little is known about the impacts of EMEs’ international M&As on their external stakeholders, such as rival firms. Based on the longitudinal data covering 325 large international M&As completed by Chinese public manufacturing firms during 2009–2015, empirical results show that international M&As at the industry level have significant negative influence on the sustainable performance of acquirers’ rivals, and these negative relationship will be accentuated when the international M&As are horizontal M&As, when rivals are carrying out cost leadership strategy, and when those M&As are completed in the high-tech industry. This study enriches the literature of international M&As and the economic pillar of sustainability by pushing current research toward rival’s perspective and denotes that firms need to consider the potential negative impact on the sustainability of their outside stakeholders (e.g., other firms and whole industry). It also generates practical implications for firms to actively deal with potential negative effects of competitors’ international M&As on their sustainable performance, especially those players in the high-tech industry.

Highlights

International mergers and acquisitions (M&As) have been increasingly used as a springboard for strategic resources by emerging market enterprises (EMEs) to build up sustainable competitive advantages [1,2], accelerate industry catch-up, and achieve sustainable economic and social development [3] in the past decades
Rivals of acquiring firms should embrace the competitive dynamics, be more aware of their competitors’ international M&As activities, and not be deluded by the positive short-term market reactions along with those M&As [14,17]. This is because our study shows that international M&As will create both efficiency gains and strategic gains for acquiring firms, which in turn will lead to competitive disadvantages for rival firms
Using a longitudinal sample of international M&As completed by public manufacturing firms in China during 2009–2015, our empirical study shows that international M&As completed by emerging market enterprises would adversely affect their rivals’ sustainable performance, and the negative effects will be stronger for horizontal international M&As compared with non-horizontal M&As

Summary

Introduction

International mergers and acquisitions (M&As) have been increasingly used as a springboard for strategic resources by emerging market enterprises (EMEs) to build up sustainable competitive advantages [1,2], accelerate industry catch-up, and achieve sustainable economic and social development [3] in the past decades. Scholars have investigated multiple dimensions of international M&As completed by EMEs—for example, motivations, post-integration process, and the influence on firms’ financial and innovation performance [4–7]. Further studies should shed light on this topic since not all firms are aggressive in realizing value from international M&As [1,2,8] and sustainability are playing the role of a prerequisite for success [3]. As González-Torres et al [3] point out in their latest study, one hot topic on sustainability in M&As is the effects of M&As on firms’ external stakeholders’ performance, which is highly related to the economic pillar of sustainability that emphasizes the value created by firms to their external context supporting future generations of prosperity [3,9]. Considering that rival firms are critical stakeholders of acquirers, and acquirers’ strategies and actions will have a direct influence on them, we focus on the impacts of acquirers’ international M&As on the sustainable performance of their rival firms

Methods

Results

Conclusion