Overseas M&A integration, innovation networks and home-country industrial technology innovation: case studies from China

ABSTRACT

Chinese enterprises’ technology-sourcing overseas mergers and acquisitions (M&A) integration is an important force to accelerate the high-quality industrial development. However, the existing theories lack a thorough explanation of this mechanism. Based on four typical cases in Chinese manufacturing industry, this study applied a multiple-case study method to explore the relationships among the four basic categories of ‘resource relatedness’, ‘integration degree’, ‘innovation network position’ and ‘industrial technology innovation’ by in-depth interviews with enterprise executives and second data analysis. We find out that acquirers’ appropriate integration degree which matches different combinations of resource similarity and complementarity, will efficiently enhance centrality and structural holes of the acquirers in the global innovation networks, and thus promote home-country industrial technology innovation in the three functional areas of research and development (R&D), operations, and upstream and downstream activities. Based on resource-based view and by emphasising acquirers’ centrality and structural holes improvement in the global innovation networks as the crucial links, this study deepens the overall understanding of the entire process of enterprises using overseas M&A integration to promote the home-country industrial technology innovation and provides insights into the technological leapfrogging of latecomers from developing countries.

KEYWORDS:

• Overseas M&A
• integration
• innovation networks
• industrial technology innovation
• case study

Acknowledgements

This work was supported by [National Natural Science Foundation of China] under Grant [71973127]; [National Natural Science Foundation of China] under Grant [71673248]; [Major Program of the National Social Science Foundation of China] under Grant [19VDL018]; [Key projects of the Natural Science Foundation of Zhejiang Province] under Grant [LZ20G020001]; [Key Projects of Zhejiang Province Philosophy and Social Sciences Superiority Discipline] under Grant [20YSXK01ZD]; [Key Projects of Zhejiang Colleges and Universities Humanities and Social Sciences] under Grant [2016ZB002]; and [Special Funding for Teaching and Research Development of Liberal Art Teachers in Zhejiang University] under Grant [2017].

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Centrality, measured by closeness centrality. The formula is$n-1/{\sum }_{i=1}^{n}d\left(p_i,p_k\right)$, where $n$represents the number of companies in the network and $d\left(p_i,p_k\right)$ is the path distance between enterprise$i$and enterprise$k$.

Structural holes, measured by network constraint. Total constraint of a node $i$ is$c_i={\sum }_j{c}_{ij}$, $\mathrm{w}\mathrm{h}\mathrm{e}\mathrm{r}\mathrm{e}{c}_{ij}={\left(p_{ij}+{\sum }_{q,q\ne i,q\ne j}{p}_{iq}{p}_{qi}\right)}^2$ is the degree to which node$i$ is constrained by $j$;$p_{ij}=a_{ij}+a_{ji}/{\sum }_k\left(a_{ik}+a_{ki}\right)$, $a_{ij}$ is the edge weight between$i$ and $j,\mathrm{w}\mathrm{h}\mathrm{e}\mathrm{r}\mathrm{e}{p}_{ij}$ is the strength of the connection between $i$ and $j$. $s_i=1-c_i$indicates structural hole richness, which we applied as the final indicator.

2 See ‘M&A integration: Choreographing great performance’, PricewaterhouseCoopers, available at: https://www.pwchk.com/en/services/deals-m-and-a/publications/pwc-2017-ma-integration-survey.html.

Additional information

Funding

This work was supported by National Natural Science Foundation of China [grant number 71973127]; National Natural Science Foundation of China [grant number 71673248]; Major Program of the National Social Science Foundation of China [grant number 19VDL018]; Key projects of the Natural Science Foundation of Zhejiang Province [grant number LZ20G020001]; Key Projects of Zhejiang Province Philosophy and Social Sciences Superiority Discipline [grant number 20YSXK01ZD]; Key Projects of Zhejiang Colleges and Universities Humanities and Social Sciences [grant number 2016ZB002]; and Special Funding for Teaching and Research Development of Liberal Art Teachers in Zhejiang University [grant number 2017].

Notes on contributors

Feiqiong Chen

Feiqiong Chen, female, born in 1961 in Hangzhou, China, graduated from School of Business Administration at Zhejiang University, Ph.D., is a professor of School of Economics at Zhejiang University and PhD supervisor. Chen studied in the University of Hannover in 1985, Germany, under the tutelage of Professor Dr Peter Brosch. She visited as a visiting scholar at the Technical University of Berlin in 1995, Germany, under the tutelage of Professor Dr Klaus Kuenkel. Her main research directions: International Investment, Multinational Corporation, Enterprise Alliance. Chen has been project leader in many professional projects and published over 50 papers in academic journals.

Huiqian Liu

Huiqian Liu, female, born in Zhejiang province of China in 1993, is a Ph.D. candidate in the School of Economics at Zhejiang University, majoring in Industrial Economics. She is now studying under her Ph.D. supervisor Professor Feiqiong Chen. Her main research directions: International Investment, Risk Management and Multinational Corporations. In the past four years of her Ph.D studying, she has participated in Professor Feiqiong Chen’s projects.

Yuhao Ge

Yuhao Ge, female, born in 1995 in Jiangsu province, is a Ph.D candidate in the School of Economics at Zhejiang University, majoring in Financial Economics. She is now studying under her Ph.D supervisor Professor Feiqiong Chen, and her research directions include International Investment, Risk Management and Multinational Corporations. In the past three years of her Ph.D studying, she has participated in Professor Feiqiong Chen’s projects.