Proximity and cross-border acquisitions of technology assets by firms in latecomer economies: a study of Chinese firms, 2001-2018

ABSTRACT

We propose an analytical framework to examine how various dimensions of proximity between home and host countries could account for the trajectories and specificities of cross-border acquisitions of technology assets (CATAs) conducted by acquirer firms in latecomer economies. As Chinese firms have been increasingly using CATAs as a mean to catch up with their counterparts in advanced economies, we referred to their acquisition records to illustrate the applicability of the proposed framework. Based on a compiled dataset of the number of CATA transactions from 2001 to 2018, this paper examines the effects of various dimensions of proximity on the spatio-temporal patterns of Chinese CATAs using negative binomial regression models. Our findings demonstrate that the difference in governance between China and host countries (institutional proximity), the size of overseas Chinese population in host countries (social proximity), and the value of import from host countries (economic proximity) have significant effects on the propensity of Chinese firms to engage in CATAs. Physical distance and cultural gap between China and host countries, however, have no significant impact on CATAs. Further examination of the results reveals that Chinese firms tend to acquire target firms outright in culturally distant host countries to reduce the risk of their overseas acquisition in CATAs. In addition, we also found that there is a dynamic relationship between different dimensions of proximity and CATAs: from the relative importance of economic proximity between 2001 and 2012 to the rising influence of social and institutional proximity between 2013 and 2018 on CATAs.

KEYWORDS:

• Technological acquisitions
• cross-border M&A
• proximity
• Innovation
• latecomer economy
• Chinese firm

Disclosure statement

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

Notes

1. The BVD-Zephyr M&A database defines a transaction as “expected to be completed” if it is in normal progression and has not updated its status in two years.

2. We followed the convention by classifying enterprises based in Hong Kong and Macau special administrative regions as host regions.

Additional information

Funding

The first author was supported by the China Scholarship Council [202106140100]. This work was supported by the Major Projects of National Social Science Foundation of China [19ZDA087].