Experiential learning for Chinese companies to complete cross-border acquisitions: the case of Chinese acquirers

Abstract

PurposeIn a contribution to the emerging research examining Chinese cross-border acquisitions (CBAs), the authors observe experiential learning applications for enhancing M&A completions. By emphasizing knowledge transfer, the authors reveal how target-to-target industry similarity and bidder-to-target cultural distance affect learning outcomes.Design/methodology/approachUsing a binary logistic regression model, the authors examine a sample of CBA attempts announced by Chinese companies from January 2002 to December 2012 to identify the variables that affect the completion of CBAs.FindingsThe authors find that foreign acquisition experience but not domestic acquisition experience enhances subsequent acquisition attempts, especially when prior and focal target companies share the dominant industrial logic. Learning transfer is negatively affected when target countries are more culturally distant from China, but learning benefits appear to increase under strong bidder-to-target cultural distance.Originality/valueBy investigating learning in the precompletion stage in Chinese outward CBAs, the authors complement research that uses postacquisition performance to assess learning. The authors’ more fine-grained characterization reveals that acquisition experience increases knowledge transfer through experiential learning. Furthermore, the authors show that dominant industrial logic and cultural distance are underexplored contextual conditions, although they interact with foreign and domestic experience to affect the completion of CBAs.

Competitive Advantages of Cross-Border M&As to Non-Location-Bound Chinese ICT Firms

“…Table 3 presents the definitions, calculations, and data sources of all variables. (1) show that the coefficient of the interaction term CBA Â CT is significantly positive at the level of 5%, indicating that cross-border M&As improve home-country-bound competitive advantage. Models (2) through (4) gradually add control variables, time, and regional fixed effects.…”

“…The HCB it and NLB it variables represent the home-country-bound and non-location-bound competitive advantage, respectively, and ∆HCB i and ∆NLB i represent the changes of the two types of competitive advantage. In terms of the home-country-bound competitive advantage (the non-location-bound competitive advantage is calculated in a similar way), whether the cross-period changes in cross-border M&As are ∆HCB 1 i and ∆NLB 0 i respectively. Thus, the actual impact of cross-border M&As on home-country-bound competitive advantage is δ:…”

“…The coefficient values CBA * CT show that internationally experienced firms are more able to benefit from cross-border M&As. 1 It is important to note that the interaction coefficient du * dt of experienced enterprises is significantly positive for non-location-bound competitive advantage. Although the coefficient's value is small, it shows that internationally experienced enterprises promote their non-location-bound competitive advantage through cross-border M&As.…”

“…Competitive advantage is a major determinant of firm survival and sustained profitability and perhaps the most decisive factor that enables emerging market multinational enterprises (EMNEs) to catch up with MNEs from developed countries. In the existing research which delved into competitive advantage in emerging market countries, foreign direct investment (FDI) is considered the most important way to enhance EMNE competitive advantage and technological catch-up [1][2][3]. Luo and Tung [4] pointed out that, due to weaker innovation capabilities and knowledge of resource reserves found in their home countries, EMNEs use FDI as a 'springboard' by adding strategic assets to establish a competitive advantage and achieve corporate growth.…”

Abandonment of mergers and acquisitions: a review and research agenda

“…A firm learns through both internal and external internationalization (He and Zhang, 2018). Foreign acquisition experience is helpful in subsequent deal completion for Chinese acquirers and is negatively affected by bilateral cultural distance (Wang et al , 2020). A host country alliance experience with other firms also creates legitimacy and is helpful in the completion of M&As (Li et al , 2017).…”