Improving Enterprises’ Cross-Border M&A Sustainability in the Globalization Age—Research on Acquisition and Application of the Foreign Experience

Abstract

The advancement of globalization has encouraged an increasing number of enterprises to go abroad and take cross-border mergers and acquisitions (M&A) to expand their overseas market and improve core competitiveness, although many acquirers fail to gain value from post-acquisition integration. On the basis of organizational learning theory, this paper explores the effect of executives’ foreign experience on cross-border M&A sustainability, and examines how the externally acquired knowledge can be effectively applied to cross-border M&A practice. Taking a sample of Chinese listed companies that have completed cross-border M&As during 2008–2016, our research proposes an integrated framework of foreign experiential knowledge, and discusses the process of acquisition and application of this experiential knowledge into cross-border M&As. Empirical research findings show that, compared with the general foreign experience, the specific foreign experience based on target country significantly improves cross-border M&A sustainability, and executives with host-specific work experience plays a more important role than that of education experience. Further research found that long-tenured executives positively moderate the effect of foreign experiential knowledge on cross-border M&A sustainability, while the pay gap for executives, which hampers internal coherence, plays a negative moderating role. This research provides a new insight into the promotion of the sustainable development of enterprise cross-border M&A in the globalization age.

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

“…In general, acquisition experience gained in foreign countries provides learning benefits that motivate subsequent acquisitions. Moreover, specific foreign experience based on the target country, rather than general foreign experience could even increase the likelihood of a successful acquisition, as host-specific experience could help acquirer better deal with local stakeholders and bring experiential knowledge in managing a business abroad (Xie et al, 2019). Hence, we expect acquirers to use their past acquisitions to differentiate between acquisitions (Haleblian and Finkelstein, 1999;Vermeulen and Barkema, 2001) and to transfer and convert that knowledge (Al-Laham et al, 2010), since the party (acquirer or target) with greater experience (experience differential) could obtain more value (Cuypers et al, 2017).…”

Acquirer’s Absorptive Capacity and Firm Performance: The Perspectives of Strategic Behavior and Knowledge Assets

“…Although it is quite challenging to pinpoint the success factors pertaining to CBMAs, we argue that an acquiring firm's absorptive capacity can be a crucial aspect when clarifying the possibility of achievements via CBMA and a firm's sustainable performance. In such a respect, our study contributes to current M&A literature by highlighting the importance of a firm's absorptive capacity for post-merger performance in terms of CBMAs [65][66][67][68] and how firms could achieve CBMA sustainability via better outcomes [10]. Such implications might be decisive, since the subject of sustainability in M&A is complementary to a firm's financial performance and is receiving increased attention in M&A literature [3].…”

Sustainability Framework for Assessment of Mergers and Acquisitions in Energy Sector

“…Elaborating on Denčić-Mihajlov [34], Figure 2 introduces a framework for assessing environmental, social and governance issues during M&A processes: target company selection, due diligence process, deal valuation and post-acquisition integration. Xie et al [35] analyzed how CEOs' foreign experience affect cross-border M&A sustainability and investigated how the externally acquired knowledge may be applied to cross-border M&A practice. The authors focus on the organizational learning theory and suggest that extensive M&A experience leads to value creation during post-acquisition performance.…”