Soft Issues During Cross-Border Mergers and Acquisitions and Industry Performance, China–Pakistan Economic Corridor Based View

Abstract

China-Pakistan Economic Corridor (CPEC) has got a vital position in the perspectives of economic growth and sustainable development of China and Pakistan. Viewing these prospects, the Chinese organizations are taking interest to deal with Pakistani organizations for the reinforcement of the mergers and acquisitions (M&As) deals. But, soft issues (SIs), such as, differences in organizational and national cultures, leadership styles, and human resource (HR) practices, may arise between Sino-Pak business entities which may hamper the successful dealings of M&As. This research investigates the effects of SIs on knowledge and technology sharing and transfer (KTST) and firm performance (FP), leading to industry performance (IP), and KTST effect on FP. Drawing on social exchange theory, psychological contract development and maintenance (PCDM) is investigated as a moderator in this study. The convenience sampling technique and administrative survey approach are applied for data collection. The 550 questionnaires were distributed among the Chinese and Pakistani workers. However, only 435 respondents gave proper feedback. Partial least square, structural equation modeling (PLS-SEM), a statistical model through smart PLS-3 is applied to analyze the data. The results elucidate the negative impacts of SIs on KTST and FP while KTST affects positively on FP and FP positively affects IP. The PCDM significantly moderates the effects of SIs on KTST and FP. If the Chinese organizations concentrate upon PCDM, the SIs would be resolved. The productive deals of M&As would be helpful in underpinning the exclusive growth of CPEC projects. The implications and limitations are discussed at the end of this study. Keywords soft issues, knowledge and technology sharing and transfer, firm performance, industry performance, psychological contract, CPEC Research Question 1: What key SIs may arise during cross-border M&As deals, especially among Sino-Pak business organization? Research Question 2: How SIs affect KTST practices and FP, leading to IP, and KTST practices affect FP? Research Question 3: How PCDM moderates the effect of SIs on KTST practices and FP, leading to the IP?

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