Research On The Relatonship Among Chinese Firms’ Cross-border M&A Strategy, Diversification Behavior In The Domestic Market And Post-acquisition Performance

Cross-border M&A has become the important way of Chinese enterprises "going out"，although some enterprises fail and do not achieve the expected effect，but there are quite anumber of enterprise success，and also enhance their international competitiveness."Choosewhat kind of Cross-border merger and acquisition strategy can ensure cross-border M&Asuccess?" It is not only a practical problem to be solved，but also a scientific problem for thetheoretical circle to solve. The traditional internationalization theories believe that firmspecific ownership advantage is the precondition of cross-border merger and acquisitionsuccess，however，most of China’s enterprises do not have the firm specific ownershipadvantage in cross-border M&A. This kind of "reverse cross-border M&A" by Chineseenterprises has caused the academic debate， some scholars think that the traditionalinternationalization theories can explain Chinese enterprises cross-border M&A， somescholars think that the traditional internationalization theories cannot fully explain Chineseenterprises cross-border M&A，Chinese enterprises’ cross-border M&A practices bringchallenges to traditional internationalization theories. According to the academic debate，thisstudy researches the logical relationship among Chinese enterprises cross-border merger andacquisition strategy， firm specific advantages，country specific advantages and M&Aperformance based on the bargaining theory. This study wants to answer “what kind ofcross-border merger and acquisition strategy can achieve success”，and also answer “whyChinese enterprises’‘reverse cross-border mergers and acquisitions’ can also achievesuccess”. According to the logical deduction，the research questions are:(1)How is therelationship between equity ownership and performance of Chinese enterprises’ cross-borderM&A?(2) How does firm capability effect on the relationship between equity ownership andM&A performance?(3) How does diversification behavior in the domestic market effect onthe relationship between equity ownership and M&A performance?According to the research questions，on the basis of literature study and theoretical study，the author proposes the internal logic relationship among equity ownership，firm capability，diversification behavior in the domestic market and the M&A performance by the theory ofbargaining power. The author reasons out the conceptual model of this study，and proposesthree groups of six research hypotheses. Using the SPSS statistical software，the author doescorrelation analysis and regression analysis of the123samples of listed companies engage in cross-border M&A between2000and2010. The results indicate some conclusions. Firstly，equity ownership of Chinese enterprises’ cross-border M&A has effects on performance，compared with the non-equal equity ownership，the equal equity ownership has bettercross-border M&A performance. Secondly，R&D capabilities and marketing capabilities havenegative moderating effects on the relationship between equity ownership and M&Aperformance，indicates that R&D capabilities and marketing capabilities would weaken therelationship between equity ownership and M&A performance. Thirdly，diversificationbehavior in the domestic market effect on the relationship between equity ownership andM&A performance. The degree of industry diversification has positive moderating effects onthe relationship between equity ownership and M&A performance，indicates that degree ofindustry diversification would strengthen the relationship between equity ownership andM&A performance. The degree of geographical diversification has negativemoderating(non-significant) effects on the relationship between equity ownership and M&Aperformance， indicates that degree of geographical diversification would weaken therelationship between equity ownership and M&A performance. The degree of verticalintegration has no moderating (non-significant) effects on the relationship between equityownership and M&A performance.Based on the bargaining theory，this study researches the relationship between equityownership and M&A performance of Chinese enterprises’ cross-border M&A strategy，thisstudy also try to use some new theories，its theoretical contributions are:(1) Explain the“reverse cross-border acquisitions” of Chinese enterprises by Country specific advantagestheory.(2) Greatly enriched the application situation of bargaining theory, this paper uses thebargaining theory in the situation of emerging economy-Chinese enterprises’ FDI indeveloped countries; this paper also complements and extends the country level of bargainingpower source, explores the bargaining power from enterprise’ home country, no longer limitsto the host country government’s bargaining power.(3) Combining the OLI paradigm andCountry specific advantages, this study explains the present Chinese enterprises’ cross-borderM&A behavior; it can be further understood as combining the OLI paradigm and LLLmodel(which complement each other) to explain.(4)This study uses normative empiricalresearch methodology to research Chinese enterprises’ cross-border M&A behavior，adds tothe domestic research on Chinese enterprises’ cross-border M&A lack of large sampleempirical research. In addition, the results of this study have certain guiding significance for Chinese enterprises cross-border mergers and acquisitions practices: at the present stage,Chinese enterprise don’t blindly pursuing a majority stake or a controlling stake in the equitystructure of strategy when engaged in cross-border M&A, if they do not have specificadvantages, peer equity structure strategy is the best choice; If Chinese enterprises havecertain firm specific advantages, or they can able to make full use of the country specificadvantages, they do not depend on the control from the equity ownership to achieve targets.At present, China’s enterprises can improve their international competitiveness by the path of"To be competitive in Chinese domestic market first, then to be competitive in the world ", itis also a process of using country specific advantage to foster firm specific advantages, whichcan make enterprises successfully implement the strategy of cross-border mergers andacquisitions. At last，this study also points out the limitations existing in the research and thefuture research direction.