Why Do Multinational Corporations Tend To Acquire Strategic Assets Via M&A In China

Cross-border mergers and acquisitions(M&A), which is often than not taken as a form of foreign direct investment Worldwide and an important global strategy of multinational corporations, is now having a profound impact on global economic development. As the fastest growing economy and the largest potential market, China is extensively involved in the trend of cross-border M&A, along with the increase of globalization and the deepening of opening up. As a prominent form of multinational operation, M&A in China entrusts multinational companies the competitive advantages to compete for China’s huge market share. Generally, the acquisition targets of multinational companies are those high-quality Chinese companies with fine background, high reputation as well as huge market potentials, particularly the state-owned enterprises with dominant positions. The acquisition of strategic assets, in particular, the resources which are tied with the host country factors, established by the domestic enterprises in a long run, reflected in the operation of the domestic enterprises but hard to transfer across border, and adjusted to domestic markets, is the motivation of multinational M&A. However, why multinational companies often choose the way of strategic asset obtaining M&A in China? To answer this question, this paper builds a model testing for the motivation of strategic asset obtaining M&A type multinational companies from the perspective of institution, and prove the model by across case studying three world-renowned multinational companies. Results show that influenced by the national level institution presure and the corporate level cultural awareness, multinational companies normally choose strategic asset M&A in China. Specifically, this paper extends as follows.Chapter1introduces the research background and what in question. Based on the review to the current research at home and abroad, this paper clearly defines the research content, the research framework and the research method. Chapter2reviews and comments the transnational M&A theory, resource based theory, institution theory, and gives the defination of strategic assets and institution, laying the foundation for further research. Chapter3builds a model testing for the motivation of strategic asset obtaining M&A type multinational companies operating in China from the perspective of institution, and proposes several hypotheses to explain the logic behind strategic asset obtaining M&A in China of multinational corporations. Chapter4proves the model by across case studying L’Oreal, ArcelorMittal and AB, the three world-renowned multinational companies. Chapter5analyzes the double impacts of strategic assets obtaining M&A on Chinese enterprises as well as China’s economy, and puts forward coping strategies from the institution control level aiming at the adverse effects. Chapter6draws relevant conclusions and points out the research limitation and innovation of this paper.