Research On The Reverse Technology Spillover Effects Of Chinese Cross-border M&A On The Domestic Enterprise Innovation

Since the national strategy of "going out" carried out ten years, the cross-border M&A of Chinese enterprises has entered a rapid development stage. According to the journal of world investment report 2013, China’s foreign direct investment(OFDI)flowed up to $87.8 billion in 2012, surpassed the United States and Japan to become the third largest foreign investor in the world. Relatively insufficient innovation ability became the bottleneck of restricting China’s economic development, also,China’s research and development spending as a proportion of GDP is far behind developed countries, even lower than the global average. Cross-border M&A can direct access the host country’s advanced technology. Study the influence of cross-border M&A’s reverse technology spillover effect on enterprise innovation ability is of great importance.This paper studied how reverse technology spillover of domestic enterprises’ cross-border M&A influence their technological innovation capability. The main contents are as follows: First of all, summarized literatures both at home and abroad in terms of the effect of cross-border M&A on innovation as well as effect of reverse technology spillover of cross-border M&A on innovative mechanisms. Secondly, I analyzed the status of domestic enterprises’ cross-border M&A and technological innovation capability with system analysis method. The results showed that the central enterprises with large funds and state-owned enterprises are the main body in China’s cross-border M&A activities. Because of the relative shortage of funds of private enterprises, the acquisitions are on small-scale. The cross-border M&A activities in China still mainly based on resources access and the technology acquisition of cross-border M&A is just on the early stage. In addition, our R&D expenditure as a percentage of GDP is increasing, but it still has a big gap between China and developed countries. Third, this paper used theoretical analysis and obtained the cost minimization conditions for Chinese companies to acquire advanced foreign technology through cross-border M&A activities. When cross-border M&Aactivity’s average fixed cost less than the NPV of the marginal cost, it is feasible for enterprises which have no technical advantages to obtain host nation’s advanced technology through cross-border M&A activity and then improve the level of their domestic technology. This article also summarized how enterprises affect the path and factors of innovation through cross-border M&A activity reverse technology spillover.Fourth, the paper establish empirical research model which using 1995-2014 time series data to run regression between cross-border M&A reverse technology spillover effect and innovation ability, the results showed that cross-border M&A reverse technology spillover can facilitate and enhance innovation capability, but the impact of the results are not very significant, just at 10% significance level.This paper has two innovation points: the first innovation point is the variables selected. Most scholars used the stock of cross-border M&A as explanatory variable,this paper used the stock of cross-border M&A reverse technology spillover’s foreign R&D capital stock as the core explanatory variables. Compared with the stock of cross-border M&A, cross-border M&A reverse technology spillover’s foreign R&D capital stock can explain technology acquisition M&A in a better way. The other innovation point is that this paper used 1995-2014 time series data of cross-border M&A reverse technology spillover’s foreign R&D capital stock to establish econometric regression. Compared with the previous literature, which selected time series data of cross-border M&A stock, cross-border M&A reverse technology spillover’s foreign R&D capital stock is more representative of technology acquisition M&A’s stock.