A Comparative Ownership Advantage Framework for Cross-Border M&As: The Rise of Chinese and Indian MNEs
Journal of World Business, Forthcoming
44 Pages Posted: 4 Jun 2010
Date Written: June 3, 2010
Abstract
Unlike multinational enterprises from developed economies (DE MNEs), MNEs from emerging economies (EE MNEs) commonly do not have absolute ownership advantage in management, technology, and know-how. Yet some of them have recently undertaken aggressive cross-border mergers and acquisitions (M&As). This phenomenon challenges the current understanding in the international business literature (particularly Dunning's ownership-location-internalization [OLI] paradigm), which posits that the primary objective of foreign direct investment (FDI) is to leverage MNEs' ownership advantage in host markets. EE MNEs' cross-border M&As therefore create a research gap between theory and reality. Integrating the comparative advantage theory with Dunning's OLI paradigm, this article develops a comparative ownership advantage framework characterized by five attributes: (1) national-industrial factor endowments, (2) dynamic learning, (3) value creation, (4) reconfiguration of value chain, and (5) institutional facilitation and constraints. We then propose five propositions on the cross-border M&As undertaken by Chinese and Indian MNEs, and test these propositions with a dataset of 1,526 cross-border M&As from 2000 to 2008. Preliminary results support the new comparative ownership advantage framework, which explains both the differences and commonalities between Chinese and Indian MNEs' cross-border M&As.
Keywords: Comparative Ownership Advantage, Emerging Economy Mnes, Cross-Border M&As, Global Strategy
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