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

See all articles by Sunny Li Sun

Sunny Li Sun

Mike W. Peng

University of Texas at Dallas - Naveen Jindal School of Management

Bing Ren

Nankai School of Business

Daying Yan

Nankai University - School of Economics

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

Suggested Citation

Sun, Sunny Li and Peng, Mike W. and Ren, Bing and Yan, Daying, A Comparative Ownership Advantage Framework for Cross-Border M&As: The Rise of Chinese and Indian MNEs (June 3, 2010). Journal of World Business, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1620380

Mike W. Peng

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Bing Ren

Nankai School of Business ( email )

94 Weijin Road, Nankai District
Tianjin, Tianjin 300071
China

Daying Yan

Nankai University - School of Economics ( email )

Wenjin Road
Tianjin, TianJin 300071
China

No contact information is available for Sunny Li Sun

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
311
Abstract Views
2,580
rank
139,238
PlumX Metrics