Do Foreign Mergers and Acquisitions Increase Acquired Firms’ Innovation? Evidence from Chinese Manufacturing Firms

20 Pages Posted: 6 Mar 2019

See all articles by Zheng Zhang

Zheng Zhang

Hunan University

Yuping Deng

The University of Western Australia - UWA Business School

Sam Hak Kan Tang

University of Western Australia

Date Written: March 2019

Abstract

By merging China's manufacturing enterprise, patent and customs databases, we construct a sample of 27,130 firms from 2002–2007. Using Poisson fixed‐effects regressions to control for firm and year heterogeneities and a host of control variables, we find that acquired firms of foreign mergers and acquisitions (FMA) apply for significantly more patents than their domestic counterparts in invention, utility model and design patents. Furthermore, FMA increases innovation through expanding firm size, exports and human capital formation. Wholly foreign‐owned firms are more innovative than partially foreign‐owned firms, and acquired firms in labour‐intensive industries are more innovative than those in capital‐intensive industries.

Suggested Citation

Zhang, Zheng and Deng, Yuping and Tang, Sam Hak Kan, Do Foreign Mergers and Acquisitions Increase Acquired Firms’ Innovation? Evidence from Chinese Manufacturing Firms (March 2019). Australian Economic Review, Vol. 52, Issue 1, pp. 41-60, 2019, Available at SSRN: https://ssrn.com/abstract=3345260 or http://dx.doi.org/10.1111/1467-8462.12282

Zheng Zhang (Contact Author)

Hunan University

2 Lushan South Rd
Changsha, CA Hunan 410082
China

Yuping Deng

The University of Western Australia - UWA Business School

Crawley, Western Australia 6009
Australia

Sam Hak Kan Tang

University of Western Australia ( email )

Nedlands, Western Australia 6907
Australia

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