The Heterogeneous Impacts of Foreign Acquisition on Domestic Targets

38 Pages Posted: 12 Mar 2023 Last revised: 4 Jan 2024

See all articles by Jen-Chung Mei

Jen-Chung Mei

University of Westminster; University of Cambridge

Minghai Zhou

Zhejiang University

Yifei Cao

University of Nottingham, Ningbo - University of Nottingham Ningbo China

Dongzhe Zhang

University of Sussex

Date Written: January 1, 2024

Abstract

This paper explores the heterogeneous impacts of foreign acquisition on domestic targets post-takeover. Our findings reveal that Western-developed (WD) MNEs employing a non-diverse market-seeking strategy drive relatively large productivity gains in domestic targets, leading to a 6-11\% increase in productivity during the first three years post-acquisition. By contrast, only MNEs from Hong Kong, Macao, and Taiwan (HMT) with export strategy generate similar effects to their targets. Furthermore, we find that only HMT MNEs' acquired targets with export strategy experience price margins increased post-takeover. Focusing on targets in the export market, we then find that only HMT MNEs' targets experience a decline in export product scope, with export product quality declining by 1.5\% post-takeover. We show that HMT MNEs' targets are generally more labour-intensive, less invested, older, and have lower innovation capability compared to WD MNEs' targets.

Keywords: Foreign origins; entry strategies; foreign acquisition

JEL Classification: F23; D24; F14

Suggested Citation

Mei, Jen-Chung and Zhou, Minghai and Cao, Yifei and Zhang, Dongzhe, The Heterogeneous Impacts of Foreign Acquisition on Domestic Targets (January 1, 2024). Available at SSRN: https://ssrn.com/abstract=4386161 or http://dx.doi.org/10.2139/ssrn.4386161

Jen-Chung Mei (Contact Author)

University of Westminster ( email )

School of Organisation, Economics and Society
Westminster Business School
London, NW1 5LS
Great Britain

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Minghai Zhou

Zhejiang University ( email )

38 Zheda Road
Hangzhou, 310058
China

Yifei Cao

University of Nottingham, Ningbo - University of Nottingham Ningbo China ( email )

199 Taikang East Road
Ningbo, 315100
China

Dongzhe Zhang

University of Sussex ( email )

Sussex House
Falmer
Brighton, BNI 9RH
United Kingdom

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