Overseas mergers and acquisitions, organizational control and selection of investment patterns: based on China’s experience
(2.School of Economics and Management, Changsha University of Science and Technology)
【Abstract】This paper introduces the hierarchical control mode, contractual control mode and the Grossman-Helpman-Antras theory of the international organization of production into the integration model of production in overseas mergers and acquisitions (M&A) and conducts an empirical test by utilizing the empirical data of China from 2003 to 2012. The study shows that the hierarchical control mode is favored in overseas M&As under the governance environment featuring high-level business productivity, capital-intensive industries and high transaction costs in the host country; conversely, the contractual control mode is preferred. However, the empirical results indicate that the current overseas M&As by Chinese enterprises only conform to this rule in terms of industrial characteristics whilst showing a certain deviation at the levels of corporate factors and regional factors. The effective ways to resolve the performance dilemma of China’s overseas M&As are to strengthen the micro condition construction of enterprises, optimize the governance structure and the integration ability of overseas enterprises and guide enterprises to rationally choose micro-production organizational control modes based on institutional innovation and management reform.
【Keywords】 overseas mergers and acquisitions; micro-production organizational control; investment pattern; hierarchical control mode; contractual control mode;
(Translated by ZHANG Jun)
. ① According to Helpman (2006), the external option returns of integrated final products manufacturers are δα as opposed to δ, which is due to the concavity of the payoff function of sales of goods. The payoff, as a function of the quantity x, is in proportion to xα, in which α determines the elasticity of demand ε = 1/ (1 − α), 0 < α < 1. [^Back]
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