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Overseas mergers and acquisitions, organizational control and selection of investment patterns: based on China’s experience

HONG Lianying1 CHEN Si2 HAN Feng2

(1.Collaborative Innovation Center for the Development of Modern Services and New Urbanization in Hunan Province, School of Economics and Management, Changsha University of Science and Technology)
(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;

【DOI】

【Funds】 National Social Science Foundation of China (11CJY095) Research Center Foundation for International Economy and International Engineering Management (131EPM08) Innovation Platform Open Foundation for Colleges and Universities in Hunan Province (14K006)

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    Footnote

    [1]. 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 , in which α determines the elasticity of demand ε = 1/ (1 − α), 0 < α < 1. [^Back]

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This Article

ISSN:1002-5502

CN: 11-1235/F

Vol , No. 10, Pages 40-53

October 2015

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Article Outline

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Abstract

  • 1 Introduction
  • 2 Analysis on the mechanism of micro-production organizational control of overseas M&As
  • 3 Empirical model of overseas M&As and the selection of organizational control modes
  • 4 Empirical test results and discussion
  • 5 Conclusion and policy implications
  • Footnote

    References