Post-merger integration and subsidiary roles in Chinese MNCs – the case of Chinese M&As in Germany

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ursula Mense-Petermann
Keyword(s):  
Multinational Corporations ◽  
Theory Development ◽  
Foreign Direct Investments ◽  
Advanced Economy ◽  
Content Type ◽  
Qualitative Case Studies ◽  
Chinese Mncs ◽  
Post Merger Integration ◽  
Merger Integration ◽  
Subsidiary Roles

Purpose This paper adds to the literature on outward Foreign Direct Investments by Chinese Multinational Corporations (MNCs) in advanced economies. Its objective is threefold: to characterize the subsidiary roles that advanced economy targets of Chinese Multinational Corporations (CMNC) takeovers typically adopt, to assess the position that these subsidiary roles grant them within the CMNCs as a whole and to flesh out how subsidiary actors perceive and make sense of the particular constellation as a subsidiary of a CMNC. Furthermore, this paper aims to contribute to theory development on headquarters‐subsidiary relations by suggesting an additional theoretical lens. Design/methodology/approach The paper draws on in-depth qualitative case studies from the automotive, mechanical engineering and solar industries and focuses on German firms that have been acquired by Chinese MNCs. Theoretically, the present paper draws on extant post-merger integration (PMI) and subsidiary role research, particularly from a micro-political and sensemaking perspective, refined by adding a neo-imperial dominance – lens. Findings The paper reveals the subsidiary roles that German subsidiaries of Chinese MNCs typically adopt and discovers the PMI pattern of “reverse integration” delineating quite a particular form of reverse knowledge transfer. Regarding human integration, it emphasizes the importance of neo-imperial attitudes surfacing in the German subsidiaries. Originality/value The value of the paper is in contributing to fill the pending research gap on the subsidiary roles that advanced economy subsidiaries of Chinese MNCs adopt, on the resulting positions of these subsidiaries within the overall Chinese groups and the sense that subsidiary actors make of being acquired by a Chinese MNC. The paper also reveals the importance of neo-imperial dominance patterns and attitudes in PMI in the constellation scrutinized.

Chinese multinationals’ FDI motivations: suggestion for a new theory

2019 ◽  
Vol 14 (1) ◽  
pp. 70-90 ◽  
Author(s):  
Byung Il Park ◽  
Taewoo Roh
Keyword(s):  
Mergers And Acquisitions ◽  
Multinational Corporations ◽  
Emerging Market ◽  
Developed Countries ◽  
Future Research ◽  
Foreign Direct Investments ◽  
Data Set ◽  
Content Type ◽  
Developed Economies ◽  
Chinese Mncs

Purpose The purpose of this paper is to complement the conventional international business (IB) theory, the OLI perspective, which is good at explaining the foreign direct investments (FDIs) undertaken by developed market multinational corporations (DMNCs). This study also suggests a new theoretical framework, namely, the OILL paradigm, that is able to encompass FDIs from emerging market multinational corporations (EMNCs) toward developed economies. Design/methodology/approach The data comprising 206 Chinese MNCs, which completed international mergers and acquisitions (IMAs), were obtained from Zephyr. By using these data, logical regressions are conducted to statistically confirm that we should not omit the learning motivation if we want to adequately understand the FDI phenomenon by encompassing investment flow from developing (or emerging) to developed countries. Findings The results based on this data set indicate that EMNCs often try to enter developed economies with the motivation to seek sophisticated foreign host knowledge that is not available internally. In particular, they tend to use IMA strategies when they want to learn from heterogeneity (i.e. inter-industry mergers and acquisitions) and absorb advanced technologies from DMNCs. Research limitations/implications By shedding light on the recent new trend in FDI (i.e. FDI from emerging countries to developed economies), the study provides useful theoretical implications, as well as suggesting scholarly contributions. However, we should acknowledge that there are some limitations to this study. First, the study explores only Chinese MNCs. Second, learning motivations need to be minutely and precisely measured by other studies. Third, this study argues that FDI from EMNCs to DMNCs is triggered by the former’s motivation concerning knowledge acquisition. However, the type of knowledge should be considered, and this is perhaps another avenue for future research. Practical implications Conventional IB theories, such as the OLI paradigm and internalization theory, have long sought to answer the question of why DMNCs go for foreign markets, in spite of the presence of the liabilities of foreignness, and focused on their main investment motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations). For this reason, these theories do not adequately capture the primary FDI motivations of EMNCs, and consequently, they are unable to see the big picture when it comes to the FDI phenomenon. Based on this idea, the authors complement the well-known triad motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations) by adding the knowledge-seeking motive and contribute to the evolution of IB theories by suggesting a new theory, which is the OILL paradigm. Originality/value The study contributes to the extant literature in the field of IB in two key ways. First, it examines EMNCs’ central motivations in conducting FDI where empirical research is sparse. By doing this, this paper attempts to solve the query indicated above (i.e. why MNCs choose FDI in spite of the presence of the liabilities of foreignness), and it offers a new theory (i.e. the OILL paradigm).

Technological knowledge access and transfer of multinational corporations from emerging economies: a comparison study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Feng Zhang
Keyword(s):  
Multinational Corporations ◽  
Emerging Economies ◽  
Explicit Knowledge ◽  
Technological Knowledge ◽  
Foreign Direct Investments ◽  
Industrialized Countries ◽  
Content Type ◽  
Wilcoxon Rank Sum Test ◽  
The Us ◽  
Knowledge Access

Purpose This study aims to analyze the subsequent investment success of EMNCs after their strategic asset-seeking foreign direct investments (FDIs), while internationalization trajectories of multinational corporations from emerging economies (EMNCs) have been extensively studied, Post-internationalization investment success of EMNCs is defined as extensive technological knowledge access and transfer for knowledge combination. This paper focuses on EMNC explicit knowledge access and transfer. Design/methodology/approach This study analyzes US patents granted between 2000 and 2014 to leading innovation-oriented EMNCs from China and India as well as to their key competitors from mature industrialized countries (MMNCs). Wilcoxon Rank Sum Test is used to compare the explicit technological knowledge access and transfer patterns of EMNCs and MMNCs. With MMNCs as the benchmark, the comparison allows to imply the patterns and extent of technological knowledge access and transfer of EMNCs. Findings While subsidiary reverse knowledge transfer is largely missing, EMNCs adopt a parent-centric approach in which the parent directly accesses and transfers explicit knowledge from the external environment of host locations. In doing so, EMNCs at least partially achieve the knowledge access and transfer goals of strategic asset-seeking FDIs. Originality/value This study contributes to an in-depth understanding of EMNCs by empirically testing key predictions in extant EMNC literature, namely, the strategic asset-seeking in host locations and the systematic integration of accessed knowledge and resources with home country activities. This study also pioneers the use of the US patent and citation data to empirically study EMNCs.

Reaching organizational ambidexterity in the merger process: a temporal switching

2019 ◽  
Vol 58 (5) ◽  
pp. 879-896
Author(s):  
Anne-Sophie Thelisson ◽  
Audrey Missonier ◽  
Gilles Guieu
Keyword(s):  
Participant Observation ◽  
Organizational Ambidexterity ◽  
Longitudinal Case Study ◽  
Exploration And Exploitation ◽  
Content Type ◽  
Merger Process ◽  
Post Merger Integration ◽  
And Control ◽  
Merger Integration ◽  
Parent Companies

Purpose The purpose of this paper is to explore how a company reaches organizational ambidexterity during a merger process. Organizational ambidexterity refers to the proactive adaptations of an organization to simultaneously explore and exploit. Design/methodology/approach The paper presents a longitudinal case study of a public-private merger of two listed French companies. The data were collected from participant observation, interviews and archival documentation over two years. Findings The balance between autonomy and control by the parent companies evolves during the post-merger integration. The findings reveal that there was no concordance between the oscillations between autonomy and control on the part of the parent companies and the new organization’s exploration/exploitation strategies. However, the progressive evolution of control and autonomy from the parent companies engendered organizational ambidexterity during the third phase integration. Practical implications The study adds insight into how organizations can develop ways to manage organizational ambidexterity dynamics by employing temporal mechanisms, referring to an organization’s shifting sequentially between exploration and exploitation. The case highlights how temporal switching between exploration and exploitation occurs to ultimately enable ambidexterity. Originality/value Although organizational ambidexterity is recognized as a key element for post-merger integration, how it is achieved over the course of the merger process has received little attention. The study highlights that in the case of public-private mergers, the parent companies influence exploration and/or exploitation strategies. The paper adds insights on whether exploration and exploitation can be differentiated over time and whether exploration and exploitation can be reconciled at the same time.

A paradoxical approach symbiotic to postmerger integration: a French longitudinal case study

2019 ◽  
Vol 31 (2) ◽  
pp. 232-259
Author(s):  
Anne-Sophie Thelisson ◽  
Audrey Missonier ◽  
Gilles Guieu ◽  
Lotte S. Luscher
Keyword(s):  
Process Model ◽  
Dynamic Decision Making ◽  
Longitudinal Case Study ◽  
Target Firm ◽  
Content Type ◽  
Organizational Autonomy ◽  
Merger Process ◽  
Inclusive Approach ◽  
Post Merger Integration ◽  
Merger Integration

Purpose This paper aims to examine post-merger integration (PMI) through the lens of paradox to determine how paradoxes contribute to successful integration. Although PMI has been identified as crucial to understand merger success or failure, the literature on PMI drivers remains inconclusive. Design/methodology/approach Drawing on the theory of paradox and two key elements of PMI, strategic interdependency (SI) and organizational autonomy (OA), the authors describe the merger of two listed French companies using longitudinal data. Findings The authors identify how the paradox between OA and SI was triggered and fostered PMI success by leading to symbiotic integration. They also show that two capabilities were central in helping the paradox to evolve: preserving the specificities of the organizations and pooling their respective capabilities. These capabilities result from basic decisions and actions during the integration implementation, such as highlighting the expertise of the target firm, refocusing the core activity while valorizing each company’s expertise, clarifying the identity of the new organization on the market and enhancing joint piloting and transferring both general management capacity and functional abilities during the reorganization period. Practical implications The authors offer several useful insights for managers trying to manage paradoxical tension throughout the merger process. This study encourages managers to embrace inconsistencies as they make decisions and to shift to dynamic decision-making as a way to adapt to complex contexts. Originality/value This study adopts a global and inclusive approach to focus on OA and SI and flesh out a picture of the integration process. It proposes a dynamic process model to conceptualize the stage-wise nature of the PMI process by highlighting the interrelations between OA and SI dynamics.

Segmentally aware: know when to merge and when to purge

2019 ◽  
Vol 33 (1) ◽  
pp. 196-214
Author(s):  
Yao Ma ◽  
Jiahua Xu
Keyword(s):  
Mergers And Acquisitions ◽  
Financial Performance ◽  
Design Methodology ◽  
Content Type ◽  
Structural Integration ◽  
Target Company ◽  
Overall Performance ◽  
Post Merger Integration ◽  
Merger Integration ◽  
Integration Levels

Purpose The purpose of this paper is to hone in on the degree of segment-level integration relative to corporate post-merger performance. Design/methodology/approach The sample consists of 89 segments in 29 combined companies resulting from large mergers and acquisitions (M&A) transactions between 2001 and 2014 in the pharmaceutical and chemical industries worldwide. The authors track the change through M&A in performance of segments with different integration forms as well as performance of entire companies with different integration levels. Findings The authors find that integrating the segments from the target significantly improves the acquirer’s overall performance, as well as the concerned segments’ performance, following an M&A transaction. Whereas the segments from the target company, when left unintegrated, not only exhibit subpar performance among all the segments, but also appear responsible for the worsening corporate performance. Various possible reasons for this contrast are discussed. Originality/value This paper raises awareness of the significance of segment-level analyses, and contributes to the post-merger integration (PMI) research by examining the influence of structural integration on operating segments. To the best of our knowledge, this paper is the first to investigate integration forms and the post-merger financial performance of various segments within companies.

Integration duration of post-merger and leverage dynamics of mergers: theory and evidence

2019 ◽  
Vol 31 (2) ◽  
pp. 208-231
Author(s):  
Yao Cheng
Keyword(s):  
Capital Structure ◽  
Dynamic Model ◽  
Content Type ◽  
Acquiring Firms ◽  
Integration Period ◽  
Target Firms ◽  
Method Of Payment ◽  
Post Merger Integration ◽  
Merger Integration ◽  
Leverage Dynamics

Purpose The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a dynamic model in which full merger benefits cannot be consumed at the instant of a merger, but rather after a pre-specified post-merger integration period. Design/methodology/approach This paper presents a dynamic model and empirical tests that describe the impact of the post-merger integration period on the capital structure dynamics of the acquiring and target firms before a merger and during the post-merger integration period. By incorporating costs associated with the post-merger integration period, the model can provide new implications for the leverage behavior around the merger. Findings The model generates new implications related to acquiring firms’ leverage dynamics along with method of payment choice. Specifically, the model indicates that the post-merger integration duration is negatively associated with the market leverage of newly-merged firms at the time of merger completion and during the integration period. Further, acquirer managers are more likely to use equity to finance a merger when the integration duration is likely to be lengthy. Originality/value This is the first model in the literature that assumes that both the acquiring and the target firms can change their capital structure overtime, which allows us to analyze both the financing structure and the merger timing. Previous empirical studies also ignore the integration period in the analysis of the method of payment choice and leverage behavior around mergers. In the tests reported in this paper, the authors control for the factors mentioned above and demonstrate that the expected integration duration is not subsumed by those variables implying that it has its own power in explaining the choice of leverage and merger financing method.

Managing failure in the merger process: evidence from a case study

2020 ◽  
Vol 42 (1) ◽  
pp. 33-39
Author(s):  
Anne-Sophie Thelisson
Keyword(s):  
Single Case ◽  
Content Type ◽  
Theoretical Concepts ◽  
Organizational Issues ◽  
Integrative View ◽  
Merger Process ◽  
Consistent Picture ◽  
Post Merger Integration ◽  
Merger Integration

Purpose Despite their high number, most mergers end in failure. Academic studies of how these failures occur have remained rare, first, because of the difficulty of accessing the cases, and second, because of the difficulty of obtaining – for the purposes of qualitative analysis – objective and freely shared perceptions from the stakeholders, who tend to avoid speaking about failure. This is unfortunate, however, as failure can serve as a stimulus for organizational learning and readaptation for the future. Design/methodology/approach The author investigated how an organization managed failure during the post-merger integration stage. The author described the merger of two listed French companies using longitudinal data. Findings This in-depth case study provides new insights into failure during post-merger integration. The paper highlights the complexity of post-merger integration processes and the failures that the integration stakeholders had to address. The author underlined how they recognized failures and put into place solutions. They particularly highlighted two failures and how they were managed by the managers who acted as knowledge brokers within the new organization and by stakeholders who deconstructed the organization to ensure its future. Research limitations/implications The limitations are those concerning a single case study. Practical implications The paper identified trigger events in the merger process that prompted stakeholders to step in and manage and resolve failures during the integration period. Such triggers can be considered as steps for managers and stakeholders to solve organizational issues in the merger process. The paper highlighted the complexity of post-merger integration processes and the failures faced by integration stakeholders. The analysis thus contributes to an inclusive and integrative view of the challenges in this process. Social implications Despite their high number, merger and acquisition failures remain surprisingly high. This paper explored how stakeholders deal with failures by identifying which solutions are best adapted to their organization. Originality/value The case provides a vivid illustration of failure management during a merger process. Theoretical concepts and empirical findings from the literature are combined to present a single consistent picture.

scholarly journals From play to pay: a multifunctional approach to the role of culture in post-merger integration

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Augusto Sales ◽  
Steffen Roth ◽  
Michael Grothe-Hammer ◽  
Ricardo Azambuja
Keyword(s):  
Cultural Differences ◽  
Social Systems ◽  
Macro Level ◽  
Niklas Luhmann ◽  
Management Tools ◽  
Content Type ◽  
Societal Context ◽  
Values And Beliefs ◽  
Post Merger Integration ◽  
Merger Integration

PurposeThe literature on Mergers and Acquisitions (M&A), cultural differences between organizations have frequently been identified as one of the main challenges in the process of post-merger integration (PMI). Existing research has explored a broad variety of cultural differences in perceptions, such as those relating to expectations, norms, values and beliefs within the respective organizations, and how these affect the process and success of PMI. However, less attention has been paid to the relevance of the macro-societal context to PMI. The ambition of this article is, therefore, to advance our understanding of how macro-level societal factors define organizational cultures and affect the success of PMI.Design/methodology/approachWe draw on social systems theory as devised by Niklas Luhmann, assuming that organizations are always embedded in the macro-level societal context of distinctive realms of social reality—such as the economy, politics, religion and the arts—that make up the so-called “function systems”. Looking at the case of the integration of a Brazilian technology start-up into a market-leading corporation, we analyze the dominant orientations towards these function systems, and the changes in these orientations over time.FindingsThe results suggest that differences in organizational culture in PMI can be partly explained by differences in orientations to the function systems. Moreover, forcing dramatic changes of orientations towards the function systems within a merged entity can severely damage its raison d'etre in the first place, potentially leading to, in some sense, an account of “culture murder”.Originality/valueThis article is unique in demonstrating that organizations are multifunctional systems whose culture is defined by the highly specific and potentially varying degrees of importance they place on individual function systems and that knowledge or neglect of these functional profiles may seriously affect the success of post-merger integration. Against this backdrop, the article presents a multifunctional profiling method that may easily translate into PMI management tools.

How do formal and informal institutional distance affect the reverse knowledge spillover of Chinese MNCs?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yi She ◽  
Jin Hong ◽  
Chuwei Ji
Keyword(s):  
Multinational Corporations ◽  
Knowledge Spillovers ◽  
Positive Impact ◽  
Innovation Performance ◽  
Parent Company ◽  
Practical Significance ◽  
Host Countries ◽  
Content Type ◽  
Chinese Mncs ◽  
The Impact

PurposeThis study examines the impact of outward foreign direct investment (OFDI) of Chinese multinational corporations (MNCs) and formal and informal institutional distances between the home and host countries on the innovation performance of parent company.Design/methodology/approachThis study uses panel data to conduct an empirical analysis on the data of 59 mature Chinese MNCs and their 872 overseas subsidiaries over the past 11 years and draws interesting results.FindingsResults show that OFDI and formal and informal institutional distances between countries exert a significant positive impact on the innovation performance of the parent company and formal and informal institutional distances negatively moderate the impact between OFDI and the parent company's innovation performance.Originality/valueAlthough international business research pays increasing attention to transnational differences in institutions and cultures, research on the relationship between technology spillover and distance is relatively limited. In addition, few studies consider the impact of FID and IFID on transnational reverse knowledge spillovers. This research fills these research gaps, and the conclusions have certain practical significance for multinational companies.

Impact of psychological capital on the resistance to change during post-merger integration

2017 ◽  
Vol 30 (6) ◽  
pp. 936-956 ◽  
Author(s):  
Jennifer Linda Dorling
Keyword(s):  
Theoretical Model ◽  
Psychological Capital ◽  
Resistance To Change ◽  
Content Type ◽  
Employee Resistance ◽  
Research Findings ◽  
Research Questions ◽  
Post Merger Integration ◽  
Merger Integration ◽  
The Relationship

Purpose Mergers and acquisitions (M&As) are major corporate changes and are among the most stressful for employees. Employee resistance is a well-recognised reason for high failure rates of post-merger integration (PMI). The contemporary concept of psychological capital (PsyCap) is a promising approach for dealing with the issue. To date, relatively little research has been conducted on the relationship between PsyCap and resistance. The purpose of this paper is to examine the possible positive impacts of PsyCap on employee resistance during PMI, based on a review of the existing literature and selected interviewers with a panel of experts, and offer a theoretical model for decreasing the resistance. Design/methodology/approach This paper builds on the literature on M&A, PMI, and employee resistance by focusing on the contribution of PsyCap. Apart from formulating propositions and answering pre-determined research questions, the findings are the basis for a theoretical model that was validated by a panel of experts. Findings This research documents the negative emotions that are triggers for resistance during PMI under the influence of PsyCap. By measuring and assessing the PsyCap needs of employees, resistant employees were revealed, and their PsyCap was developed using tailored interventions. The research findings indicate this to be a feasible approach for reducing resistance during PMI. Research limitations/implications All of the findings rely on empirical testing and operationalisation. Cultural differences may influence the PsyCap dimensions. Practical implications M&A deals often fail due to unsuccessful PMI implementation because leaders fail to consider the psychological impacts when trying to overcome resistance. The model proposes a possible solution. Originality/value The offered theoretical approach is original and provides new insights for researchers and practitioners who evaluate M&A strategies.

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