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Chinese MNE acquisition of unrelated foreign businesses: The role of diversified business group affiliation, private ownership and strategic asset seeking

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  • Shi, Xinwei
  • Sutherland, Dylan
  • Williams, Christopher
  • Rong, Ke

Abstract

While the acquisition by Chinese firms of unrelated foreign businesses has become quite common, it is a highly risky undertaking not fully explained by international business scholars. Using resource-based and institutional theory, we hypothesize that affiliation with a domestically diversified business group confers pre- and post-acquisition advantages and legitimacy, fostering unrelated foreign acquisitions. In addition, we argue that private ownership as well as a motive to seek strategic assets amplify this tendency among Chinese firms affiliated to diversified groups. Ordered logit modelling for 662 Chinese cross-border M&As over a 10-year period provides support for our hypotheses. Our findings shed new light on: the distinctive characteristics of Chinese MNEs; broader conceptual arguments regarding the strategy of emerging market MNEs; the apparent paradox of why Chinese MNEs have used international acquisitions to diversify at a time when many Western diversified conglomerates are divesting non-core businesses.

Suggested Citation

  • Shi, Xinwei & Sutherland, Dylan & Williams, Christopher & Rong, Ke, 2021. "Chinese MNE acquisition of unrelated foreign businesses: The role of diversified business group affiliation, private ownership and strategic asset seeking," Journal of Business Research, Elsevier, vol. 129(C), pages 145-156.
    • Handle: RePEc:eee:jbrese:v:129:y:2021:i:c:p:145-156
    DOI: 10.1016/j.jbusres.2021.02.036
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