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The effects of ownership identity on corporate diversification strategy of Chinese companies in foreign markets

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  • Rekha Rao-Nicholson

    (Newcastle University London)

  • Catherine Cai

    (University of the West of England)

Abstract

In this paper, we examine the impact of acquirer’s ownership identity on corporate diversification decisions of Chinese companies in their cross-border acquisitions. Few studies to date have looked at the effect of ownership on corporate decisions to diversify abroad, particularly in the emerging market context. We find that certain characteristics of acquirer’s ownership identity such as the government ownership, business group membership and being publicly traded will be negatively linked with industry diversification in international markets. Also, the effects of ownership identities are contingent upon the host country selection, and acquisitions into developed host countries are likely to be in unrelated industries. We observe that Chinese companies that buy in developed markets engage in global consolidation. These results support our arguments on domestic market protection strategies adopted by Chinese companies for mitigating competition from their developed market rivals.

Suggested Citation

  • Rekha Rao-Nicholson & Catherine Cai, 2020. "The effects of ownership identity on corporate diversification strategy of Chinese companies in foreign markets," Asia Pacific Journal of Management, Springer, vol. 37(1), pages 91-126, March.
    • Handle: RePEc:kap:asiapa:v:37:y:2020:i:1:d:10.1007_s10490-018-9578-8
    DOI: 10.1007/s10490-018-9578-8
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