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Effects of Absorptive Capacity on International Acquisitions of Chinese Firms

In: Chinese International Investments

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  • Ping Deng

Abstract

Outward foreign direct investment (OFDI) by Chinese multinational corporations (MNCs) continues to grow, with international mergers and acquisition (M&A) the primary mode of entry for Chinese firms (Alon & McIntyre, 2008). In the first quarter of 2008, cross-border M&A volume from China jumped to $28.5 billion, four times the previous year’s amount (Xinhua, 2008; Fortune, 2009). Although various motivations underlie Chinese overseas acquisitions, strategy asset-seeking predominates (Child & Rodrigues, 2005; Deng, 2007). Chinese MNCs use cross-border M&As to acquire strategic assets or knowledge to improve their competitive advantage in the global marketplace. However, such strategic-asset-driven M&As do not guarantee superior business performance, especially in light of the tacit and proprietary nature of knowledge. For a number of Chinese MNCs, international acquisitions have proven to be highly problematic and value-destroying ( Economist.com , 2007).

Suggested Citation

  • Ping Deng, 2012. "Effects of Absorptive Capacity on International Acquisitions of Chinese Firms," Palgrave Macmillan Books, in: Ilan Alon & Marc Fetscherin & Philippe Gugler (ed.), Chinese International Investments, chapter 7, pages 137-153, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-36157-7_8
    DOI: 10.1057/9780230361577_8
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