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Going out to innovate more at home: Impacts of outward direct investments on Chinese firms' domestic innovation performance

Author

Listed:
  • Anthony Howell

    (The Christie - The Christie, ASU - Arizona State University [Tempe])

  • Jia Lin

    (Beijing Gas Group - Lvyuanda Compressed Natural Gas Co.Ltd, CEIBS - China Europe International Business School)

  • Stephan Worack

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne)

Abstract

This study explores the effects of cross-border mergers & acquisitions (CBMA) on domestic innovation of Chinese firms. We build a new panel dataset that matches information on CBMA and innovation activities for China's publicly listed firms. We rely on matching techniques combined with a difference-in-differences estimator to study the causal effects of CBMA respectively on firms' investments in innovation, innovation outputs, and financial performance. The main findings reveal that CBMA has both a positive impact on firms' R&D spending and number of patent applications, no statistically significant effect on the number of granted patents or on the quality of those patents, and a negative effect on firms' financial performance. These results depend, however, on the type of CBMA (horizontal or vertical), destination country (OECD or non-OECD), and the technological intensity (high-tech or not) of the acquirer and target firm. Overall, the findings bring into question whether CBMAs, and China's going-out strategy, will significantly boost its indigenous innovation capabilities.

Suggested Citation

  • Anthony Howell & Jia Lin & Stephan Worack, 2020. "Going out to innovate more at home: Impacts of outward direct investments on Chinese firms' domestic innovation performance," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-02866804, HAL.
    • Handle: RePEc:hal:cesptp:hal-02866804
    DOI: 10.1016/j.chieco.2020.101404
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    Cited by:

    1. Son, Sung Hyun & Kim, Young-Han, 2024. "Does cross-border M&A improve merging firms’ domestic performances?," Journal of Asian Economics, Elsevier, vol. 90(C).
    2. Xun Liu & Sen Lin & Lixing Liu & Fei Qian & Kun Zhang, 2020. "Exploring the Factors Triggering Occupational Ethics Risk of Technology Transaction in Chinese Construction Industry," IJERPH, MDPI, vol. 17(4), pages 1-18, February.
    3. Zhang, Wenyue & Sun, Chuanwang, 2024. "Do multinational enterprises’ overseas investment activities promote their green transition performance? Evidence from Chinese listed companies," Structural Change and Economic Dynamics, Elsevier, vol. 71(C), pages 594-608.
    4. Alexander Jaax & Sébastien Miroudot, 2021. "Capturing value in GVCs through intangible assets: The role of the trade–investment–intellectual property nexus," Journal of International Business Policy, Palgrave Macmillan, vol. 4(3), pages 433-452, September.
    5. Guiyu Bai & Wenjuan Wang & Xinxin Wang, 2022. "Research on the Influence of Technological Innovation Enthusiasm on Innovation Performance from the Perspective of Nonlinearity—Empirical Evidence from Chinese Listed Firms," Sustainability, MDPI, vol. 14(16), pages 1-14, August.
    6. Shi, Xing & Zeng, Yujie & Wu, Yanrui & Wang, Shuai, 2023. "Outward foreign direct investment and green innovation in Chinese multinational companies," International Business Review, Elsevier, vol. 32(5).
    7. Li, Ping & Wang, Yujing & Li, Meng & Gao, Haoyu, 2024. "The power of speed: High-speed railways and scientific research competitiveness in China," Journal of Asian Economics, Elsevier, vol. 95(C).
    8. Wang, Shanshan & Wang, Ying & Li, Qiuyue, 2024. "Impact of mergers and acquisitions on enterprise innovation efficiency: The mediating role of factor endowment," Finance Research Letters, Elsevier, vol. 66(C).
    9. Lin, Jia & Wu, Ho-Mou & Wu, Howei, 2021. "Could government lead the way? Evaluation of China's patent subsidy policy on patent quality," China Economic Review, Elsevier, vol. 69(C).
    10. Dong, Zhixiao & Miao, Zhuang & Zhang, Yan, 2021. "The impact of China’s outward foreign direct investment on domestic innovation," Journal of Asian Economics, Elsevier, vol. 75(C).
    11. Thakur-Wernz, Pooja & Bosse, Douglas, 2023. "Configurational framework of learning conduits used by emerging economy firms to improve their innovation performance," Journal of Business Research, Elsevier, vol. 157(C).
    12. Xing Shi & Yujie Zeng & Yanrui Wu & Shuai Wang, 2023. "Outward Foreign Direct Investment and Green Innovation in Chinese Multinational Companies," Economics Discussion / Working Papers 23-05, The University of Western Australia, Department of Economics.
    13. Yan Han & Cheng Pan & Fengjun Jin, 2023. "Does the Improvement of the Business Environment Improve the Innovation Efficiency of Enterprises? Evidence from the Listed Companies in China," Sustainability, MDPI, vol. 15(14), pages 1-25, July.

    More about this item

    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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