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Foreign Acquisitions in China and Multinationals’ Global Market Strategy
Author(s) -
Liu Qing,
Qiu Larry D.,
Li Zhigang
Publication year - 2016
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12213
Subject(s) - china , business , key (lock) , industrial organization , economics , international trade , international economics , ecology , political science , law , biology
Using firm‐level data from 2000 to 2006, we find that foreign acquisitions in China change the target firms’ export extensive margins. We develop a three‐country model with cross‐border acquisitions to show that the acquirers can alter the targets’ export decision through three possible channels: fixed‐cost jumping, technology transfer and global market reorganization. We find evidence that foreign acquisitions change the Chinese target firms’ probability of exporting to a third market. Technology transfer is not observed. Evidence implies that fixed‐cost jumping is used to enable the targets to export, while global market reorganization is a key motive for the acquirers to withdraw the targets from the export market.