CROSS‐BORDER MERGERS & ACQUISITIONS BY CHINESE MULTINATIONAL CORPORATIONS: PERFORMANCE, DETERMINANTS AND MODERATING FACTORS A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Shijia Zhou B., MBA, MPAcc, MFA School of Management College of Business RMIT University October 2014 CROSS-BORDER MERGERS & ACQUISITIONS BY CHINESE MULTINATIONAL CORPORATIONS: PERFORMANCE, DETERMINANTS AND MODERATING FACTORS A thesis submitted in fulfilment of the requirements for the degree of DOCTOR OF PHILOSOPHY by Shijia Zhou B., MBA, MPAcc, MFA School of Management College of Business RMIT University October 2014 DECLARATION I certify that except where due acknowledgement has been made, the work is that of the author alone; and the work has not been submitted previously, in whole or in part, to qualify for any other academic award; the content of the thesis is the result of work which has been carried out since the official commencement date of the approved research program; any editorial work paid or unpaid, carried out by a third party is acknowledged; and, ethics, procedures and guidelines have been followed. Signed: i ACKNOWLEDGEMENTS The journey of undertaking this thesis has become one of the most extraordinary experiences as well as charming memories in my life. Progressively reaching the gate of PhD, I realised the intellectual challenge, the emotional stress and solitary life while undertaking this thesis were worthwhile. Particularly, I am deeply appreciative and grateful to my respected supervisors, dear friends and lovely family, who have accompanied, motivated, encouraged and supported my journey to achieve this dream.
My deepest gratitude and thanks go to my supervisors, Dr Xueli Huang and Professor Adela McMurray. Dr Huang is a responsible, polymath and warm-hearted supervisor who has played an enormous role in my study as well as personal development. His vast expertise in the field of Chinese overseas investment and critical advice in designing, structuring and analysing this thesis is invaluable. I am always feeling extremely lucky and honoured to be his student.
Adela is an elegant, experienced and detail-oriented supervisor who has encouraged, supported and motivated me to keep working hard all the time. Her excellent comments and professional feedback on this thesis significantly enriched its quality. To be their student, I greatly enjoyed the close cooperation and will cherish every moment we spent together. My appreciation also goes to other colleagues, who have provided their outstanding support on my study and also thesis development.
In particular, I would like to thank Dr. Rui Bi and Miss Dashi Zhang. They contributed valuable time, knowledge and effort during the substantial case coding period. Additionally, I would like to thank Professor Chi Renyong, who has provided deep support through the interview period in Hangzhou China.
Furthermore, I would like to express my gratitude to Dr. Ling Deng, who kindly helped my study and guide my research process at early beginning. I also extend my thanks to Graeme Kemlo for his professional editorial contributions and valuable support in delivering a quality thesis. ii My thanks also go to school of management, RMIT University.
Its generous financial support enabled me to concentrate on the study. Finally, I deeply thank my family members who have shared their care and love to me during the study. Thank you my mother, Fengjuan Sun, for your support, sacrifice and contribution of your maternal love to me. Thank you my brother, Qianmao Sheng, who provided financial support for my study.
Thank you, Hua Bai, for your understanding, encouragement and wholehearted support throughout my study. Fortune favours the bold. - Alexander the Great (356-323 BC) iii DEDICATION I dedicate this thesis to: My mother Fengjuan Sun My brother Maosheng Qian For your constant support, encouragement and unconditional love throughout my life. iv TABLE OF CONTENTS Page DECLARATION I ACKNOWLEDGEMENTS II DEDICATION IV TABLE OF CONTENTS V LIST OF TABLES XII LIST OF FIGURES XIV LIST OF ACRONYMS XVI ABSTRACT XVII CHAPTER 1 INTRODUCTION 1 1.2 Research questions and objectives 6 1.3 Outline of the thesis 8 1.4 Summary 10 CHAPTER 2 LITERATURE REVIEW 11 2.2 Definition and justification of CBMA concept 12 v 2.3 Review of CBMA studies 14 2.1 Conventional theoretical perspectives on Western CBMA research 22 2.2 Contemporary CBMA research: current theoretical development 39 2.3 Context-free and context-embedded considerations in Chinese CBMA research 44 2.4 Research methodology in CBMA studies 46 2.1 Consideration of method design in CBMA research 46 2.2 Review of case-survey approach in CBMA research 54 2.5 Limitations of previous CBMA research 58 2.6 Summary 60 CHAPTER 3 DEVELOPMENT OF AN INTEGRATIVE CBMA FRAMEWORK AND HYPOTHESES 61 3.2 Development of an integrative conceptual framework and hypotheses 62 3.2 The proposed integrative model of Chinese CBMA 70 3.3 Concept definitions of constructs 72 3.4 Development of hypotheses 76 vi 3.3 Development of measurements for the constructs 86 3.2 Independent, moderating and control variables 89 3.4 Summary 97 CHAPTER 4 RESEARCH METHODOLOGY 99 4.1 Quantitative method selection consideration and case-survey 103 4.2 Qualitative method selection consideration and multiple case study 105 4.3 Sampling frame and considerations 106 4.3 Case-survey design 111 4.1 Step One: Developing case selection criteria 113 4.2 Step Two: Collecting cases materials and constructing case samples 114 4.3 Step Three: Designing a detailed coding scheme 118 4.4 Step Four: Using multiple raters to code case samples 119 4.5 Step Five: Measuring interrater reliability and resolving coding discrepancies 121 4.6 Step Six: Quantitative analysis of the coded quantitative data 125 4.4 Case study design 127 vii 4.1 Multiple case study design 127 4.4 Quality of case study research 140 4.5 Summary 143 CHAPTER 5 CASE-SURVEY ANALYSIS AND FINDINGS 144 5.2 Demographic characteristics of samples 144 5.1 Geographic distribution analysis 145 5.2 Historical distribution analysis 147 5.3 Industrial distribution analysis 150 5.3 Hypotheses testing and discussions 153 5.1 Pearson correlation coefficients 153 5.4 Findings and discussions 168 5.5 Summary 177 viii CHAPTER 6 CASE STUDY ANALYSIS AND FINDINGS 179 6.2 Case Study One: Lenovo’s acquisition of IBM PCD 180 6.2 Case findings and discussions 181 6.3 Case Study Two: Geely’s acquisition of Sweden Volvo 198 6.2 Case findings and discussions 199 6.4 Case Study Three: Wanxiang’s acquisition of Ford’s driveshaft business 219 6.2 Case findings and discussions 221 6.5 Cross-case analysis and discussion 231 6.1 Strategic combination benefits and Chinese CBMA 231 6.2 Organisational integration and Chinese CBMA 234 6.3 Cultural resistances and Chinese CBMA 238 ix 6.4 Ownership and firm-specific resources and competences with Chinese CBMA 242 6.6 Summary 244 CHAPTER 7 CONCLUSION 245 7.1 Crucial factors influence the performance of Chinese CBMA 247 7.2 Other factors influence the performance of Chinese CBMA 250 7.3 Contributions and implications 252 7.4 Limitation and recommendations for future research 258 REFERENCES 261 APPENDICES 299 Appendix 1 The steps of conducting case-survey research 299 Appendix 2 The complied list of Chinese CBMA deals 308 Appendix 3 The summary of data sources and specific databases used in screening the case samples 323 Appendix 4 The summary of collected case samples, sources and references 324 x Appendix 5 The list of detailed references for case samples 339 Appendix 6 The summary of searching strategies and sources for collected eligible cases 348 Appendix 7 Coding scheme 349 Appendix 8 Invitation letter and information distributed to interviewees (in English and Chinese) 361 Appendix 9 Interview protocol 367 Appendix 10 Geographic distribution of Chinese OFDI stock, case samples and Chinese CBMA deals 373 Appendix 11 Historical distributions of case samples and Chinese CBMA deals 375 Appendix 12 Industry distributions of case samples and Chinese CBMA deals 376 Appendix 13 Case One: background of Lenovo’s acquisition of IBM PCD 377 Appendix 14 Case One: summary of the interview record 382 Appendix 15 Case Two: background of Geely’s acquisition of Volvo 383 Appendix 16 Case Two: cost control and benefit in JVs 389 Appendix 17 Case Three: background of Wanxiang Group and its CBMA 390 Appendix 18 Case Three: cultural resistances and cost control strategy 401 Appendix 19 The list of author’s publications from this thesis 403 xi LIST OF TABLES Page Table 2.1 The reviewed journals and M&A articles (Jan 1990 – June 2014) 15 Table 2.2 Summary of the research groups, issues, central propositions, references and frequency counts in 215 leading articles 16 Table 2.3 The distribution of research methods in 215 articles 47 Table 3.1 The summary of theoretical and operational definitions of coding items and variables 91 Table 4.1 The results of screening Chinese CBMA deals by Zephyr database 110 Table 4.2 Four databases for matching the screened deals 111 Table 4.3 The summary of working loads and contributions for three raters 121 Table 4.4 The results of APPA across three raters 123 Table 4.5 The summary of coding resolution analysis 125 Table 4.6 The summary of case information, profile of interviewees and information for interviews 134 Table 4.7 Strategies and criteria to improve trustworthiness 141 Table 5.1 T-test: the comparison of key variables before 2009 and after 2009 149 Table 5.2 ANOVA test: the results for key variables on three industrial groups 152 Table 5.3 Pearson correlation coefficients of main variables (N=55) 155 xii Table 5.4 The results of Hierarchical regression analyses 157 Table 5.5 T-test: the comparison of key variables between SOEs and POEs161 Table 5.6 The results of hypotheses testing: main hypotheses 169 Table 5.7 The results of hypotheses testing: moderating hypotheses (institutions) 174 Table 5.8 The results of hypotheses testing: moderating hypotheses (Organisational resources and competences) 176 Table 6.1 The integration process of Lenovo’s acquisition of IBM PCD 184 Table 6.2 The summary of process, objectives and major activities of cultural integration 189 Table 6.3 The summary of strengths and weaknesses between Geely and Volvo 201 Table 6.4 The summary of JVs activities between Geely and Volvo 208 Table 6.5 The summary of employed consulting firms and their roles 213 Table 6.6 Cross-case analysis: strategic combination benefits 232 Table 6.7 Cross-case analysis: organisational integration 236 Table 6.8 Cross-case analysis: cultural resistances and integration 240 xiii LIST OF FIGURES Page Figure 1.1 The comparative historical value between China’s OFDI and CBMA between 2001 to 2013 (in million US dollars) 2 Figure 3.1 The context-free model and its linkage with strategic management concept 65 Figure 3.2 The context-embedded factors and moderating effects 68 Figure 3.3 An integrative framework of Chinese CBMA performance 71 Figure 4.1 A two-stage research design 103 Figure 4.2 The relationship between OFDI and majority control of related CBMA 108 Figure 4.3 The six steps of conducting case-survey research 113 Figure 4.4 The strategies for collecting case materials 115 Figure 5.1 The comparison of geographic distribution between case samples and population 145 Figure 5.2 The comparison of historical distribution between case samples and population 147 Figure 5.3 The comparison of industrial distribution between case samples and population 151 Figure 5.4 The results of multiple regression analysis 158 Figure 5.5 The moderating effect of institutions on the cultural resistances– Chinese CBMA performance relationship 164 xiv Figure 5.6 The moderating effect of organisational resources and competences on the organisational integration–Chinese CBMA performance relationship 167 Figure 5.7 The relationships of three antecedents with Chinese CBMA performance 172 Figure 6.1 The dynamic process of post-transaction integration 194 Figure 6.2 The slow and partial touch integration process 204 Figure 6.3 A two-way process of technological transfer between Wanxiang and acquired business 225 xv LIST OF ACRONYMS APPA Average Pairwise Percent Agreement CMAA China Mergers & Acquisitions Association OEM Original Equipment Manufacturer OFDI : Outward Foreign Direct Investment CBMA : Cross-Border Mergers and Acquisitions CR : Cultural resistances GFC : Global Financial Crisis IFDI : Inward Foreign Direct Investment JV : Joint Venture MNCs : Multinational Corporations MOFCOM : China’s Ministry of Commerce OI : Organisational Integration POEs : Private Owned Enterprises RBV : Resource-Based View SASAC State-Owned Assets Supervision and Administration Commission SCB : Strategic Combination Benefits SOEs : State Owned Enterprises xvi ABSTRACT Chinese Cross-Border Mergers & Acquisitions (CBMA) have accounted for a majority of Chinese outward foreign direct investment (OFDI) and thus received much academic attention in recent years.
