The First Global Merger Wave and the Enigma of Chinese Performance

Killian J. McCarthy, Wilfred Dolfsma, Utz Weitzel

Abstract: The first five merger waves were US-led events. In this article we show that the largely over-looked sixth wave (2003–2008) emerged in all regions simultaneously. Because of this, and building upon interconnected literatures – which: (1) suggests that agency is a big predictor of merger performance; (2) distinguishes between three distinct governance traditions; and (3) argues that the Anglo-Saxon system puts the most effort into protecting investors and aligning interests, and the Confucian system the least – we predicted that Anglo-Saxon acquirers would create value in the sixth wave, and Confucian acquirers would destroy it. We find the opposite to be true and show that Chinese acquirers, in particular, created the most value in the sixth wave. In attempting to explain why, we find that China outperformed its Asian neighbors while doing the same thing, and outperformed its Western peers while doing what the literature suggests that they shouldn’t do. This not only points to the limits of the generalizability of the existing literature, but supports the suggestion that Chinese acquirers are ‘different’. We call, therefore, for additional research into understanding Chinese and Confucian acquirers using the standard comparative merger data.

Rethinking the Literature on the Performance of Chinese Multinational  Enterprises 

Alan M. Rugman, Quyen T. K. Nguyen, Ziyi WeiWe

Abstract: Synthesize the literature on Chinese multinational enterprises (MNEs) and find that much of the prior research is based on as few as a dozen case studies of Chinese firms. They are so case-specific that it has led to a misplaced call for new theories to explain Chinese firms’ internationalization. In an attempt to better relate theory with empirical evidence, we examine the largest 500 Chinese manufacturing firms. We aim to find out the number of Chinese manufacturing firms to be true MNEs by definition, and to examine their financial performance relative to global peers using the financial benchmarking method. We develop our theoretical perspectives from new internalization theory. We find that there are only 49 Chinese manufacturing firms to be true MNEs, whereas the rest are purely domestic firms. Their performance is poor relative to global peers. Chinese MNEs have home country bound firm-specific advantages (FSAs), which are built upon home country-specific advantages (home CSAs). They have not yet developed advanced management capabilities through recombination with host CSAs. Essentially, they acquire foreign firms to increase their sales in domestic market, but they fail to be competitive internationally and to achieve superior performance in overseas operations. Our findings have important strategic implications for managers, public policy makers, and academic research.

Institutional Transformation and Changing Networking Patterns in China

Jianjun Zhang, Wei Zhao, Yanlong Zhang

Abstract: Drawing insights from the institutional embeddedness perspective, this article explores the changing patterns and significance of two types of strategic networking along with the institutional transformation in China. Using two-wave survey data on Chinese private firms, we find that after the state relaxed its control of resources the importance of networking with the state tends to decline, while ties with market actors become increasingly important. Determinants of network investment have shifted from managers’ perceived importance of different types of network ties to a firm’s immediate institutional environment. Finally, the impact of networking on firm growth has also altered over time. These findings advance our understanding of the crucial role of the institutional environment in shaping firms’ networking strategies and have important theoretical and practical implications.

Environment, Resource Integration, and New Ventures’ Competitive Advantage in China

Li Cai, Sergey Anokhin, Miaomiao Yin, Donald E. Hatfield

Abstract: Chinese new ventures have two principal approaches to resource integration: the stabilizing approach, which makes minor changes to a firm’s current resource bundles, or the pioneering approach, which creates new capabilities. Two characteristics of Chinese entrepreneurial environment are distinct: environmental dynamism (uncertain markets, unstable institutions and the rapid technology upgrading) and munificence (the degree of competitive intensity and resource abundance). This study suggests that environmental dynamism and environmental munificence moderate the relationships between resource integration approaches and competitive advantage. Results based on a study of 410 Chinese new ventures show that both stabilizing and pioneering approaches to resource integration positively influence new ventures’ competitive advantage under the condition of low environmental dynamism and either high or low environmental munificence. However, neither stabilizing nor pioneering approaches have a significant effect on new ventures’ competitive advantage under the condition of low environmental munificence and high environmental dynamism. Only the pioneering approach has a positive effect on new ventures’ competitive advantage under the condition of high environmental munificence and high environmental dynamism.

Institutional Ownership and Corporate Philanthropic Giving in an Emerging Economy

Yuanyang Song, Peter T. Gianiodis, Yuanxu Li

Abstract: In this study, we examine the effect of institutional ownership on corporate philanthropy in China, an emerging economy. Employing stakeholder identification and salience theory, we posit that institutional ownership positively influences corporate philanthropy, which varies for different types of institutional investors. We further argue that institutional ownership’s influence is stronger when philanthropy is aligned with firm goals. Using data from Chinese publicly listed firms, we find a positive effect of institutional ownership on philanthropy, and this effect is stronger for domestic institutional owners when compared to foreign institutional owners, and long-term when compared to short-term institutional owners. We also find that the positive influence of institutional ownership is stronger in private firms and in regions with low institutional development – situations characterizing high alignment between philanthropy and firm goals. Our findings highlight the important role of institutional investors on corporate philanthropy decisions, which have implications for scholars studying and policy makers enacting corporate governance in emerging economies.

Coping with Multiple Institutional Logics: Temporal Process of Institutional Work during the Emergence of the One Foundation in China 

Yuhuan Liu, Chenjian Zhang, Runtian Jing

Abstract: An increasing body of research has applied an institutional perspective to understand actors’ responses to conflicting institutional logics and the creation process of new organizational forms. Although China provides a natural, real-time laboratory to study this topic, scant empirical research has been done. Moreover, we find it is insufficient to apply current frameworks, which have been mainly driven by studies conducted in Western contexts, to study actors’ responses to institutional multiplicity in China, especially in its emerging non-profit sector. This article fills research gaps by providing an in-depth case analysis of the creation and legitimation process of the One Foundation – the first independent charity foundation established by civic individuals in China. Our study shows that the coexisting and competing relationship among state, civil society, social mission, and market logics provides impetus for organizational change and innovation. This article theorizes a temporal model by showing that actors seek provisional solutions in different organizational stages and gradually develop capabilities to progress institutional work from individual to organizational and to societal level to achieve their goals. By showing how a charity foundation plays a role as a change agent, this article also sheds light on the condition and process that drive innovation in China’s non-profit sector.