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Journal cover: Management Research Review

Management Research Review

ISSN: 2040-8269
Previously published as: Management Research News

Online from: 2010

Subject Area: Management Science/Management Studies

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Absorptive capacity and a failed cross-border M&A


Document Information:
Title:Absorptive capacity and a failed cross-border M&A
Author(s):Ping Deng, (Maryville University of St Louis, St Louis, Missouri, USA and Shanghai Lixin University of Commerce, China)
Citation:Ping Deng, (2010) "Absorptive capacity and a failed cross-border M&A", Management Research Review, Vol. 33 Iss: 7, pp.673 - 682
Keywords:Acquisitions and mergers, Assets management, China, Organizational development
Article type:Research paper
DOI:10.1108/01409171011055771 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Abstract:

Purpose – Chinese companies are increasingly using cross-border mergers and acquisitions (M&A) to source knowledge or strategic assets. For many, global acquisitions have proven to be highly problematic and value-destroying. The purpose of this paper is to address this critical acquisition failure issue from an absorptive capacity perspective.

Design/methodology/approach – Guided by the framework that focuses on how acquiring a firm's weak absorptive capacity damages its ability to assimilate, integrate and apply external new knowledge, one high-profile Chinese failed acquisition: TCL acquisition of France's Thomson's TV business in 2004 is analyzed empirically.

Findings – Acquisition performance of Chinese overseas M&A is found to be substantially affected by the acquiring firm's absorptive capacity at multiple dimensions.

Research limitations/implications – The absorptive capacity construct provides an insightful account for differentials in Chinese overseas M&A performance.

Practical implications – For decision makers interested in formulating and implementing overseas M&A strategy, appropriate evaluation of their own firms’ absorptive capability should be the first step to take.

Originality/value –This is the first paper to apply absorptive capacity arguments to Chinese resource-driven M&A strategy, and will prompt business academicians and practitioners to think about M&A strategy in new and innovative ways.



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