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

Anthony Howell, Jia Lin and Stephan Worack

China Economic Review, 2020, vol. 60, issue C

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.

Keywords: Outward direct investment; Patenting; Innovation; China (search for similar items in EconPapers)
JEL-codes: F23 O30 O33 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Going out to innovate more at home: Impacts of outward direct investments on Chinese firms' domestic innovation performance (2020)
Working Paper: Going out to innovate more at home: Impacts of outward direct investments on Chinese firms' domestic innovation performance (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:60:y:2020:i:c:s1043951x20300018

DOI: 10.1016/j.chieco.2020.101404

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