Managing Cross-border M&A: Based On The Mode Of Contracts And Resources Integration

It is a common sense that management is a core principle of cross-boarder merger andacquisition (M&A). However, why it is the core has not become a sharedunderstanding. This article figures out that systematic framework for the theoreticalanalysis of cross-boarder M&A is absent. Moreover, few research works haveaddressed on management theories and integration studies of cross-border M&A.Thus cross-boarder M&A's economics and management theories are unsynchronizedwith its empirical practice. This article is trying to establish a theoretical frameworkof managing integration on cross-boarder M&A. This framework is based oncontracts and resource theory. The author considers cross-boarder M&A as anefficient integration model of input factors from two countries thoughcorporate-control market. The effects of contracts and resources integration aredecisive to the successfulness of cross-boarder M&A.According to contract-based view, overseas expansion mode, such as cross-boarderM&A and green-field investment etc., can be restated as various contract-basedtransaction modes that effectively integrate input factors of two countries. Thecompare of transaction costs is one of the key elements to choose different modes.Enterprise is a nexus of contracts or a kind of hierarchy coordinate mechanism and theownership is thus a veil of control right. Therefore cross-boarder M&A issubstitutions among varied hierarchy coordinate mechanisms. On the other hand,according to resource-based view, enterprise is a nexus of resources and capabilities.Cross-boarder M&A not only maintain integrity of enterprise organizational capitalfrom target country, which achieves speed economy and strategic resource. It alsoforms new organizational resource by adequately integrating input factors from homecountry.The choice of different expansion modes, either cross-boarder M&A or green fieldinvestment etc., is based on which mode can perfectly combine two countries'inputfactors in a lower-cost and higher-profit manner. Thus managing integration is the key 2of whether to choose cross-boarder M&A and whether it could be successful. Thestrategy of cross-boarder M&A is to obtain static and dynamic strategic benefitsthought global resource reallocation. It compares, substitutes and improves hierarchycoordinate mechanisms and organization management modes of various enterprisesfrom different countries. Managing integration is the foundation to achieve strategicbenefits of cross-boarder M&A. It covers the whole transaction and integrationprocedures of cross-boarder M&A. It requires thorough evaluation of strategy,organization, asset, labor, culture and environment. They are key elements ofmanagement integration, which make cross-boarder M&A a repeatable option withincorporates'cross-national growth path.The activity of cross-boarder M&A itself doesn't mean input factors from targetcountry can automatically come in to control. Only through effective managingintegration could cross-boarder M&A achieve a perfect combination of two countries'input factors. The author concentrates in transnational corporations'(TNCs) superbglobal strategy and management ability, while others usually focused on massiveamount of cross-boarder M&A and huge size of those TNCs. The author believes thatcross-boarder M&A is based on a systematic operation of global strategy,management theory and integration framework. This article is trying to set up anacademic framework of managing integration on cross-boarder M&A. It presents athorough understand of the first international M&A trend and helps enterprises andgovernment to improve their management and supervision skills.