The Influences Of Overseas M&A On Proprietary Innovation Of Chinese Company

This exploratory study mainly focuses on overseas mergers and acquisitions (M&As), one form of the open innovation, especially with regard to its influences on Chinese companies when they try to improve their proprietary innovation capacity. In terms of theory, I try to explore into the two relatively separate yet important concepts in the innovation management literature, namely, open innovation and proprietary innovation. I first review their respective origin and meaning. In addition, I further discuss their mechanisms, make connection and comparison between the two concepts, and try to investigate the impacts of open innovation on proprietary innovation. Based on the case of Nanjing Automobile Group's acquisition of merging MG Rover Company in July, 2005 and the post-acquisition integration, this study briefly analyzes the independent innovation capability of the Chinese auto industry and the main M&A events in recent years. Focusing on Nanjing Automobile Group and MG Rover Company, I then provide an in-depth view of the entire acquisition process, the gains of Nanjing Automobile from this acquisition, and the recent progress of its MG project. Conclusions from the case show that overseas M&A can enhance proprietary innovation of Chinese companies, provided that: (1) The knowledge accumulation of the target company exceeds or complements that of the acquirer and, (2) Innovative ideas from the target company could be internalized by the acquirer in enhancing its internal innovation capability, as often reflected in the new product development.