Determinants Of Location Choices Of Cross-Border M&A:A Comparison Of China And Japan

As a result of economic globalization, cross-border mergers and acquisitions have become a dominant pattern in international investment and also an important way for the enterprises to achieve a leap development. In cross-border M&A which is an important strategy for companies to improve their competitiveness, the host country location selection is the first key strategic decision. In the context of intensifying global competition, factors of the country and industry level become more and more prominent compared to the company and transaction level. The best host location may increase resources, competitive advantage and profitability for the companies.This article, taking Japan and China as an example, based on two perspectives of developed and developing countries, compared and analyzed the motivation, location selection and the dominant factors of Chinese and Japanese enterprises’ cross-border mergers and acquisitions. A comparison helps to understand the respective factors that drive the cross-border M&A of developed and developing countries’ enterprises, as well as the status quo of location selection and its dominant factors of Chinese and Japanese enterprises’ cross-border M&A, which has great significance for improving the relevant theories of cross-border M&A and guiding the enterprises’ practice. Using the cross-border M&A samples of China and Japan during the period of 2005-2014, through the empirical study of the influence of national competitiveness, institutional distance, cultural distance and other factors on the destination choices in cross-border M&A.This article reveals several main factors that affect location selection:the national competitiveness has a significant positive effect on location choices in Chinese and Japanese enterprises’ transnational acquisition. Particularly in the manufacturing and service industries, the national competitiveness’s positive effect is significant. Combined with the motivation of cross-border M&A, the efficiency improvement and innovation dimension of the national competitiveness are also consistent with the objectives of pursuing better resources, bigger market and more competitive advantage. When it comes to institutional factor, the institutional quality of home and host country plays an important role in location selection in cross-border M&A. The importance of the influences of cultural distance on location decision in cross-border M&A is also reflected in the results. Studies have found that the target countries of Chinese enterprises’ cross-border M&A are mainly those have similar culture with China. Besides, the political relationship has significant impact on Japanese enterprises’ transnational acquisition attraction.Studies show that China and Japan have some determinant factors in common for location choices in cross-border M&A, both also have differences in other factors. This paper introduces a concept of national competitiveness, focusing on the relative distance between home and host country level characteristic factors, extending from the enterprise motivation to explore the specific process of location selection. Providing direct empirical evidence for Chinese and Japanese enterprises’ cross-border M&A motivation and location choice as countries in different stages of development, and improving the relevant theory of developing countries.