Institutional Environments,Absorptive Capacity And The Cross-border M&A Performance Of Emerging Market Enterprises

Enterprises in emerging market countries are playing an increasingly important role in the trend of internationalization.They have expanded overseas through foreign direct investment such as cross-border mergers and acquisitions to seek advanced technology and strategic assets.The literature on post-transnational M&A activities is relatively small compared to research on multinational companies in developed countries,and their lack of experience in overseas mergers and acquisitions let them face the pressure from the formal and informal institutional environment of the host country.At the same time,firm's own absorptive capacity will moderate the process.This paper takes 256 cross-border M&A events conducted by Chinese companies in2001-2017 as a sample,using event study method,least squares regression model and negative binomial regression model to study how the formal institutional environment and informal institutional environment affect the short-term,long-term and innovation performance of emerging market firms.And explores how the internal absorption capacity of the company will affect the relationship between the institutional environment and these performance dimensions.Through empirical analysis,this paper draws some conclusions: firstly,the formal institutional distance has a negative impact on the short-term performance and innovation performance of cross-border M&As,but it has no significant impact on the long-term performance.Secondly,the informal institutional distance shows a“U-shape” relationship with long-term performance and innovation performance,but its impact on short-term performance of M&A is not significant.Lastly,the company's own absorptive capacity can mitigate the “U-shape” impact of informal institutional distance on long-term performance and innovation performance.Based on this,the paper concludes with policy recommendations.First,considering that the formal system distance is related to the short-term performance and innovation performance of the cross-border mergers and acquisitions of the home country enterprises,we suggest that the post-transnational mergers and acquisitions of the national enterprises are optional.The distance between the system and the host country is smaller,and the experience is accumulated.At the same time,before entering a country with a large institutional distance for cross-border M&A activities,you can choose a more modest entry method,and fully study the host country system norms,and then plan in detail after deep understanding.Second,considering the cultural distance and the “U” relationship between thelong-term performance and innovation performance of the cross-border M&A of the home country,it means that the cultural distance is a “double-edged sword”,and the post-development enterprise can estimate the value of the cultural distance,transnational Mergers and acquisitions have better innovation performance and cross-border mergers and acquisitions based on countries that estimate the most appropriate cultural distances.In addition,given the diversity and complexity of culture,countries with large cultural distances may have more innovative ideas and solutions.It can bring greater innovation output,so latecomers should seize the opportunity to integrate into the culture of the host country and reduce cultural conflicts.Finally,since the absorptive capacity of enterprises can weaken the negative impact of institutional distance,late-stage enterprises should increase their R&D investment and improve their absorptive capacity when formulating cross-border M&A plans,thus making short-term,long-term and innovative cross-border M&A.Output produces a positive boost.The innovation of this paper is combining institution theory,absorptive capacity theory and signal theory,considering internal and external factors that influence the performance of companies.Moreover,this paper investigates the effect of the institutional environment from the short-term performance,long-term performance and innovation performance to avoid the defect of the previous researches that only discuss one kind performance.