Exploring the Effects of Processes, Institutions and the Industrial Environment on Acquired Firms' Capabilities: Evidence from China

Abstract

Despite the increasing attention to the mergers and acquisitions (M&As) literature, few studies have tried to incorporate the influences of institutional/industrial environment and processes on researching firm capabilities in M&As, considering their close links to firm capabilities. Specifically, why institutions and industrial environment influence the acquired firms’ processes changes and therefore their capabilities are so far unclear. Given the unique institutional and industrial characteristics in China, this research puts the argument into the Chinese context and deals with three issues: how the processes in the acquired Chinese firms (state-owned and private-owned) have changed (differently) after acquisition; why the capabilities in each of the acquired firm would benefit from certain processes changes; and relatedly, why the institutional environment (governing system, ownership and control, finance and banking system and trust) and the industrial environment (competition) in China provide or deprive such processes changes and therefore their capabilities. By doing so, this research provides a comprehensive analysis framework of how macro-level (institutions), mezzo-level (industry) and micro-level (firm-specific processes) factors influence firm capabilities differently. The analysis is based on in-depth case studies in China and focuses are on the processes of the acquired firms under Chinese institutional and industrial environment. This research constructs a framework to demonstrate why the country’s environmental context and processes constitute core components in understanding firm strategies and capabilities in M&As. The main findings are that, compared with private firms in China, the Chinese state-owned firms (SOEs) under political acquisitions have experienced ‘radical’ processes changes after being acquired, contributing to their capabilities; and these changes are achieved through the transformation of organization structures, top management team, corporate strategy and operational processes changes. At the same time, the institutional and the industrial environment in China, including its multi-layered power delegation system, power delegation to managers with supervision, political economy, state-controlled finance system and low trust system, have provided Chinese firms with resources to conduct such transformational and transactional changes. The country-specific institutional environment significantly shapes firms’ potential sources of capabilities, leading to the practical implication that firms operating in China should be cautious of the institutions and industrial environment that they might operate in and develop capabilities that are appropriate for country-specific institutional environment.

Date of Award	31 Dec 2017
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Matthew Allen (Supervisor) & Jiajia Liu (Supervisor)