Journal of International Business Studies
October 2013, Volume 44, Issue 8, pp 853–860
 

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Sea-Jin Chang, Jaiho Chung, Jon Jungbien Moon
https://link.springer.com/article/10.1057/jibs.2013.35



Abstract

This study explores when foreign subsidiaries outperform comparable local firms by evaluating the performance of local firms acquired by multinationals vs continuing local firms. This comparison allows us to single out foreign ownership effects. We employ the propensity score matching method and difference-in-differences approach in order to control for the endogeneity problem inherent in multinational firms’ acquisition decisions. We find strong evidence that foreign-acquired local firms outperform comparable local firms in China, especially when the foreign firm acquires local target firms with higher absorptive capacity or with modernized ownership structure.

Keywords

subsidiary performance; cross-border mergers and acquisitions (M&As); absorptive capacity; endogeneity; propensity score matching; difference-in-differences