Cross-border M&As, complements or substitutes for emerging economy multinational enterprises’ innovation performance? A resource dependency logic

Prior research suggests that emerging economy multinational enterprises (EMNEs) use cross-border mergers and acquisitions (M&As) as a springboard to compensate for innovation capability voids and enhance global competitiveness. However, inconsistent conclusions regarding the relationship between cross-border M&As and EMNEs' innovation performance exist. This can be attributed to the fact that some EMNEs use cross-border M&As as complements to improve innovation, while others acquire needed innovations through cross-border M&As, treating them as substitutes for internal innovation activities. Drawing on resource dependence theory (RDT), this study argues that the level of interdependence between EMNEs and the government and domestic customers matters. This study uses propensity score matching (PSM) with a difference-in-differences (DID) analysis on Chinese listed manufacturing firms between 2008 and 2017. The results suggest that the higher the dependence of EMNEs on the government and the domestic market, the higher likelihood that EMNEs leverage M&As as complements to improve innovation performance. However, these effects are weakened by the alternative strategies employed by EMNEs, such as political connections and cost-leading strategies.