Question 1.

The transfer of knowledge-based resources from acquirers to the acquired units has been emphasised as an important driver of post-acquisition integration. A research project  is  carried  out  to  investigate  the  facilitating  role  of  Human  Resource Management (HRM)  practices  in the success of knowledge transfer between the acquirer and target firms.

The  researchers conducted  a survey  between 2018  and 2019. They specifically targeted the Chinese companies that had been fully acquired by foreign multinational enterprises (MNEs) between 2011 and 2016. The restricted time frame is to ensure that the respondents were able to remember about the knowledge flows and the issues influencing them. Acquisitions were required to be at least one year old to ensure enough time had passed for possible post-acquisition changes to be implemented.

To develop a list of firms to take part in the study, the researchers obtained and reviewed lists of foreign firms that made acquisitions in China’s 10 largest cities and their surrounding areas (Beijing, Shanghai, Guangzhou, etc.). They combined this information and compiled a master list based on the following criteria for sampling:

First, the Chinese firms had to be acquired by foreign firms coming from one of

the following seven countries: Germany, France, South Korea, US, Sweden, Singapore, or the UK. These seven countries were chosen because they were the major investors in China.

Second, the acquired company needed to have 20 or more employees , as with

even smaller acquisitions we believe the issues involved are rather different.

Based on these sampling criteria, a list of 512 firms was generated. These firms were contacted in a written form and in person to ask if they would be willing to take part in this study. The total response rate was 35% and 181 firms completed questionnaires. Among these 181 firms, the smallest company had 30 employees and the largest employed 2000 individuals (the average = 353). The oldest company was founded in 1987 and the youngest company was founded in 2008, and the average firm age was around  17  years.  Regarding  the  industries  of  the  acquired  firms,  the  top  three industries  of  the  acquired  firms  participating  in  this  survey  are  manufacturing, wholesale trade, and information technology.

Define the population of the research project. Evaluate the applied sampling strategy and the representativeness of the sample. Propose an alternative sampling strategy and justify its effectiveness.

[20 marks]

Question 2.

Due  to  the  increasing  impact  of  global  supply  chain  disruptions,  a  multinational enterprise (MNE) is re-evaluating its supply chain strategy to improve its resilience. The firm would like to change its current sole sourcing practice (i.e., only relying on a single supplier) to dual sourcing (i.e., using two suppliers). It carefully selects four potential suppliers (A, B, C, and D) in the global market and their order fulfilment rates in the past five years are reported in Figure 2.1. (Note that the order fulfilment rate is the number of orders processed divided by the total number of orders received. A low order fulfilment rate could be due to inadequate inventory, logistic complexity, etc.)

Figure 2.1 Boxplot of Order Fulfilment Rate (%) of the potential suppliers

In addition, by analysing the data on supply chain within the industry, the firm finds that the order fulfilment rate could be influenced by the communication effectiveness (negatively associated with factors like linguistic distance and time zone difference) and  return  processing.  They visualise  the  industry  data  in  Figures  2.2  and  2.3. Accordingly, the firm collects the information on those two factors for each of the four potential partners and reports it in Table 2.1.

Figure 2.2 Scatter plot (Communication Effectiveness vs. Order Fulfilment Rate)

Figure 2.3 Scatter plot (Return Processing vs. Order Fulfilment Rate)

Table 2.1 The perceived trustworthiness, cultural distance, and legal protection level

Based on the information provided, please advise the firm which two suppliers to choose and explain your answer.

[20 marks]

Question 3.

Cross-border  mergers  and  acquisitions  (M&As)  by  Chinese  firms  have  risen significantly over the past decade. Chinese firms increasingly target firms in developed countries,  especially  in  Europe,  which  accounted  for  over  one-third  of  Chinese acquisitions globally between 2015 and 2017.

A project is developed to investigate the impact of acquiring similar or complementary technologies on the innovation performance of Chinese multinationals’ strategic asset- seeking M&As in the EU, and whether such impact is contingent upon firm-level and region-level technological gaps. Six hypotheses are developed:

Hypothesis 1. Technological similarity has a negative impact on Chinese acquirers’ post-acquisition innovation performance.

Hypothesis 2. Technological complementarity has a positive impact on Chinese acquirers’ post-acquisition innovation performance.

Hypothesis 3a. Firm-level technological gap has a moderating effect on the relationship between resource similarity and post-acquisition innovation performance, such that a larger gap will weaken the negative impact of resource similarity on innovation performance.

Hypothesis 3b. Firm-level technological gap has a moderating effect on the relationship between resource complementarity and post-acquisition innovation performance, such that a larger gap will strengthen the positive impact of resource complementarity on innovation performance.

Hypothesis 4a. Region-level technological gaps have a moderating effect on the relationship between resource similarity and post-acquisition innovation performance, such that a larger gap will weaken the negative impact of resource similarity on innovation performance.

Hypothesis 4b. Region-level technological gaps have a moderating effect on the relationship between resource complementarity and post-acquisition innovation performance, such that a larger gap will strengthen the positive impact of resource complementarity on innovation performance.

The hypotheses were tested using a sample of 65 strategic asset-related M&A deals by Chinese firms acquiring EU firms. The results are reported in Table 3.1.

The variables involved in the analysis include:

Chinese MNEs’ post-acquisition innovation performance, measured by the rate

of change in patent applications made by Chinese acquirers three years pre- and post-acquisition. Specifically, this variable is calculated by subtracting the number  of  patent  applications  three  years  before  the  M&A  from  patent applications three years after the M&A, and then dividing this difference by applications made three years after M&A;

Resource Similarity, refers to the overlap of technological resources (patents)

between acquirer (A) and target (T), calculated by:

oveTlap patens in the same class      total A patents in the same class

× ;

Resource Complementarity, refers to the overlap in patents in the same sub-

category but different class

oveTlap patens in the same subcategoTy diffeTent class

total patents of A and T

oveTlap patents in same categoTy diffeTent class

× ;

Firm-level technology gap,  measured  by  the  ratio  of  number of firm-level

patents between target and acquirer, in natural logarithms;

Regional technology gap, measured by the ratio of number of regional patent

applications between target and acquirer, in natural logarithms;

State-ownership, measured by a dummy variable, value 1 if a firm’s ultimate

owner is the government, 0 otherwise;

Firm size, measured by the number of total employees, in natural logarithms; External collaboration,  measured  by  a  dummy  variable,  value  1  if  a  firm

engages in other external research collaboration activities (e.g., university), 0 otherwise;

Firm age, measure by total years since foundation;

Acquirer home region, measured by the natural logarithm of regional GDP in

the acquisition year;

Acquirer’s industry R&D intensity, measured by R&D expenditure over sales at

industry level.

You are required to answer the following questions:

a) Write down the statistical model for Model 4.

[2 marks]

b) Suggest whether the results in Table 3.1 are consistent with any of the six hypotheses. Please support your answer with a detailed analysis (in terms of the directions and statistical significances of the key explanatory variables).

[8 marks]

c) The CEOs in the emerging markets would like to know how the results of this project can help them make decisions in strategic asset-related M&As. How would you respond?

[12 marks]