Chinese cross‐border mergers and acquisitions in the developing world: Is Africa unique?

• Published date: 01 January 2021
• Author: Shuang Hu,Saileshsingh Gunessee
• Date: 01 January 2021
• DOI: http://doi.org/10.1002/tie.22169

RESEARCH ARTICLE

Chinese cross-border mergers and acquisitions in the

developing world: Is Africa unique?

Saileshsingh Gunessee

1

| Shuang Hu

2

1

Nottingham University Business School

China, University of Nottingham Ningbo

China, Ningbo, China

2

International Doctoral Innovation Centre,

School of Economics, University of

Nottingham Ningbo China, Ningbo, China

Correspondence

Saileshsingh Gunessee, Nottingham University

Business School China, University of

Nottingham Ningbo China, 199 Taikang East

Road, Ningbo 315100, China.

Email: saileshsingh.gunessee@nottingham.

edu.cn

Abstract

China has emerged as an important partner for Africa. Not surprisingly, Chinese busi-

ness and investment relations with Africa have been growing. This article contends

that Africa offers a different proposition to Chinese business interests in non-African

developing economies. In this optic, it takes a “comparative”institution-based view

treating factors that determine Chinese multinationals' cross-border merger and

acquisition (CBMA) decisions as comparatively different for Africa to the rest of the

developing world. From a panel data estimation of the number of Chinese CBMAs

from 2007 to 2016, we find among market size, natural resources, strategic assets,

labor productivity, and institutional governance, only natural resources and market

size have a distinctive effect, with Chinese investors being more attracted to African

natural resources than the African market. The drive for natural resources provides

impetus for Chinese MNEs to choose CBMAs over greenfield investment, and

through majority ownership to exercise control. Our inference is that Africa is “signif-

icantly”different from other developing regions, in terms of CBMAs, as Chinese mul-

tinationals have a strong motive to control access to natural resources.

KEYWORDS

acquisitions, Africa, Chinese multinationals, institutions, natural resources

1|INTRODUCTION

China–Africa economic engagement has been rising in recent times. For

example,China has become Africa'slargest trading partner replacingthe

UnitedStates. Similarly,Chinese FDI stock inAfrica has witnesseda sub-

stantial increase, for instance, in 2003, Chinese FDI stock to Africa was

about 0.49 billion U.S. dollars, while the comparative number in 2018

was 46.1 billion (UNCTAD, 2019). Not surprisingly, the studies of Chi-

nese FDI in Africa has garnered some interest (Biggeri &

Sanfilippo, 2009; W. Chen, Dollar, & Tang, 2018; Cheung, De Haan,

Qian, & Yu, 2012; K olstad & Wiig, 201 1; Mourao, 2017) . However, a

lesser knownphenomenon is Chinese cross-border mergersand acquisi-

tions (CBMAs) in Africa. Though this type of investment or establish-

ment mode is stilla nascent part of growing ChineseCBMA in the world

(relativeto greenfield investment),it begs the question of how different

ChineseCBMAs in African economies are to otherdeveloping countries.

Our contribution is at the intersection of two streams of the litera-

ture: Chinese CBMAs and CBMAs in Africa—with emphasis on providing

a comparative perspective between Africa and other developing regions.

While there have been studies of CBMAs in the African context

(Degbey & Ellis, 2017; Oguji & Owusu, 2017), they mainly focus on

CBMAs undertaken by developed economies' firms but do not explore

the subject of a developing economy, such as China, as the source of

investment. In addition, African economies as an investment target market

are different from other developing nations. To bridge the gap, we use a

“comparative institution-based”view to develop a theoretical framework

of Chinese CBMAs in the non-African developing world and how they

contrast with those in Africa. The antecedents of Chinese CBMA deci-

sions are expounded in this context. We examine how market-seeking,

resource-seeking, strategic assets-seeking, and efficiency-seeking loca-

tional motives impinge on Chinese multinationals' takeover and location

decisions through this comparative institutional lens.

DOI: 10.1002/tie.22169

Thunderbird Int. Bus. Rev. 2021;63:27–41. wileyonlinelibrary.com/journal/tie © 2020 Wiley Periodicals LLC. 27