Mergers and acquisitions between Western companies and Chinese state-owned enterprises

• Main Author: Chen, Xi
• Other Authors: Steve, Brown : Zhenxu, Tong
• Published: University of Exeter 2011
• Subjects: 338.83
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.578986

This research investigates acquisition activities carried out between Western companies and Chinese state-owned enterprises (SOEs), focusing on the influences of acquisitions on identity, culture and commitment of the target SOE employees. The managerial factors that influence the acquisition integration are investigated and their relationships with the post-acquisition performances of the target SOEs are explored. There are three research questions: How do acquisitions influence the identity, culture and commitment of the target SOE employees? What are the factors that determine an employee’s post-acquisition identification? What are the relationships between acquisition management and post-acquisition performance? Case studies are adopted as the main research methodology in order to provide an in-depth answer to these research questions. Statistical analysis is used in order to provide clear evidence of the factors influencing post-acquisition identification and the effect of acquisitions on the performance of SOEs. The findings of this research indicate that acquisitions have significant negative effects on the performance of target SOEs and these negative effects are mainly due to inappropriate managerial strategies adopted by Western acquirers. Further, although not significant, a positive correlation between acquisition management and acquisition performance has been found in this research, a finding which is in line with the prediction of theories and consequently, supports the assumption that acquisition management contributes to acquisition performance. All factors (pre-acquisition identification, cultural incompatibility, communication, a sense of continuity, fast reform and negative emotion) are significantly related to post-acquisition identification when age, education, salary, size, employee position and organisational tenure are controlled. Different from previous studies, which found that the individual-organisation relationship influences employees’ organisational identification in the Western context, this research finds that social relationship is a vital factor in influencing Chinese employees’ identification. Also, social relationship is a unique factor fostering Chinese employees’ positive identity, but not the shared social identity as has been found in the Western context. These findings imply that social relationship is a distinct factor in fostering employees’ organisational identification in China and consequently, in predominantly collectivistic countries. Further, this research shows that the point held in previous studies that out-group is not necessarily discriminated against in collectivistic cultures when group membership is salient due to the collectively-oriented feature is not applicable in acquisitions because people of collectivistic cultures show a strong in-group identity, a strong motive to distinguish insiders (i.e. in-group members) from outsiders (i.e. out-group members), and a strong resistance to uncertainty. These responses are driven by the characteristics of collectivistic culture such as collective-orientation and high uncertainty avoidance. Three particular issues emerged that may be useful for acquisition management in China. The first is the recruitment of employees at the post-acquisition stage. Selecting people as managers of post-acquisition organisations cannot be based only on their ethnic groups or multi-language capability, but also on other factors. To run post-acquisition companies, it is better to employ people who are professionals in the industry with multi-cultural working experience than those returned overseas Chinese who have been away from China for a long time and ethnic Chinese who lack managerial experience in China. The second issue is that middle-aged and older employees find it difficult to accept changes due to their deeply rooted culture. Younger employees can more easily accept the changes than middle-aged and older employees because their values are more or less in accordance with those of Westerners. The third issue is that due to the fact that the M&As do not require employees to completely abandon or change their old identity, and social relationship is a unique factor in fostering organisational identification in China, these factors contribute to a sense of continuity perceived by Chinese employees and consequently lead to a positive correlation between pre- and post-acquisition identification in the acquired SOEs, which are positioned as having dominated status in acquisitions. The implications are discussed at the end of this thesis.