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.
Module Title: Quantitative Method for © UNIVERSITY OF LEEDS International Business
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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 therespondents wereable toremember about theknowledgeflows andtheissues 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]
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Module Code: LUBS5901M01
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
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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)
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Figure 2.3 Scatter plot (Return Processing vs. Order Fulfilment Rate)
Table 2.1 The perceived trustworthiness, cultural distance, and legal protection level
| Partner A | Partner B | Partner C | Partner D | |
| Communication effectiveness | 0.25 | 0.4 | 0.1 | 0.3 |
| Return processing | 0.1 | 0.15 | 0.2 | 0.35 |
Based on the information provided, please advise the firm which two suppliers to choose and explain your answer.
[20 marks]
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Question 3.
Cross-border mergers and acquisitions (M&As) by Chinese firms have risen significantlyover the past decade. Chinesefirms increasinglytarget 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 performanceof Chinesemultinationals’ 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 thata 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 thata 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;
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- Resource Similarity, refers to the overlap of technological resources (patents) between acquirer (A) and target (T), calculated by:
??????? ?????? ?? ?ℎ? ???? ????? ????? ? ??????? ?? ?ℎ? ???? ????? ????? ??????? ?? ? ??? ? ????? ? ???????
- Resource Complementarity, refers to the overlap in patents in the same sub-category but different class
??????? ?????? ?? ?ℎ? ???? ??????????? ????????? ?????
????? ??????? ?? ? ??? ?
??????? ??????? ?? ???? ???????? ????????? ?????
????? ? ???????
- 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 inthe emerging markets wouldlike 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]
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Table 3.1 Regression results
Constant
State ownership
Firm size
Firm age
Acquirer region GDP
Industry R&D intensity
External collaboration
Similarity
Complementarity
Firm tech gap
Regional tech gap
Similarity * Firm gap
Complementarity * Firm gap
Similarity * Regional gap
Complementarity * Regional gap
Observations
R-square
Model 1 -6.68 (4.26) -0.17 (0.46) 4.59*** (0.71) -0.04* (0.02) 0.19 (0.39) 1.15 (4.17) 0.16 (0.40) -2.42 (1.57)
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65
0.32
Model 2 -7.25* (4.28) -0.06
(0.43) 4.80***
(0.54) -0.04
(0.03) 0.21
(0.40) -0.21 (4.31) 0.17 (0.38)
7.34*** (2.48)
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65
0.32
Model 3
-6.00 (4.56) 0.01 (0.49) 4.41*** (0.73) -0.06** (0.03) 0.24 (0.41) 2.07 (4.84) -0.09 (0.37)
-7.97*** (2.55) 5.08*** (1.44) -0.13 (0.43) 0.03 (0.02)
-4.97*** (1.54)
65
0.32
Model 4
-6.51 (4.18) -0.05 (0.44) 5.06*** (0.50) -0.04* (0.02) 0.15 (0.39) -0.25 (4.54) 0.24 (0.41) -1.47 (1.26) 1.59 (3.37) 0.21 (0.34) 0.01 (0.02)
-9.13* (4.12)
65
0.31
Model 5
-7.30* (4.21) -0.06 (0.44) 4.63*** (0.68) -0.04* (0.02) 0.29 (0.40) -0.24 (4.29( 0.08 (0.39) -3.15* (1.71) 5.44*** (1.39) 0.59* (0.33)
-.015*** (0.05)
0.39*** (0.14)
65
0.35
Model 6
-9.08* (4.35) -0.00 (0.43) 4.74*** (0.57) -0.04** (0.02) 0.40 (0.40) 0.46 (4.46) 0.10 (0.37) -1.57 (1.25) 8.41*** (2.41) 0.48 (0.31)
-0.10*** (0.03)
1.16* (0.55)
65
0.37
Note. Standard errors are shown in parenthesis. *** p<0.01, ** p<0.05, * p<0.1.
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Question 4.
A research team is investigating the post-acquisition performance of multinational enterprises (MNEs) in emerging markets and collects a sample of 90 firms. The dependent variable in the study is the post-acquisition performance, measured by the rate of change in profit made by acquirers five years pre- and post-acquisition. The impacts of the following factors are examined:
- PD distance(theabsolutedifferencebetweenacquirer andtarget firms in power distance dimension);
- IND distance (the absolute difference between acquirer and target firms in individualism dimension);
- MAS distance (the absolute difference between acquirer and target firms in Masculinity dimension);
- UA distance (the absolute difference between acquirer and target firms in uncertainty avoidance dimension);
- LTO distance (the absolute difference between acquirer and target firms in long-term orientation dimension);
- Prior CBA experience of the acquirer (the number of cross-border acquisitions prior to the current deal);
- Home country GDP (the natural logarithm of home country GDP in the acquisition year).
The researchers conduct a linear regression analysis. The results are reported as follows:
Figure 4.1 Residual histogram Figure 4.2 P-P plot
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Figure 4.3 Scatter plot (̂ against ?)
Table 4.1 Descriptive statistics
Table 4.2 Correlation
Table 4.3 Model Summary
Table 4.4 Coefficients
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You are required to answer the following questions:
- a) Evaluate the use of linear regression mod Please include all the linear regression assumptions in your answer.
[20 marks]
- b) Discuss the practicalimplications of thestudy fromthe perspectiveof the manag
[10 marks]
- c) The research team categorizes the dependent variable into a dummy variable, with a value of 1 if the firm’s profit is increased postacquisition (i.e., ??????????? > 0) and a value of 0 otherwise, and run a logistic regression. Write down the statistical model.
[4 marks]
|
- d) The log-likelihood of the intercept-only model is -120.285 and the log-likelihood of the unconstrained model in c) is -105.108. Given ?0.05,7 = 14.07, would you recommend that the variables in the logistic regression are useful to enhance our understanding on emerging market firms’ cross-border acquisition performance? Explain your a
[4 marks]
6732-LUBS5901M 100% Online Resit Exam August 2022(1)
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