Acquisitions from emerging to advanced countries and capability upgrading strategies

Extant research has documented that Multinational Enterprises from Emerging countries (EMNEs) rely on cross-border acquisitions of advanced country firms to upgrade their capabilities. However, these studies have investigated the phenomenon in terms of a generic capability upgrading strategy. This paper seeks to advance this literature by distinguishing between a dual capability upgrading strategy, which implies the acquisitions of both technology and complementary capabilities, and a pure complementary capability strategy, and by relating them to the technological intensity of acquiring and target firms. Hypotheses are developed and tested on a large sample of more than 600 acquisitions undertaken by firms located in Brazil, Russia, India and China in Europe, North America and Japan between 1985 and 2008. Results show that firms belonging to medium-tech manufacturing and services industries pursue a dual capability upgrading strategy by investing in high-tech industries, while high-tech and low-tech EMNEs pursue a pure complementary capability strategy.