Information from the abstract
This study examines whether environmental, social, and governance (ESG) performance affects Chinese firms’ choice of cross-border mergers and acquisitions (M&As) as a mode of foreign-market entry. Drawing on stakeholder theory, the resource-based view, and the capability perspective, we argue that stronger ESG performance can reduce a firm’s reliance on acquiring an incumbent platform abroad by strengthening internally accumulated capabilities. We examine innovation capability as a mechanism through which ESG performance may influence entry-mode choice and ownership concentration as a governance condition that shapes the strength of this relationship. Using 17,395 firm-year observations of Chinese listed firms between 2010 and 2024, we combine Huazheng ESG ratings with information on overseas investment, firm characteristics, patents, and ownership structure. The baseline results show that ESG performance is negatively associated with the likelihood of cross-border M&A entry in the subsequent year. Economically, a one-standard-deviation increase in log ESG is associated with a 0.725 percentage-point decline in the probability of acquisition-based entry, equivalent to approximately 3.68% of the sample mean, calculated from the displayed estimates. Additional evidence shows that ESG performance is positively associated with subsequent patent-based innovation capability, providing evidence consistent with the proposed innovation capability mechanism. Moreover, ownership concentration strengthens the negative association between ESG performance and cross-border M&A entry. These findings suggest that ESG should not be viewed solely as a legitimacy or reputation device in international expansion. It may also alter firms’ dependence on externally acquired platforms by changing the capabilities available for establishing foreign operations.
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Related topics: International Business and FDI · Corporate Social Responsibility Reporting · Innovation and Knowledge Management
Thai researcher and institutional participation
唐万欢 · Payap University
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