Exploring the trust and innovation mechanisms in M & A of China's state owned enterprises with mixed ownership

This book is dedicated to strategic management research relating to China’s SOE. As China’s economic system of the day is featured by mixed ownership, state-owned enterprises (SOEs), under the New Normal of economic backdrop, are devoted to exploring the reform of stock resources reorganization, one of which is through mergers and acquisitions (M&A). This book explores the key points and difficulties in the successful reform of Chinese enterprises with mixed ownership by focusing on trust and innovation and by widely covering normative research, index evaluation system, game theory and empirical research with case study. It is significant for evaluating the reform of SOE in China by integrating the informal institutional aspects into the formal one and understanding the leading role of SOE in China’s economic development. Acknowledgment Contents 1 Introduction 1.1 Research Background and Significance from the Perspective of China 1.1.1 Research Background from the Perspective of China 1.1.2 Research Significance from the Perspective of China 1.2 Research Goal, Approach and Methodology 1.2.1 Research Goal 1.2.2 Research Approach 1.2.3 Research Methodology 1.3 Organizational Structure 1.3.1 Theoretical Research 1.3.2 Indicator Evaluation System 1.3.3 Deduction Based on Game Theory 1.3.4 Empirical Research 1.3.5 Case Study 1.3.6 Research Conclusions and Suggestions 1.4 Innovation Points 1.4.1 Research Perspective: Mixed Ownership-Oriented M&A of Chinese SOEs 1.4.2 Research Content: Deduction with Game Theory Based on the Principle of Competitive Neutrality 1.4.3 Research Approach: Linkage Effect of Innovation Ability and Trust Mechanism 2 Literature Review on Chinese SOEs’ Mix Ownership-Oriented M&A 2.1 Summary of Research on the Development of the State-owned Economy and Mixed-ownership System 2.1.1 Research on the Development of the State-owned Economy 2.1.2 Research on Mixed Economy 2.1.3 Summary 2.2 A Summary of Research on Mixed Ownership-oriented Reform of SOEs 2.2.1 SOEs Invest in or Merge/Reorganize Non-SOEs 2.2.2 SOEs Increase Capital and Shares to Introduce Non-public Investors 2.2.3 SOEs Launch Employee Stock Ownership Plan 2.2.4 Government Social Capital Cooperation (PPP) Model 2.2.5 Summary 2.3 Summary of Research on Trust and Corporate Value 2.3.1 Research on “Trust” in Different Fields 2.3.2 Research on the Relationship Between “Trust” and Corporate Value 2.3.3 Summary 2.4 Summary of Research on Innovation and Corporate Value 2.4.1 Research on the Connotation of Innovation 2.4.2 Research on the Connotation of Innovation Capability 2.4.3 Research on the Relationship Between Innovation Ability and Corporate Value 2.4.4 Summary 2.5 Summary of Research on Motivations of M&A and Post Merger Integration 2.5.1 Research on Motivations of M&A 2.5.2 Research on Post Merger Integration 2.5.3 Summary 2.6 Literature Review 3 Theoretical Basis of Trust and Innovation Mechanism in M&A of China’s SOEs 3.1 Related Theories on State-Owned Sector and Mixed Economy 3.1.1 The State-Owned Sector 3.1.2 The Private Sector 3.1.3 The Mixed Economy 3.1.4 Theories of Mixed Economy with Chinese Characteristics 3.1.5 Summary 3.2 Theory of New Institutional Economics 3.2.1 Transaction Cost Theory 3.2.2 Property Rights Theory 3.2.3 Corporate Governance Theory 3.2.4 Institutional Change Theory 3.2.5 Summary 3.3 Theory of Strategic M&A 3.3.1 Motivations of Strategic M&A 3.3.2 Economic Consequences of Strategic M&A 3.3.3 Risks of Strategic M&A 3.3.4 Summary 3.4 Theory of Contract Economics 3.4.1 Incomplete Contract Theory 3.4.2 Design of Incentive Contract 3.4.3 Summary 3.5 Information Economics Theory 3.5.1 Information Asymmetry Theory 3.5.2 Signal Theory 3.5.3 “Principal-Agent” Theory 3.5.4 Summary 3.6 Informal Institution Theory 3.6.1 Institutional Environment 3.6.2 Corporate Culture 3.6.3 Summary 3.7 Enterprise Capability Theory 3.7.1 Enterprise Resource Theory 3.7.2 Core Competence Theory 3.7.3 Dynamic Capability-Based Entrepreneurial Theory 3.7.4 Knowledge-Based Theory 3.7.5 Summary 3.8 Trust Theory 3.8.1 Trust Source Theory 3.8.2 Trust Transmission Theory 3.8.3 Organizational Trust Theory 3.8.4 Summary 3.9 Innovation Theory 3.9.1 Schumpeter’s Innovation Theory 3.9.2 Technical Innovation Theory and Institutional Innovation Theory 3.9.3 Innovation Diffusion Theory 3.9.4 Summary 3.10 Brief Summary of Theoretical Foundations 4 The Theoretical Framework of Trust and Innovation Mechanism in M&A of China’ SOEs 4.1 Review of Mixed-Ownership Reform of China’s SOE 4.1.1 Review of the Development of China’s State-Owned Sector 4.1.2 Review of the Development of China’s Mixed Economy 4.1.3 A Review of the Mixed Ownership Reform of China’s SOEs 4.2 Research on Problems in the M&A of China’s SOEs 4.2.1 Analysis of Pre-merger Problems of China’s SOEs 4.2.2 Analysis of Problems in M&A of China’s SOEs 4.2.3 Analysis of Post-merger Problems of China’s SOEs 4.2.4 Resolve Problems in China’s SOE Reform Through the “Innovation-Mergers and Acqusitions- Trust” Mechanism 4.3 Research on the Three-Dimensional Macro-Mechanism of “Innovation-M&A-Trust” 4.3.1 Macro-Innovation Mechanism and M&A from China’s Perspective 4.3.2 Macro Trust Mechanism and M&A from China’s Perspective 4.4 Research on the Three-Dimensional Meso-Level Industrial Development Mechanism of “Innovation-M&A-Trust” from China’s Perspective 4.4.1 The Collaborative Innovation Mechanism and Mixed Ownership Mergers from China’s Perspective 4.4.2 “Meso-Level” Trust Mechanism and M&A from China’s Perspective 4.5 Research on the Three-Dimensional Micro Enterprise Development Mechanism of “Innovation- M&A-Trust” from China’ Perspective 4.5.1 Micro Enterprise Innovation Mechanism and M&A of China’s SOE 4.5.2 Micro Trust Mechanism and M&A of China’s SOEs 5 Research on the Evaluation Index System of Trust and Innovation Studies Based on Mixed Ownership Reforms of SOEs 5.1 On the Construction of the Evaluation System of Mixed Ownership M&A Value of SOEs from the Perspective of China 5.2 Evaluation System of Trust Mechanism 5.2.1 Evaluation Index of Shareholder Trust 5.2.2 Evaluation Index of Creditors’ Trust 5.2.3 Evaluation Index of Suppliers’ Trust 5.2.4 Evaluation Index of Buyers’ Trust 5.2.5 Evaluation Index of Enterprises’ Integrity 5.3 Evaluation System of Innovation Mechanism 5.3.1 Evaluation of the Technological Innovation Capability and Innovation Mechanism 5.3.2 Evaluation of Market Competitiveness and Innovation Mechanism 5.3.3 Evaluation of Sustainable Development Ability and Innovation Mechanism 5.4 Evaluation System of M&A Value 5.4.1 Tobin’s Q 5.4.2 Operating Cash Flow 5.4.3 Return on Total Assets 5.4.4 Enterprise Governance Capabilities 5.5 Empirical Research Model 5.5.1 OLS Linear Regression Model 5.5.2 Multivariate Discriminant Analysis Model 5.5.3 Logistic Regression Model 5.5.4 Probit Regression Model 5.5.5 Cluster Analysis Model 5.5.6 Structural Equation Model 5.6 Case Study Model Based on Balanced Scorecards 5.7 Summary 6 Game Analysis of China’s Enterprise M&A Pricing Based on Expected Market Excess Reward 6.1 Introduction 6.2 Institutional Background 6.3 Construction of M&A Game Model 6.3.1 Basic Assumption 6.3.2 Game Process 6.3.3 Construction of Game Model 6.4 Empirical Research 6.4.1 Verifiable Hypothesis 6.4.2 Sample Selection and Empirical Research Methods 6.4.3 Descriptive Statistics and Correlation Analysis 6.4.4 OLS Regression Analysis 6.4.5 Robustness Test 6.5 Conclusion 7 Trust, Innovation and M&A Value: An Empirical Study in China 7.1 Introduction 7.2 The Institutional Background from the Perspective of China 7.3 Literature Review 7.3.1 Trust and Enterprise Value 7.3.2 Innovation and Core Competence of Enterprises 7.4 Research Hypotheses 7.4.1 Mixed Ownership M&A and Enterprise Value Creation 7.4.2 Stakeholder Trust, Innovation Capability and M&A Value of Mixed Ownership of SOEs 7.5 Research Design 7.5.1 Research Samples and Data Sources 7.5.2 Research Model and Variable Definition 7.6 Empirical Analysis 7.6.1 Descriptive Statistics 7.6.2 Regression Results 7.7 Further Analysis: Missing Variables and Endogeneity 7.8 Robustness Test 7.9 Conclusion 8 Trust Mechanism and M&A Performance: Trust Mechanism in Chinese SOEs’ Mixed Ownership-Oriented M&A 8.1 Introduction 8.2 Institutional Background Based on China Perspective 8.3 Theoretical Analysis and Research Hypothesis 8.4 Research Design 8.4.1 Sample Selection and Data Sources 8.4.2 Model Setting and Definition of Main Variables 8.5 Empirical Results and Analysis 8.5.1 Descriptive Statistical Analysis 8.5.2 Multivariate Regression Analysis 8.5.3 Further Analysis 8.5.4 Robustness Test 8.6 Conclusion 8.7 Rethinking SOEs’ Mixed Ownership-Oriented M&A Based on Social Trust 9 A Case Study of Mixed Ownership-Oriented M&A and Innovation-Driven Development of Chinese SOEs 9.1 Research on Problems Embedded in the Background of China’s Economic Transformation and Upgrading 9.2 Literature Review 9.2.1 Corporate M&A and the Development of Independent Innovation Capabilities 9.2.2 SOEs’ Reform and Mixed Ownership-Orientde M&A 9.2.3 Mixed Ownership-Oriented M&A and Independent Innovation Capabilities of Enterprises 9.2.4 Research Review and Gaps 9.3 Research Design and Approach 9.3.1 Research Approach 9.3.2 Selection of Case Enterprise 9.3.3 Constructive Measurement 9.3.4 Data Sources 9.3.5 Data Analysis 9.4 Case Analysis 9.4.1 Formation of Original Innovation Capabilities and Accumulation of Independent Innovation Capabilities in M&A 9.4.2 Evolution from Government-Led M&A and Open Innovation to Secondary Innovation Capabilities 9.4.3 The Evolution of Mixed Ownership-Oriented M&A and Open Innovation to Integrated Innovation Capabilities 9.5 Case Analysis and Discussion 9.5.1 Prerequisites for Realizing Innovation-Driven Development Through M&A 9.5.2 Positive Impacts of Mixed Ownership-Oriented M&A on Realizing Innovation-Driven Development 9.6 Conclusions and Prospects 9.6.1 Research Conclusions 9.6.2 Theoretical Contributions 9.6.3 Practical Implications 10 Research Conclusions and Policy Recommendations for Mixed Ownership-Oriented M&A of Chinese SOEs 10.1 Research Conclusions on China’s Mixed Ownership-Oriented M&A 10.1.1 Research Conclusions on the Theoretical Framework of China’s Mixed Ownership-Oriented M&A 10.1.2 Conclusions of Empirical Test for China’s Mixed Ownership-Oriented M&A 10.1.3 Conclusions from Case Study 10.2 Policy Recommendations for China’s Mixed Ownership-Oriented M&A 10.2.1 Improve Market-Oriented Allocation of Production Factors Starting from Mixed Ownership-Oriented M&A of SOEs 10.2.2 Reduce Administrative Intervention from the Government, Establish a Trust Mechanism and Cultivate Innovation Growth Points 10.2.3 Clarify Property Relations and Improve the Efficiency of Mixed Ownership-Oriented M&A of SOEs 10.2.4 Reduce Irrational Behaviors in the Game of SOEs in Mixed Ownership-Oriented M&A 10.2.5 Emphasize the Establishment of Trust Mechanism in Integrating Innovation Abilities of SOEs 10.2.6 Cultivate a Mature Capital Market and Accelerate SOEs’ Mixed Ownership Reform Through M&A 10.2.7 Improve Laws and Regulations on M&A and Provide Effective Operating Platforms for SOEs to Conduct Mix Ownership-Oriented M&A 10.3 Prospects of Research on China’s Mixed Ownership-Oriented M&A Bibliography This book is dedicated to strategic management research relating to Chinas SOE. As Chinas economic system of the day is featured by mixed ownership, state-owned enterprises (SOEs), under the New Normal of economic backdrop, are devoted to exploring the reform of stock resources reorganization, one of which is through mergers and acquisitions (M & A). This book explores the key points and difficulties in the successful reform of Chinese enterprises with mixed ownership by focusing on trust and innovation and by widely covering normative research, index evaluation system, game theory and empirical research with case study. It is significant for evaluating the reform of SOE in China by integrating the informal institutional aspects into the formal one and understanding the leading role of SOE in Chinas economic development