Impact of cross-border mergers and acquisitions on firm innovation performance: from the perspective of dynamic capability theory

This study constructs an empirical framework from the perspective of dynamic capability theory, and uses a combined dataset of Chinese listed companies from 2008 to 2020 to test the causal impact of cross-border mergers and acquisitions (M&As) on firm innovation performance by using propensity score matching, time-varying difference-in-differences model and instrumental variable method. The findings are as follows: (1) Cross-border M&A has a significant promoting effect on the innovation performance of acquiring firms. (2) Heterogeneity analysis shows that traditionally less innovative state-owned, non-manufacturing, and non-high-tech enterprises experience notable enhancements in their performance through cross-border M&As. The post-M&A innovation performance of enterprises in central China is strong, followed by enterprises in eastern China, while enterprises in western China show limited improvement. (3) Among the internal factors of firm dynamic capability, knowledge breadth and managerial capability positively moderate the impact of cross-border M&As on innovation performance, while knowledge depth and financing constraints play a negative moderating role. (4) Among the external factors of firm dynamic capability, local knowledge externalities and regional trade resilience play a positive moderating role. This study highlights the importance of firm dynamic capabilities in the cross-border M&As process and provides new insights into innovation strategies in emerging economies.