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Extending the springboard perspective with the resource dependence theory, the authors posit that cross-border mergers and acquisitions (M&As) are a new channel for emerging economy firms (EEFs) to enhance their technology capabilities. This study aims to examine the impact of cross-border M&As initiated by EEFs on their technology augmentation vis-à-vis matched domestic M&A cases and investigate the factors influencing the difference in post-merger innovation capability.

This paper estimates the post-acquisition innovation capability of acquirers from emerging economies (EEs) that engage in cross-border M&As. To remove possible selection bias, the authors leverage a difference-in-difference-style approach in combination with a matched sample constructed by pairing each cross-border M&A case with a similar domestic deal. The data set contains 266 cross-border M&As and 266 matched domestic M&A deals between 2003 and 2011, whereby acquirers are based in 6 EEs and targets are in 36 countries consisting of both EEs and advanced economies (AEs).

The present empirical results show that cross-border M&As engaged by EEFs are an important engine for improving EEFs’ innovation capability through technology augmentation. The main empirical results are as follows. First, compared with matched domestic acquirers with similar characteristics, EE cross-border M&As have a positive effect on innovation capability. Second, the positive effect of the EEFs’ cross-border M&As relative to the matched domestic M&As on innovation capability is driven largely by cross-border M&As with targets in AEs. Third, the increase in post-M&A innovation capability of the EE cross-border acquirers comes mainly from deals where targets are based in countries with relatively superior human capital and innovation capability than those of the acquirers.

To the best of the authors’ knowledge, this study is the first systematic study of whether cross-border M&As serve as an effective channel of technology augmentation for EE acquirers compared to matched domestic acquirers with similar characteristics.