The Impact of Reverse Cross-Border Mergers and Acquisitions in Emerging Countries on the Division Position in the Global Value Chain: A Systematic Framework of the Third Country Effect

Abstract

The purpose of this paper is to build a systematic framework of the spatial spillover effects of host country heterogeneity, and to illustrate the impact of the third country effect of reverse cross-border mergers and acquisitions in emerging countries on the division position in the global value chain. We develop a composite index to measure the gap in the global value chain position, and use the ADB-MRIO database in UIBE GVC from 2010 to 2019 to conduct an empirical test, which includes 27 sample countries. The spatial modeling results suggest that both the third country effect of reverse cross-border mergers and acquisitions and the direct effect of forward cross-border mergers and acquisitions are conducive to narrowing the gap in the division position in the global value chain of China, as well as the host country. Therefore, reverse cross-border mergers and acquisitions should develop the export platform based cross-border mergers and acquisitions, while forward cross-border mergers and acquisitions are suitable for choosing the destination countries directly. An interesting insight shown by the spatial and temporal heterogeneity test is that the narrowing effect of cross-border mergers and acquisitions on the gap in the division position varies with time and space. There is also a trend of increasing convergence and spatial differentiation, and the change of this spatial spillover effect may be closely related to the bilateral relations between countries. The model of the third country effect with spatial heterogeneity affirms the spatial impact of host country heterogeneity, and provides empirical evidence for cross-border mergers and acquisitions based on export platforms.