Global value chain embeddedness and Chinese firms' cross-border mergers &acquisitions

The global value chain (GVC) position of a host country is an important benchmark for firms from home countries to determine their degree of embeddedness within the chain and implement corresponding internationalization strategies. Although there have been a certain number of existing studies related to GVC from various aspects, the links between a host country's GVC embeddedness and firm-level cross-border activities stemming from home countries are surprisingly unexplored in the current literature. This study fills this gap and applies the feasible generalized least squares model to examine how the cross-border mergers and acquisitions (M&As) strategies adopted by Chinese listed firms from 2005 to 2015 are affected by host countries' GVC embeddedness, with particular reference to their forward and backward embeddedness as well as the degree of participation along GVC. It is found that Chinese firms are more likely to conduct large-scale cross-border M&As when a host country has higher backward GVC embeddedness and a relatively lower position within GVC. This conclusion remains robust after considering alternative indices, sample range adjustments, and issues of selfselection bias. Further empirical discussions show that the Belt and Road Initiative results in more balanced M&A structures. Additionally, it is empirically demonstrated that host countries' capital intensities, total factor productivity, and labor productivity moderate Chinese firm M&A location preferences along GVC. This paper has far-reaching policy implications for the internationalization strategies adopted by Chinese firms and offers important insights into how firms could effectively utilize cross-border M&As to conduct optimal international investments around the globe.